INTERACTIVE: BEHIND THE HYPE/ARE RETAILERS MAKING THE MOST OF HOME SHOPPING?; Forward-thinking retailers should get online for the profits

There is plenty of cash to be made via the Internet, but the sceptics

won’t get a share.

Winston Fletcher, the chairman of Delaney Fletcher Bozell, is

notoriously sceptical about the Internet. He was on top form back at the

start of January, writing a very sniffy piece about home shopping in the

Financial Times.

He had a go at all forms of electronic retailing, but his main target

was virtual shopping - the notion that soon we’ll all be putting on one

of those cyberpunk headsets to take a stroll down the aisles of a

virtual-reality superstore. Get real, wake up, Fletcher asserted. People

will always want to smell the coffee and squeeze the oranges before they

buy.

But there’s growing evidence that this is just not true. Take television

home shopping. Contrary to Fletcher’s assertions, QVC’s UK operation is

doing very well. During 1995, it turned in net sales of around pounds 45

million - nearly three times the figure for 1994. And, in the US, TV

home shopping accounts for total sales of dollars 4 billion, or 0.2 per

cent of all retail.

Other forms of electronic retailing are getting there too. According to

the Simba Information market research company, total digital commerce in

the US - including things such as retailing via CD-Rom as well as the

Internet - totalled dollars 543 million in 1995. Simba predicts that it

will reach dollars 4 billion by the end of the decade.

Budd Margolis, the president of MIT Consulting, an electronic retailing

consultancy based in London, says he can understand why many in the UK

remain sceptical.

‘It’s important to realise that electronic and digital retailing does

not create a new economy - it just takes away from traditional retail,’

he says. ‘While it remains fairly small, traditional retailers ignore

it. But when the reality hits, it will be a bit like Pearl Harbour.

They’ll wake up and find that someone’s stolen 10 per cent of the market

from under their feet.’

Margolis believes that scepticism sets in when too much hype is followed

by a disappointment that the world hasn’t changed overnight. So what

exactly does the Internet offer? At present, and for the foreseeable

future, digital retailing should be regarded as an extension of the

direct marketing and catalogue businesses - although it will undoubtedly

take direct marketing further into the fmcg sector than ever before.

In the UK, the two most important sites - the London Shopping Mall and

BarclaySquare - are ‘virtual malls’, that is to say sites that group

together offerings from a range of manufacturers and retailers,

including Sainsbury’s, Boots and Marks and Spencer. They tend to offer

non-perishables like wine, but elsewhere you can order more fragile

goods such as flowers and smoked salmon.

The real growth areas are financial services, computer equipment, music

CDs and travel - already a mainstay of retailing on another electronic

outlet, teletext. The catalogue people are already on the Net and, if

the US pattern is followed, we’ll see a lot more of the direct response

TV retailers entering the market too, selling everything from gifts and

kitchenware to cosmetics and jewellery. QVC and its main TV home

shopping rival in Europe, the Swedish-based TV Shop, have also made

tentative explorations of the Net’s potential.

Small beer? Until more people are on the Net and the technology is both

faster and more ‘transparent’, digital retailing has limited potential.

There are also worries about secure payment systems, although the credit

card companies promise to have these in place by the end of the year.

Growth may be slow at first, but shopping on the net isn’t going to go

away. And the more enlightened companies in the fmcg sector are already

realising that it will eventually have an impact on their businesses.

Smart Store, Andersen Consulting’s research and development operation

for the consumer industry, recently took a straw poll of 650

manufacturers and retailers in the grocery sector. Half of those

companies now believe that, in ten years’ time, 20 per cent of grocery

consumption will go direct to the home.

Alan Symonds, the senior manager of Smart Store Europe, points out that

consumers are known to hate struggling around the aisles for staple,

repeat-purchase groceries - mainly tinned and dry goods. Retailers are

already working on systems through which these items can be ordered

directly.

‘The logistics will be difficult to work out and it might not involve

the net as it is currently,’ Symonds admits. ‘But when we invite people

here, we show them an exhibition on the history of retail. We say that

there are three sorts of companies. Some get involved in new

developments very early on, others sit on the sidelines waiting to see

what happens, and others will never join in. It’s time for companies to

decide which of the three they really want to be.’

UK-based retailers on the WWW

BarclaySquare http://www.itl.net/barclaysquare

Retailers include: Sainsbury’s, Toys ‘R’ Us, Argos, Eurostar,

Innovations, Blackwell’s Books, Barclays, Campus Travel, the Car Shop,

McDonald’s, Marks and Spencer, Boots, Oddbins, Interflora and Expotel

London Mall http://www.londonmall.co.uk/

A range of UK retailers plus specialists in computer equipment and

financial services

Eurodollar http://www.eurodollar.co.uk

Car rental operation due to launch soon

Griffin Laundry http://www.demon.co.uk/griffin-corp

Designer menswear

Highland Trail http://www.highlandtrail.co.uk/highlandtrail/

Malt whiskies, smoked salmon etc

Innovations http://www.innovations.co.uk/giftpoint/

Unusual gifts and innovative gadgets

Sainsbury’s http://www.j-sainsbury.co.uk

Pricing information on Sainsbury’s, Homebase and Savacentre, plus next-

day wine delivery service

UK Internet Florist http://www.mkn.co.uk

Smart Store http://smartstore.ac.com/smartstore

This is a bargain-finder site that lets you compare prices among eight

music CD suppliers on the Internet

A full list of sites worldwide can be found on Buddweb

http://ourworld.compuserve.com/homepages/budd_margolis

This article was first published on Campaign