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BeOnTheNet's
Electronic Commerce |
Volume 1 Number 5 July 1998
ISSN: 1520-8095
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Read "20 Reasons for your business to be on the Internet" at http://www.beonthenet.com/20reasons.html
In This Issue:
Studies Show On-line Shopping is Becoming the thing to do.
Will Price be the only way to compete on the Internet?
Microsoft goes Beyond Windows and enters the Real Estate market
Short Notes - A collection of interesting Internet E-commerce quotes
Studies Show E-commerce Shopping is Becoming the thing to do.
By Gene McMahon
Many different research organizations differ on the amount of money that is being spent on Internet hopping. But no matter how you look at it the numbers are large and growing at an explosive rate:
- Activmedia predicts 1998 revenue will reach $75 billion.
- Deloitte & Touche say Internet shopping will grow by 400% in the next two years.
- Cyber Dialogue says $3.3 billion was spent on on-line shopping last year.
According to most studies the typical on-line Shopper is a highly educated affluent male who likes the convenience of on-line shopping. However, since women now constitute over 46% of Internet users, don't ignore the distaff side. As a matter of fact, many on-line sellers should seriously consider making their sites more "female friendly".
More and more surveys show that people are going on-line to shop for particular items and find them using Search engines. Findings announced recently at the Jupiter on-line Shopping Forum in New York City showed that 77% of buyers go on-line with specific purchase in mind. And 79% of those comparison shop several sites before making a purchase.
Our experience with our on-line retail customers show that a significant percentage of on-line shopping is for gifts. You would be amazed at the number of adult children who sent Mom a gift basket from www.salami.com on Mother's Day. We were gratified to see a large number of US servicemen stationed overseas used the Internet and www.salami.com to remember Mom.
If you think about it it's truly a no hassle way of gift giving, particularly for someone overseas or in a different state. For, as they say at salami.com , "The parking is easy, there are no checkout lines, we are open 24 hours a day, and we deliver right to your door. We even have virtual shopping carts!".
Even our customer The Video Computer Store ( www.vcstore.com ), which sell computers on-line, with an average ticket price of $1,900 - $2,000 a pop, does considerable business as gift giving. During slack gift giving times they may sell five or six computers a week as gifts but from late April to June with graduations coming up those numbers have almost tripled. Yet you would be surprised at the number of on-line stores who don't even provide a way to include a gift card with the purchase!
Unfortunately, a large number of on-line merchants seem to forget their merchandising skills on the Internet. They don't run sales, they don't update their sites frequently and they don't do enough to attract traffic. They would never dream of not cleaning or redecorating their real store's windows or merchandise, but they will let their on-line stores gather dust for months!
Check out our Affordable On-Line Stores
Will Price be the only way to compete on the Internet?
As the technology of the Internet improves it is becoming easier for customers to compare prices of merchandise on the Internet. And more and more of them are doing it. I recently saw a survey which said that 75% of people who ought something on the Internet had used a search engine to find that specific product and that 77% of these people had looked at more than one site before making their purchase. There are already a number of ways to find the cheapest CD or book. Where is this trend going and how will on-line retailers compete?
Below is an interesting article on this subject by Victor Cheng, a former McKinsey consultant. Victor offers some valuable insight in how to maintain your marketing edge in this "Brave New World".
Yes, if the web is truly a more efficient channel, customers will migrate there over time. I used to be a consultant at McKinsey & Company and did an analysis of the impact of the Internet on traditional music retailing. Basically, what we figured out was companies like CDNow were very active in selling the back catalog stuff (vs. new releases). Incidentally, this is where all the money is made in music retailing (since most retailers "give away" new releases to generate store traffic. The bottom line is it doesn't take much to make a high fixed cost retail store go broke. All you need to do is take away 10% of their most profitable sales, and the retailer is dead.
While the economics of each industry varies, IMHO the net is a big threat if you're a traditional retail player. So in the long-run, if you want to stay in business, you many not have much choice.
- The net sure makes competition very tough. I believe companies will go to where the customers are. If that means the net, some companies will always remain. Frankly, I think the key to sustaining profitability on-line is Information. In most cases, a widget is a widget is a widget. This is especially true if you
have widget price search engines. As an on-line marketer, you gotta have some sort of proprietary information that allows your customers to have a more compelling experience. This could be content, customer preferences, discussion groups, the ability to connect with other people with similar interests, etc...
