Guest column: Threat of e-retailing Is overstated -- for now

Is it time to end the myth that retailers (and almost anyone else) who don't already have hot e-commerce sites up are dead? Really, I hear this all the time: "The pure plays are so far ahead of the brick-and-mortar players that traditional retailers don't have a chance to catch up. is the wave of the future, and laggards are dinosaurs that no one will even bother to dig up in a few years."

True, a lot of traditional retailers lag the dot-coms online. But the reason they don't throw the kinds of resources at their sites that dot-coms do is that they're focusing on the market that actually makes them money -- people in the stores.

A study by Deloitte & Touche and the National Retail Federation predicts that Americans will spend up to $US185 billion during the holidays -- but only around $12 billion to $15 billion of that will be spent online.

That's worth ramping up your online operation, but not if you have to spend your whole IT budget to do it. Dot-coms have to put all their resources into their sites -- the only way they can get to a customer is through a router.

But for brick-and-mortars, it may be smarter to let the dot-coms bleed venture capital in pursuit of a trickle of revenue than it is to confront them immediately.

Look at the all-powerful retail force at Wal-Mart, which has retreated from its online assault for the season, figuring it's better to lose a few potential sales online than to risk a very public failure.

But you can bet that the site it plans to launch early next year will be a Death Star that takes full advantage of Wal-Mart's vaunted logistics, distribution and supplier discounts -- not to mention the advantage of having a place where customers can touch items before buying or return items without a trip to the post office. With that fine-tuned engine behind it, the site only has to be medium-cool to deliver everything its loyal herd of consumers want -- decent products at decent prices.

On the other hand, Toys R Us, which was evil-empired out of its No. 1 spot in the toy market by Wal-Mart last year, continues to beat its head against the online wall. The latest iteration of its e-commerce site is as mildly unsuccessful as the others. E-commerce-oriented ad campaigns drove so many people to the site that the company had to put limits on visitors to keep it from crashing, despite quadrupling its servers.

But even considering the $132 million it lost in fiscal 1999, no one expects Toys R Us to go away. It brought in $11 billion overall last year. It also has one of the most recognised brand names in America and just posted its best quarterly increase in 10 years. Betting on its survival, most Wall Street analysts rate it a Buy or better.

But even if Toys R Us does get whacked somehow, Wal-Mart, not eToys, is more likely to pull the trigger. It takes a lot to kill big players off-line -- and the dot-coms aren't high enough caliber weapons to bring them down ... yet.

Kevin Fogarty is Computerworld's business editor. Contact him at

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