Widespread Internet commerce developed in 1997 with online auctions and try-before-you-buy offerings. -- Internet Commerce Continues in Earnest

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January 05, 1998, Issue: 196
Section: CRW Top 100

Widespread Internet commerce developed in 1997 with online auctions and try-before-you-buy offerings. -- Internet Commerce Continues in Earnest

From online auctions to electronic software downloads, revenue-sharing models and personal avatars, the world of Internet commerce is becoming busier and more varied every day. While online-only retailers such as Amazon.com and CDNow have had the greatest success in their specialties early on, traditional retailers began stepping up to the plate in 1997, with computer retailers figuring prominently in the future of Internet commerce.

The number of visitors to online stores increased by more than 35 percent in the past year, according to the latest reports by New York-based Media Metrix, which measures Web usage.

Several Web shopping sites have seen a significant increase in usage since 1996, including Amazon.com, whose hits more than tripled from 1.4 percent in October 1996 to 5.9 percent in October 1997, according to data from Media Metrix's Internet user panel.

The Yankee Group, Boston, estimates that in 1997 there were 20 million households online. By the end of the year 2000, that number will jump to an estimated 43.2 million households online. Based on statistics such as these, retailers are beginning to pay much more attention to this growing market.

But getting online can be expensive. Corrine Smith, vice president of NetSales, a company specializing in electronic software distribution and electronic commerce, estimates that it can cost more than $100,000 to start an e-commerce site. Smith says there are 400,000 Web retailers up and running, and 85 percent of them are small businesses.

Consumers are still hesitant about ordering products via the Internet, according to Jack Hughes, chairman of Business Data Services, a company that processes e-commerce orders for retailers such as Barnes & Noble, Bloomingdales, CVS, Circuit City Stores and Best Buy. Customers are primarily worried about security, but he said companies can combat those fears by designing Web sites that look as professional as possible. In addition, consumers feel much better about products that trigger name recognition. Many people equate credibility with well-known brands or retailers.

"A consumer must have a sense of the industrial strength and feel of a retailer," he said.

Hughes said the typical e-commerce consumer is a young person who is familiar with the Web, and who does not harbor as many security fears as older users. The second most common category of e-commerce consumer is the midlevel professional, who has the resources to purchase online products.

It appears as though retailers should be less concerned about the negative impact of the Internet on retail sales and more concerned about the lost sales opportunities resulting from a failure to pursue Internet-based sales.

"A good merchandiser can figure out how to set up different appeals as far as what the customer shops for in the store vs. what they shop for on the Web," said Tom Litle, chief executive officer of Litlenet, an electronic commerce transaction clearinghouse. "As the Web develops, sales will be in complementary channels, and each store is going to have to figure out how to achieve that on their own."

While 1996 saw retailers putting up their first Web sites offering store location, product and employment information, 1997 saw these same retailers beginning to dabble with online sales of all or some of the merchandise offered in their stores. By the end of the year, companies such as Egghead Computer that had been online for more than a year began to drive consumers to their Web sites with online-only offers.

Egghead has been one of the more high-profile advertisers on the Web, with sweepstakes offers for pickup trucks and sports cars in the interest of expanding customer lists and driving purchasing decisions. The coming year will likely see more Web-based merchandising built around promotional propositions available only to Internet shoppers, and that may well change the balance of power between retail and the Internet. For now, though, there is peaceful coexistence.