Over Dot Com’d?

The run up to Christmas was extraordinary for the eRetail Industry and not just for the huge growth in online sales (P.10). The weeks before Christmas saw a huge increase in the amount of TV and radio advertising from eRetail companies and other high tech ventures trying to get a share of the online consumer.

In fact, there was so much advertising in the US that dot com fatigue began to set in and consumers were left bemused by so many dot com messages. Faced with all the confusing messages, the big winners are the well-established brands. (P.9)

It seems incredible that ToysRUs had so much volume when often their service was apparently so poor compared to established rivals such as eToys. The only explanation of this phenomenon (other than a hefty dose of advertising) seems to lie in the fact that to many first time e-consumers, ToysRUs.com was the natural first place to start shopping for toys .

What does this mean as we move into 2000?

Advantage Click and Mortar?

Pure eRetailers need to watch over their shoulders as click and mortar stores get their act together. With advantages such as allowing consumers to take product returns back to any local store, national chains like ToysRUs, The Sharper Image and others can establish a clear service differential. Wal-Mart now lets online customers pick-up at store locations (p12).

Pure eRetailers need to establish very easy return policies to overcome their physical deficiency in this respect. According to research by BizRate.com, only 45% of online merchants offer a 100% satisfaction/money back guarantee and only 16% will pay the return shipping. 10% even charge a return penalty.

The ideal return policy has to be for a customer to be able to take a self adhesive label that ships with the goods and attach it to the carton and then call an 800 number to request a pickup from home, with the merchant paying for return shipping. (Check out the latest offerings from the USPS, www.uspsprioritymail.com/et_top.html, where merchants can find API’s to integrate Priority mail into shipping services and “Merchandise Return” that lets merchant’s customers download and print a postage paid return label, allowing return packages to be dropped off at any US Post Office).

Unless eRetailers can provide simple returns, they are unlikely to overcome the confidence that comes with being able to visit a store and get a refund on the spot.

Click and mortar stores also leverage brand image to drive traffic both to stores and the web.

Not just another mall

Malls around the world have become filled with generic stores that look the same. It’s possible to walk into a similar looking Body Shop in New York, London or Sydney. 

The Internet brings to consumers a virtual city, full of stores where specialist boutiques can thrive and where even the smallest stores can find their niche market (or the market can find them).

There can only ever be one winner in the competition to offer generic products at the lowest price. Only one company can have the lowest price in the market.

The company with the most leverage over suppliers will be able to negotiate the lowest cost prices. The most efficient company will be able to deliver products to the consumer with the least add-on cost. Often the most efficient company is also the one negotiating the lowest prices. This is as true on the Internet as it is in the shopping mall.

The original Amazon.com model of distribution without owning inventory was seen as a more efficient way of delivering product, revolutionizing the supply chain. Amazon.com now owns substantial distribution facilities and their business model grows more like that of a traditional retailer each year.
To succeed in the long run many eRetailers will need to compete in niche markets for customers that are looking for something beyond low price.

What differentiates a store online are many of the same qualities that differentiate stores in the mall: good in-stock product assortment (and fast delivery); customer service with an e-smile; excellent returns policies; detailed, accurate product information; knowledgeable sales staff; making it easy to find specific items. 

If, when the customer clicks into the store, the experience isn’t up to expectations, no amount of advertising will bring the customers back.

Post your comments here.