You've got mail! Portals hungry for piece of e-commerce pie

The holidays are shaping up to be a stellar season for companies selling goods online. And Internet hubs such as Yahoo!, Netcentre and MSN.com are positioning themselves to get a piece of the e-commerce pie.
Written by Matthew Broersma, Contributor

The portal push for e-commerce: Can they win? The role of merchandiser is a new one for the hub sites, or "portals," which began as search engines or popular corporate home pages. At the moment, the portals are mostly known as a convenient place to find all sorts of no-charge services, from e-mail to news to discussion groups. But through new acquisitions and partnerships, the sites are driving to become something else -- a place users choose for their online shopping.

"We don't expect to see Yahoo! or Excite selling their own products," said Melissa Bane, a program manager with Yankee Group. "But we do expect to see them becoming a centre point for commerce to take place."

It's no surprise that the sites are looking to get their shopping features in place by the time the shopping season begins. This holiday season, users will spend $2.3 billion (£1.3 billion) on the Internet, compared to $1.1 billion (£0.6 billion) last year, according to Jupiter Communications. That means this year's shopping season will account for a full third of the $7 billion (£4.2 billion) that Jupiter projects for online shopping revenues this year.

And the potential revenues will continue to shoot up over the next few years as the online population grows. Jupiter estimates that annual e-commerce revenues will be $41.1 billion (£25 billion) by 2002.

But while the mall might be the destination of choice for busy holiday shoppers in the real world, Net users tend to flock to the wired equivalent of speciality boutiques -- e-shops such as Amazon.com or CDNow.

Portals might find more success (than online malls) -- they already have recognised brands, not to mention plenty of user interest.

"The biggest portion of online shopping is done at strategic sites," said analyst Chris Charron of Forrester Research Inc. "People know what they want, and they know where to get it; they tend to go directly to L.L. Bean or Amazon.com."

Also, once users have taken the trouble to buy something from an online store, entering their credit card and shipping information, they're likely to stay loyal -- if for no other reason than convenience, observers say. It's just inconvenient to have to enter the same information at a new location.

For instance, experts have estimated that repeat customers account for about 65 percent of Amazon.com's user base.

The online mall concept has several factors in its favour. For one, online consumers' usage patterns could easily change, analysts say. Those online now represent only about a quarter of the U.S. population, and when new users come online, they may be attracted to the idea of registering with one site -- such as a portal -- and being able to buy a variety of products with no extra hassle.

The portals' push to bring one-stop shopping to Web users taps into a powerful idea, but one that so far hasn't worked well on the Web, analysts say. "The idea of convenient shopping on the Web is great, but once you actually try to do it, having to enter your credit card information again and again can be a drag," said Yankee Group's Bane, who favours the notion of an online wallet, in which a user enters credit card and address information once, then shops freely.

The only problem is, "online malls" have tried to tap into that idea, and haven't generated much interest. But the portals might find more success -- they already have recognised brands, not to mention plenty of user interest.

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