Untangling The Web
My Mac Magazine #30, Oct. ’97

The Future of E-Commerce

On August 12-14th, My Mac invaded the Jupiter Communications Online Advertising 2 Seminar in New York City. This seminar bought together some of the true industry heavyweights to discuss the current state of online advertising– as well as where it might be headed.

As usual, your intrepid Web surfer was there to meet and greet the digerati. One of the highlights of the conference was the pre-conference seminar “Online Shopping”. The keynote address was given by Walter Forbes of CUC International. Entitled “Direct Response Is Online Shopping”, it was a sometimes scary but always interesting peek into the future.

Forbes thinks that Internet retailing will far exceed current expectations and rate of growth. Therefore, the entire retailing world is about to be set on its ear, if they don’t wake up and smell the digital coffee.

But, as Forbes pointed out, don’t let this fool you into thinking that the Internet is the great equalizer. Consumers will react to it just like all of the other retail sales outlets. The big will get bigger and the small will get…well…crushed. He then outlined several myths that online retailers would have to understand in order to compete in this new world.

8 Interactive Myths vs. Reality

Myth 1: This is a world where the little guy can compete.

Truth: This is another retail environment. This is a large player game, a world that Forbes believes is ruled by price. “We have a bookstore (bookstacks.com
) where we can sell at cost and still make money due to the membership model. This makes us hard to beat.”

Myth 2: Advertising revenue is the savior of the Internet business model.

Truth: Advertising revenue will not be the way to earn money in this medium, at least not yet. The main models that will earn revenue are the pay for play model and the transaction model.

Myth 3: Existing business models will work on the Net.

Truth: Existing business models will not work well. This is a new medium, with its own set of challenges and strengths. Some real-world models may be transformed to fit this Internet space, but the real winners will design models that work best within this system. We will have to differentiate ourselves with better levels of information and service that the new medium affords us.

Myth 4: Human Behavior will change to adapt to the Net.

Truth: Technologists must understand that people will not change. They must design the stores of tomorrow into compelling experiences that will fit the consumer’s frame of reference. People will continue to go to a few major name brands that they trust.

Myth 5: Consumers will rely on intelligent agents.

Truth: There will always be a certain “touchy-feely” quality about making a purchase. Consumers will want to know who they are buying from and know what they are buying.

Myth 6: Shipping costs will offset the savings gained by shopping online.

Truth: As distribution costs go down because of decreasing data warehousing costs, shipping becomes more efficient and therefore cheaper. The bigger the company, as always, the larger the shipping
discount that they receive.

Myth 7: Major retailers will enter the market and compete.

Truth: By the time most major retailers can right themselves and change their businesses to enter the market, they will have lost critical ground. For example, Barnes and Noble is just now trying to compete with Amazon Books. It remains unclear if they will be able to close the distance on this competitor without significant expenditures in research and advertising.

Myth 8: Internet sales are nothing but electronic catalog sales.

Truth: Catalogs do not change the value proposition of the sale. The Internet can, by providing full information, lower price and better
service. (Geektalk translation: The Internet makes the sale a better risk
for the consumer by giving him all the product information he can
digest, including other stores with competing prices. This is something
a catalog can’t provide.)

So has Forbes listened to his own prophecy? Apparently so. He has
taken several of CUC’s more successful shops and combined them into one store location. This megasite is called Netmarket.com
and houses some recognizable names like bookstacks.com
, autovantage.com
and others. He has reasoned if several small
sites pull traffic, one really big site will draw even more consumers.
He will continue to make sure that all of his sites are membership-based
to keep all prices as low as possible to beat out even Internet-based
retailers on the price point.

He ended his speech with this statement: “The Internet will change the
way people do business. I expect that CUC will be there to watch it
happen. Who else will make it? That’s anybody’s guess.”

Tune in next month…. when the Web head delves into the area of site
design… same Mac Time… same Mac Channel.

Brian Harniman (harnie@hotmail.com

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