The interactive retail market, including sales of goods and services over the Internet, will move slowly for the next two to three years according to “Retail’s Interactive Future”, a recent report from Forrester Research Inc. of Cambridge Massachusetts. Beyond the learning curve, however, an explosion in demand is forecast. http://www.forrester.com/esearch/sw/1995/mar95swe.html
Merchants will need the next couple of years to learn how to sell via online and CD ROM, and how to find and nurture repeat customers. Once these hurdles are cleared, three trends will fuel rapid market expansion:
1)strong PC shipments into middle- and upper-income homes, 2) more appealing buyer demographics and 3) increasing technical sophistication among consumers. Forrester projects that revenues from goods and services sold through interactive retail channels will rise from $240 million in 1994 to $6.9 billion by 2000.
One should never underestimate the effect that Microsoft will have on this market. The merry men from Microsoft have set course to provide online technical support and product upgrades online and, a logical extension is to take payment for these goods and services online too. They are building the Microsoft Network up to be a strong competitor for online services like Compu-Serve and American OnLine that have already set up shop. There will be plenty of others riding on their coat tails.
One major problem thus far, is the failure to think globally but act locally. Not many UK Internet users will want to buy, for instance, Hawaiian coffee via the Internet if the coffee has to be shipped at great expense and delay from Hawaii, regardless of the quality and uniqueness of the product. See http://planet-hawaii.com/bec/ indexs.html. The Best Expresso Company also offers Italian coffee from its Hawaiian stores - a wasteful exercise for any European buyers.
In their rush to experiment, many merchants have made obvious errors and built retail models that are destined to fail, according to the Forrester report. “Early interactive merchants are not thinking straight,” says Emily Nagle Green, Senior Analyst with Forrester’s People and Technology Strategies and author of the report. “You can’t test out a new channel with one tenth of your product line or fully probe the market with T-shirts and coffee mugs.”
The Forrester report warns that current interactive shopping efforts do not provide the consumer with real value. Merchants have yet to embrace and promote the advantages that the new media can provide: timeliness, convenience, ease-of-use, and lower prices. If interactive retail doesn’t give consumers a better deal, the report says, they will stick to traditional channels and avoid the new media frontier.
It seems that there has been a tendency to take a low cost, toe-in-the-cyberwater approach that just will not work. Companies that want to take a profit in the Internet are just going to have to take a deep breath and invest. Otherwise the small companies that are not quite so risk-adverse will turn into staunch competitors before the big guys notice.
Forrester predicts that merchants who create a new interactive shopping experience will face a wide-open market where creativity, not cash, is most important for success. Consumers will be lured by low prices and convenience , a return for information, new services, and a sense of shared community. By contrast, the report predicts that Internet malls, pseudo-interactive catalogues, and sites that offer trivial merchandise will not survive. “The fuse is set for successful interactive shopping,” says Green. “But there’s lots of clutter - merchants need to win consumers’ hearts and keep them coming back.”
Meanwhile, there’s work to be done. The first roadblock is customer confidence, but the security that is provided with Netscape’s browsers have almost conquered that obstacle.
Credit cards pose more of a problem. They are not the best way to transact over the Net and the credit card companies themselves are quite wary of Internet sales. Mondex and DigiCash are other electronic cash proposals nearer to what consumers want. But these and others like them are all in trial stages. It’s just too hard to buy things on the Net at the moment, although the process is simplifying all the time.”