Big retail chains gearing up to put sales pitch online

Holiday season seen as time to grab share of Internet shoppers

On the Web

October 17, 1999|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Mere months ago, Internet retailing was dominated by companies that had never sold a product in a store, with the Amazon.coms of the world grabbing headlines and Wall Street's attention.

But now, the virtual retailers are bracing for an onslaught from the "bricks-and-mortar" chains, which have been galvanized into action by last year's phenomenally successful holiday season that racked up $3 billion in online sales.

"Once consumers started shopping online, they stayed shopping online," said Seema Williams, an analyst with the consumer e-commerce group for Forrester Research Inc. "That was the wake-up call."

Traditional retailers have so far not been hurt by e-commerce, but eventually, Williams said, "the Internet will steal market share and retail dollars from traditional channels."

Among the heavy hitters gearing up to launch or drastically improve Web selling: Home Depot and Dayton Hudson Corp., the parent of Target, Marshall Field and other department stores. Circuit City and Crate & Barrel arrived online last summer. Toys `R' Us is overhauling its site. Late arrivals Williams-Sonoma and Ethan Allen are also planning sites.

And Wal-Mart -- the world's biggest retailer -- is causing jitters in the virtual world with plans to open a vastly revamped and upgraded site by Jan. 1. The giant retailer isn't revealing details.

Rather than launching a limited test site this year, Home Depot will hold off and launch a more extensive site next spring.

"We want to be able to offer customers [a chance] to have Home Depot products on their own terms, whether they come to the store, order online, have it delivered or pick it up at the stores," said Carol Schumacher, a Home Depot spokeswoman. "Our biggest asset is still our stores. We can use our stores to be part of the fulfillment process from the Internet."

Dayton Hudson bought a direct-mail company over a year ago to gear up for Internet shopping and plans to have 10 sites up before the holiday selling season, said Jerry Storch, