By Steven E. Brier
Although the business-to-consumer market made a huge splash - think of all those Super Bowl ads - it has been taking a backseat to the less sexy, more lucrative business-to-business market.
But, as the industry evolves, the changes wrought by B2C will expand and continue to rattle the retailing landscape. The spread of wireless devices, broadband and persistent connections will transform the Internet's uses in the consumer arena. And although the changes are coming more slowly than expected, they are coming.
"Barnes & Noble's Web site originally tried to reinforce the community its stores had, and drive traffic. But Amazon came along. They knew that the Web was the store," says Dan Roam, vice president of creative strategy at Circle.com. Although Amazon.com has had its share of woes recently - those pesky profit problems and the like - the company has forced traditional bookstores to revamp their online operations to be more than brochureware, offering a complete lineup of books and related information, compelling prices and fast shipping.
That same change has hit most of the retailing industry. Clothing, sports gear, gardening supplies and even bigger-ticket items such as automobiles, long thought to require a hands-on approach to sell, are available online. Though only 1 percent of all North American retail sales were made online in 1999, according to GartnerGroup reports, that 1 percent was worth $16.8 billion. The mere 5 percent share Gartner forecasts by 2004 is real money and attracting a lot of attention. Traditional brick-and-mortar businesses are scrambling to protect their franchises by establishing their own operations before too many Internet-only retailers move in and stake a beachhead.
But the change is slow. As they move to click-and-mortar stores, traditional retailers are forced to revamp their computer systems to link existing inventory control systems with Web servers and then with ordering, billing and shipping systems.
These billing, payment and customer service functions are already slowly migrating to the Web and will pick up speed.
Through a handheld device, one will be able to access personal information and data at warp speed and with much greater ease. Bank and credit-card balances, investment portfolio status reports, health records and anything else one wishes to add will be just a click or two away.
And that handheld device will be the entryway for much more. Interested in reading Harry Potter No. 9? B&N just saw your cell phone ID go past a B&N kiosk and offered an extra $10 off on instant delivery to your personal digital assistant. Or the local restaurant sent you a note that free California rolls are available with every takeout order between 6 and 7 p.m.
Sustaining the flow
E-commerce will continue to undergo a shaking out, probably through 2003. Of those that do fail, most will follow the traditional business experience of having decent business models and sales levels, but not sustaining sufficient cash flows for ongoing operations.
Advertising revenue at the successful e-commerce sites will evolve into icing on the cake as primary solid profits come from sales. It will no longer be necessary to give away the store to build a brand, as e-commerce selling prices fall more closely in line with brick-and-mortar prices, and even a tad lower due to increased efficiencies.
States will step up their efforts to collect sales taxes as e-commerce sales grow. The majority of e-commerce customers will not be strongly affected by slight price increases - and maybe sales taxes - as they continue to buy online with convenience, not price, as the primary motivator.
The greatest success will come to those e-merchants that, over the next five years, develop a balanced click-and-brick marketing strategy. Such a strategy will allow the merchant to provide multiple outlets - and multiple opportunities to capture the sale - in the consumer's portfolio of shopping venues.
The most immediate and noticeable change is likely to occur in grocery shopping. Based on efficiencies and quality of service, the local market will continue to provide fresh produce, meats, fish, deli and dairy items. With smart refrigerators coming online and home scanners entering the marketplace, the bulk center-of-the-store items, also known as pantry replenishment items, will increasingly be bought online and delivered to the home. By 2005, as much as 10 percent of those items will be on automatic pantry replenishment orders offered by online grocers - if you use 4 pounds of coffee per month, order it once and get 4 pounds delivered once per month or 1 pound every week. Brick-and-mortar partnerships will allow consumers to pick up these prepaid and prepackaged orders at the local market or have them delivered.
So, while we will still have to dust and wash dishes and clothes, we'll be able to find local maid service on the Internet or at least get our cleaning supplies and detergents automatically replenished and delivered as needed.
Additional reporting by Tom Monroy