In 1999, most Web retailers wanted to be the next Amazon, or Yahoo, or eBay. Many spent uncontrollably on advertising and promotions to achieve their goal. Not surprisingly, many Web retailers, with their go-for-broke ad campaigns, got just what they were going for. In 2000, layoffs among Web retailers already reached tens of thousands of workers, with hundreds of B2C Web businesses closing forever. For 2001, it’s time to consider strategies and tactics apart from ad spending to differentiate Web retailers. The alternative is to wake up one morning and find one’s employer listed at www.fuckedupcompany.com.

We believe Web retailing has reached its first plateau.  It’s true that Web storefront “packages” have resulted in thousands of online catalogue sites that are boring and too similar to each other. It’s also true that the number of new shoppers, while still increasing, is growing at a slower rate than in the last two years.

The easy explanation is that “the thrill is gone.” People can no longer impress their friends at cocktail parties by talking about what they bought online. As a result, Internet retailers must reinvent themselves. They must evolve from being a “novelty act” to being a necessary component of a person’s daily life. The near term focus should be on improving the efficiency of the shopping process, not on improving the visual appeal of a Web site.

The key to the reinvention of Web retailing is understanding more about why people visit a Web site and why they do or do not become customers, rather than just what they click on and how long they stay on the site. In the near term (2001-2002), most Web site visitors will continue to be humans, and the best-of-breed Web retailers will stop simply trying to generate “awareness” with expensive ad campaigns and try to actually understand and solve the problems of those persons for whom Web shopping is a regular activity. We have listed a number of Web retailer “do’s” and “don’ts” below, based on our work consulting with B2C companies and the research we conducted for our new book “Doing E-Business,” from John Wiley & Sons.

WEB SITE DO’S & DON’TS         top

Do spend money to add “personality” and “character” to your Web business.  The simple way to do it is to hire a spokesperson with a personality that matches your message, but it is better to build “attitude” into the entire site, including text, graphics and media. An example is SlimJim.com, the snack food’s Webpage.

Don’t spend money on elaborate customer experience technology, such as 3-D. While retailers like Eddie Bauer and Sharper Image are investing in technology to enable products spin around on the screen so that customers can see them from all angles, we do not believe this investment is justified for most retailers who sell products with which consumers are familiar. Better to spend money on customer service or perfecting the fulfillment process. Also, customers surveyed by research firm Creative Good consistently indicate they want a simple online shopping experience.

Don’t waste money trying to patent “ease of shopping” technologies or processes. Even though Amazon has patented their 1-Click checkout technology or that Priceline has patented their “name-your-own-price” business model hasn’t helped these companies achieve profitability or kept their stock prices from collapsing along with other Web retailers.

Don’t try to block shopping agents or bots. As software agents or bots get more powerful, many Web retailers are tempted to block them from scouring their catalogues on behalf of users or content aggregators. We believe a better approach is to determine the origin of these bots and work with aggregators to ensure your store is accurately represented, rather than not being represented at all. This technology will be used more and more over the next few years.

CUSTOMER SERVICE        top

Do provide positive feedback to customers at every step of the order process via opt-in e-mail. As buying online becomes less of an event, people are more likely to forget what they ordered and from whom. Status e-mails become more important as reminders in such cases.

Don’t spend money on Customer Care Robots (CCR) are a software tool that is growing in popularity for customer self-service. While some CCRs do a decent job of simulating human interaction, there is a growing body of research from Creative Good, Jupiter and others that shows that when customers have problems, they want to talk to humans.

Do measure satisfaction; don’t stop at clickthroughs. According to researcher Creative Good, satisfaction with selection, shipping, problem resolution and return handling are critical factors in consumer profitability. There is no substitute for asking customers (particularly those who call or e-mail with complaints) if they are satisfied with the elements of their interaction with your store.

Don’t drive the last mile. While consumers like the potential convenience of having their purchases delivered to their home, in reality the solution doesn’t “scale” very well. The new crop of “home delivery” companies such as Kozmo, Streamline, HomeRuns and WebVan have yet to figure out an acceptable model or system for reconciling all the different products destined for the same home or street. We doubt this can be a profitable business model for the near term.