- Pricing transparency makes life very tough. A core strategic maneuver that is taught at all the top business schools, is product differentiation. In simple terms, make your product more unique so that its impossible to make an apples to apples comparison. Here are the typical moves that work well in lots of consumer and b-to-b industries:
- have a loyalty points program - so that pricing from a search engine is less relevant,
- bundle products together with their complements - so always sell
the golf club driver with a super high quality cover the nobody else has...which makes it that much more difficult to price compare (and don't sell the driver as a stand-alone product),
- combine your products with value-added services that are included like extended warranties, a trade-in/trade-up program, leasing, financing (heck GE Capital got started doing just the last 2 items, and now they drive an absurdly high percentage of GE's profits), free training, etc...
- have a loyalty points program - so that pricing from a search engine is less relevant,
I've spent years thinking about the Net, and IMHO the biggest winner of all is the customer. They just make out like bandits in all this.
My 2 cents,
Victor Cheng
http://www.smallbizsavings.com
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Is Internet Advertising Coming of Age?
Proctor & Gamble, a company which markets over 300 brands worldwide and has the worlds largest advertising budget, is building interactive websites to promote their brands at a furious pace. They are experimenting and trying to learn how to get the most out of this new media as fast as possible.
Denis F. Beausejour, P&G VP -Advertising, says that the one million dollars a month that they are spending on Internet advertising is just a drop in the bucket - they see the possibility shifting up to 80% of their $3B advertising budget to the Internet. . Dennis made some extremely interesting comments at the Spring '98 Ad-Tech Conference in Chicago.
You will find his complete presentation at:
Now Bill Gates wants to sell you the rest of the house. On July 13 Microsoft showed HomeAdvisor, an on-line real estate service for finding and financing homes. Since the housing market accounts for about 15 percent of U.S. gross domestic product, it's a place the company wants to be.
Given the success they have had with auto buyers at CarPoint and travelers at expedia they will surely be a force to be reckoned with. What will separate them from other Real Estate sited ( One of the fastest growing industries on the Web) is their extensive offerings of mortgage and financing options . Visitors will be able to compare loans and find out if they qualify and find. Microsoft will make money by generating loan leads to lenders (reportedly at $40.00 to $60.00 per lead - who says you can't make money on the Internetw.)
And Microsoft is not alone in this area other big names on Web, such as Yahoo!, Intuit and Netscape are all planning to, or have already set up similar services.
Short Notes - A collection of interesting Internet E-commerce quotes
Citibank recently launched a marketing campaign whose goal is to attract a million customers to its Titian site by year-end. ... And how are you marketing your company on the Internet?
UPS projects that one-third of urgent document deliveries will be made over the Internet by 2002. ...Is your company using Internet technology?
From Cyber Dialogue's latest E-commerce study.
- 27 percent of Internet users made an on-line purchase in the past 12 months.
- 65 percent of on-line shoppers used a credit card to purchase on-line.
- 95 percent were either satisfied or very satisfied with their shopping experience.
The Federal Trade Commission is collecting "Spam" and doing something about it!
STATEMENT OF JODIE BERNSTEIN, DIRECTOR BUREAU OF CONSUMER PROTECTION PRESS CONFERENCE ON "SPAM" JULY 14, 1998
"When you get unsolicited e-mail, feel free to forward it to us at the FTC. We may be the only people in town who actually want your spam."
You can forward this spam to the FTC at uce@ftc.gov .and you can read the full story at http://www.ftc.gov/opa/9807/jbspam.713.htm
"As of the end of last week, consumers had forwarded well over 250,000 pieces of spam to uce@ftc.gov , and they continue to do so at a rate of between 1,000 and 1,500 spams per day."
Online Concert Sales Will boom
According to Jupiter Communications on-line concert ticket sales were $18,000,000.00 in 1997 and will grow to a whopping $508,000,000.00 by 2002!
Global Web Commerce Up 205 Percent in May
IDC's Internet Commerce Market Model reports that 92 million Internet users worldwide spent nearly $2.3 billion in Web commerce during May of 1998. Up from 60 million users who spent $750 million in May of 1997!.
That's it for this month. -Gene McMahon
