Magazine Article | June 1, 2002

Gotta Sell Online - Or, Do You?

Source: Innovative Retail Technologies

The Internet might be the retail channel of the future, but you should consider its business merits in the present.

Integrated Solutions For Retailers, June 2002
Matt Pillar

Web storefront developers would have you believe that selling online is imperative in today's retail marketplace. "More people are buying online every day," they'll say, and they've got the statistics to prove it. But how excited should we get about a sales channel that garners only slightly better than 1% of the whole retail market? Honestly, I think there is a reason to be excited. But, structuring your company's Web site to handle online B2C transactions alone might not be the most prudent use of your Web development budget.

Take Consumers Into Consideration
Remember the television commercial a few years back in which a young group of Internet startup executives gather around a PC to anxiously await their first order? They cheer exuberantly when the orders begin to roll in, but jubilation is replaced by anxiety as they realize they have too many orders to deal with. While the commercial was really about fulfillment, it also illustrated the high expectations of naive and Net-happy retailers who anticipated overnight success. We all know that the Internet hasn't become the dominant sales channel some thought it would be, but there is real business value in having a retail Web site. Retailers that are already operating a Web store (and that are secretly disappointed by its results) and those that are apprehensive about starting one may be focusing too much on online sales figures and too little on overall profits and business advantages. Consider a recent study conducted by Jupiter Media Metrix, which reveals that 45% of online window shoppers use the Internet to browse, then go to physical stores to touch and buy.

Additionally, some consumers are still hesitant to buy over the Internet because they are afraid to give out their credit card numbers or they fear someone will track their personal information. Providing tools like store locators and product finders help overcome these fear factors by giving consumers an option to make purchases through a channel they are more comfortable with.

An online presence also gives retailers an opportunity to gather customer data and experiment with things like pricing and branding. Traditional brick-and-mortar retailers with Web sites should focus less on the transactional elements of their sites and more on these marketing functions.

Low Percentage, High Potential
In the end, 1% might not sound like much, but it translates into tens of billions of dollars spent each year online. In terms of the retail sales pie, that's just a crumb, but dollars spent online have just about doubled over the last two years. That's fast growth - the fastest, in fact, of any retail sales channel. An example of fast online growth can be found on page 40. Ritz Interactive, Inc., an Internet retailer of photography and marine products, began with and has expanded to 14 e-commerce Web sites since 1999.

Combining the potential success of online retail with the fact that retail Web sites drive brick-and-mortar sales, it's easy to see why retailers should not let what looks like a miniscule contribution fool them into thinking that building and maintaining an Internet presence isn't a wise investment.