STRATEGY       top

Do implement a Multi-Centric Business Architecture. This is really just a geeky way of saying that there is absolutely no reason why a company cannot have two or 10 different types of Web retailing “storefronts” selling exactly the same product. One storefront could be straight retail, another could be an auction model and the third a buyer aggregation model, like Mercata. For example, uBid and eCost are different front ends on highly similar content from the same parent company.

Do develop partner relationships between online and offline stores. A study published in June, 2000 by McKinsey found that pure-play online retailers could not be profitable without an offline partner to achieve economies of scale, build brand identity and support customer service and fulfillment.  Training of in-store employees on Web site content and consistent policies and prices are other recommendations.

Don’t offer free shipping or other loss leader services with a plan to make back the money on advertising or from customer loyalty. According to research from Gartner Group, consumers do not mind paying shipping costs and are not more loyal just because a company offers free shipping.

MARKETING TIPS        top

Do list your site with independent retailer rating services. Rating services not only serve as a referral agent (for a fee), but they are also important sources of user ratings regarding experiences and opinions. Companies such as BizRate, Gomez, and ePinions are some of the well-known companies to consider.

Do focus on a well-defined MicroMarket. Personal and MicroMarket Web sites already generate more than 75% of the Web’s aggregate page views, according to Forrester Research. So it is not surprising that some of the fastest Web retailing growth is among the entrepreneurs that are establishing MicroMarkets affiliated with groups such as affinia, Amazon’s, or Yahoo. Standalone niche retail stores are still viable, but comparatively costly to establish as brands.

Do join one of the “MicroMarket Malls” which are being launched under the “umbrella brands” of the major portals and top tier Web retailers, such as Amazon and Yahoo. Web retailers that are not already household names should not waste their capital on massive advertising blitzes. They should define a MicroMarket that is homogeneous and join a MicroMarket Mall wherein all the merchants target the same demographic or psychographic segment.

Do join a third party E-Loyalty program, such as NetCentives, Flooz, or MyPoints. But make sure that the program is targeted at exactly the same audience you are, because the value to customers comes from the synergy among the community of merchants.

FUTURE INTERNET RETAILING       top

But what is the future of Web retailing long term (2003-2005)? We argue that it will be more like B2B – the opposite of the situation today, where B2B has adopted the manually intense model of consumers looking through catalogues. The increasing use of home computers to manage billing and payment, combined with always-on cable modems and the proliferation of “smart,” Internet-enabled appliances will result in a new type of “household management” application. You can expect it to manage utility costs, buy groceries, and perform other routine “optimization” tasks based on a set of household management “rules” chosen by the consumer. As this model kicks in, your Web site look and feel will become irrelevant.

Household management applications will use replenishment agents to search the Web, purchase goods or services from a series of merchants and integrate the results into the home management application. The household manager applications will be similar to the range of small business B2B Web purchasing applications. Their role will be to assist high-end home owners in managing the process of buying goods and services.

Examples of the type of value we expect home management systems to provide by 2003 include:  1) online monitoring the shifting prices of telephone, cable electric and other digitally switchable services, and shifting providers to optimize savings and service; 2) online monitoring of special deals at a pre-set group of merchants for a pre-set list of products, and automatically placing orders for pre-set quantities; 3) online monitoring of the household’s inventory of consumables ( via barcode scanners in microwaves and/or refrigerators) and placing replenishment orders; 4) online monitoring of bank and other account balances, shifting money based on pre-set rules and paying bills.

SURVIVAL OF THE FITTEST

The Internet retailers that survive and thrive will be the ones that focus their limited capital on those tactics that have a clear payoff, rather than waste money on television or online ads that have questionable retention power or on visually impressive interfaces that do not improve shopping efficiency.

Building an online brand and a supporting strategy must go beyond advertising and Web site content to focus on customer service, strategic alliances and well-defined joint marketing efforts. As we evolve toward a more automated shopping model, Web retailers should invest in relationships with software and services vendors who can deliver the next generation of small business and household management applications.

David Taylor is a partner in Emarket Holdings and Co-Author of “Doing E-Business” published by John Wiley & Sons. You can reach Taylor at dtaylor@emarketholdings.com