If e-commerce were a mad dash to the finish line, pure-plays would have taken the gold medal, according to analysts. But it has turned into a marathon — and as dot-com startups gasp for breath, traditional retailers, many of which stumbled out of the gate, are steadily passing pure-plays like the tortoise that whipped the hare.
And many analysts said that in 2002 and beyond, e-commerce would become more and more about multichannel selling, giving traditional retailers a huge advantage as the race continues.
“Obviously, it’s easier to establish a virtual infrastructure than it is to go out and build a physical presence,” GartnerG2 research director David Schehr told the E-Commerce Times.
“Unless some of the virtual companies can come up with more innovative solutions to issues like returns — to become virtually physical, in a sense — then traditional retailers are only going to continue to surpass them.”
Nagging Problems
So, how did retailers battle back after a sluggish start that saw pure-plays staking their claims throughout much of the online business world? Often, they did it by offering solutions to e-commerce’s toughest problems, namely shipping and returns.
In fact, Schehr and other analysts said that absent some creative solutions to those nagging problems, pure-plays will see their domain limited to certain items.
“The small, shrink-wrapped stuff will continue to work well, but as you get into the purchases that require look, touch and feel, retail stores are always going to have an advantage,” Schehr said.
Top of the Crop
Several national retail chains were among those cited by analysts as strong online performers, including Eddie Bauer, Gap and J.C. Penney, which was one of the first retailers to encourage shoppers to choose between stores, catalogs and Web shopping.
What those chains have in common, Forrester analyst Christopher Kelley said, are strong brand names and clear interchanges that let shoppers move from one channel to another.
And a recent report on the 2001 shopping season by business consulting and systems integration firm Answerthink found that these companies performed better than many pure-plays in several categories, including ease of ordering and tracking purchases.
Wait and Watch
Often, though, retailers have simply shown patience and are now benefiting from their well-established offline brands.
“There was a certain amount of waiting and seeing going on,” Edward Harbour, director of e-commerce initiatives at IBM, told the E-Commerce Times.
That, in turn, meant fewer of the crash-and-burn mistakes that some pure-plays experienced, he noted. While retailers have been far from immune from missteps — Federated Department stores announced in the midst of the 2001 holiday shopping season that it would curtail its Web efforts — keeping fumbles to a minimum is critical to protecting more established offline brands.
“As a consumer, you develop a fair amount of expectation on a given brand,” Harbour said. “If I shop at Nordstrom’s, the expectations I have carry over to the Web site. You want that to be linked together as seamlessly as possible. Some retailers realized they didn’t have to have a site in 1998 to survive. They’ve been able to wait and watch and learn.”
See Clearly Now
Forrester analyst Kelley dubbed this trend of linked expectations “channel transparency” and said that in its purest form, it enables shoppers to move freely from online sites to brick-and-mortar stores to catalogs.
“Companies that give the same experience, the same results, in each channel are going to see more spending [and] more repeat customers,” Kelley told the E-Commerce Times.
“Pure-plays may continue to capture a lot of online sales,” he added. “But retailers will be winning sales from customers who may have started out online. Those sales won’t be counted, but smart retailers will understand the value of the Web goes beyond what’s bought and sold there.”
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Traditional retailers have stores; pure-plays don’t. Stores facilitate the exchange of goods; goods left exposed outside of locked consumers’ homes don’t. Pure-plays could compete if only the function of stores — storage — was outside consumers’ homes.