E-retailing 2.0

They are mostly gone now, those early online retailers. They believed profits didn't matter. They saw advanced technology as the silver bullet. And their business plans ran to just six words: "Build it, and they will come."

Now, the dot-com survivors say, there's a new focus on basics, such as how to attract customers to a site once it's been built and how to make them happy there. There's a big push to integrate Web sites with back-end systems and brick-and-mortar retail operations. And, yes, there's still a drive toward the latest technologies, such as wireless, 3-D and Web site personalization.

"The first use of a new technology is always imitation of the old," says Michael Shamos, co-director of the Institute for eCommerce at Carnegie Mellon University in Pittsburgh. "So what we see in e-tailing is the first thing you do with your Web site is replicate your catalog."

Although understandable, that's a huge mistake because an online catalog is harder to use than a paper one, Shamos says. "A catalog can't ask you questions. So what Web sites are generally terrible at is eliciting consumer needs," he says.

But the best sites are moving far beyond cataloglike presentations. A year ago, Shamos asked his e-commerce graduate students to see how many Web pages they had to traverse on Delray Beach, Fla.-based Office Depot Inc.'s Web site to find the heaviest-duty stapler offered. Results ranged from 23 to 56 pages.

But now you can get the answer (a US$70 behemoth that will staple 210 sheets at once) in just five clicks. "They now have a beautiful new interface I haven't seen anywhere else," Shamos says. The advanced "search by attributes" option lets you select and search product characteristics. There are 23 listed for staplers, such as color, staple size, grip material, sheet capacity and warranty.

Another e-retailer that Shamos says heralds the future is Lands' End Inc. in Dodgeville, Wis. The online clothing store allows shoppers to build virtual models of themselves and then use the models to try on and display clothing. Lands' End buys the modeling service from Montreal-based My Virtual Model Inc., which stores a shopper's model and lets him use it at a number of clothing Web sites. The next step, which Shamos says is the subject of research at Carnegie Mellon and elsewhere, will be true 3-D images of models and products.

Much research is going into how to make online sites more trusted, and the answer doesn't lie in fancy technology. In a recent survey by Yonkers, N.Y.-based Consumers Union, only 29 percent of 1,500 U.S. Internet users polled said they trust Web merchants, far fewer than those who trust off-line retailers.

The Web Credibility Project at Stanford University is trying to identify what factors make a Web site trusted and respected. A few Web sites, such as Amazon.com and The New York Times site, are "reaching the ceiling in terms of credibility," but most could do substantially better, says B.J. Fogg, director of the Persuasive Technology Laboratory at Stanford. Factors that decrease credibility include typos, broken links, a Web counter showing only a few thousand hits and text that's too small.

Attention to these things will become increasingly important as the population becomes more sophisticated online, Fogg says. "We've found that little things have surprisingly large consequences in terms of credibility," he says. "For example, that little copyright notice on the bottom of the page. How many Web sites still have 2001 or 2000 there? Details matter."

Fogg says high-tech features sometimes backfire. "A few years ago, animation was a great gee-whiz kind of technology, but from a consumer standpoint, there's been a backlash," he says. "Our research has shown that an animated [graphic] will hurt your credibility."

John M. Jordan, a principal at Cap Gemini Ernst & Young Group in Cambridge, Mass., says the major development activity for many Web retailers during the next two years will be integrating online operations with back-end systems and off-line sales channels. "The integration challenge is hitting a lot of people," he says. "Even some of the largest and most advanced online retailers have a lot of duct tape behind the scenes."

Instead of duct tape, Martha Stewart Living Omnimedia Inc. in New York used Consumer Commerce Suite from Art Technology Group Inc. in Cambridge, Mass., to tie together its four major businesses. "We built a data mart for all the information about our customers from magazine subscriptions, television viewers, buyers of our books and people ordering through catalogs," says Raffaele Pisacane, vice president of Internet development at Martha Stewart. "We integrated this into a single view, and we leverage it through our Internet channel."

For example, Pisacane says, Martha Stewart's online system can generate e-mails to people whose magazine subscriptions are about to expire, or it can flash an expiration warning to a subscriber who happens to be shopping or looking for information online.

Secaucus, N.J.-based Matsushita Electric Corp. of America has an even tougher integration challenge: how to tie its Panasonic Web site to the inventory systems of the retail chains that sell Panasonic gear. "If your Web site sends someone to a dealer down the street that doesn't have the model they are looking for, they'll buy something from someone else," says Tom Popp, eBusiness applications manager.

The Panasonic Web site now lists those stores that have received a shipment of the requested item within the past two weeks. "That's about as close as we can get right now," Popp says. Developing a real-time online inventory capability for a dozen major retail chains is one of two major projects under way at Panasonic now, he says.

When wine seller NextWine LLC in Napa, Calif., built its e-commerce site two years ago using IBM's WebSphere Commerce software, it insisted on providing real-time inventory views to its shoppers, even though few online retailers did that. But at the time, NextWine couldn't afford an automated inventory system, so it manually posted stock balances on some 5,000 items to the Web site so that the site always showed current stock on hand.

But the company recently migrated from the Windows NT version of WebSphere to the Linux version. NextWine President Dain Dunston says Linux and other open standards such as XML made it easy to interface the Web site to a new automated inventory system.

The inventory system will automatically post XML-compliant inventory updates every 10 minutes to the Web site using a very simple interface, Dunston says. "Because it's an open system, we were able to do this for an extraordinarily low cost," he says.

A few of IBM's e-commerce customers use Linux, "but we are getting much larger demand going forward," says Bart Lautenbach, IBM's director of WebSphere Commerce software. He says small companies are attracted to the low cost of integrating standards-based systems, while larger companies especially like the scalability of Linux.

Goodbye To Wires

Ideally, a Web site that tries to sell something should have the audio and visual appeal of a salesperson, says Carnegie Mellon's Michael Shamos. The trouble is, few home Internet connections have enough bandwidth to make that possible.

But wireless communication based on the 802.11 standard will change that, he predicts. "If I can send 11M bit/sec. or 50M bit/sec. into your house through 802.11, now I can give you unbelievable multimedia content," Shamos says. "I foresee Web sites where you actually get sold to, and if you don't like that you can press a button that says, 'No, I prefer text.' "Wireless will transform e-retailing by blurring the distinction between virtual and physical stores, says Cap Gemini's John M. Jordan. "What if you could see the store layout on the shopping cart, and it's the same layout you see on your desktop? So I have my Palm Pilot at the store ready with my shopping list, and I say to ship certain things to me because they are not in stock, or I don't want to pick them up. Wireless can make this really seamless."

Jordan says shoppers might roam a store armed with a wireless bar-code scanner attached to a personal digital assistant, selecting items for home delivery by the store. "It's a fuzzy hybrid," he says. "My order is going in over IP, but I'm not at a Web browser. That's why wireless is so exciting."

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