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
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
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
‘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
‘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
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
Car rental operation due to launch soon
Griffin Laundry http://www.demon.co.uk/griffin-corp
Highland Trail http://www.highlandtrail.co.uk/highlandtrail/
Malt whiskies, smoked salmon etc
Unusual gifts and innovative gadgets
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
This article was first published on Campaign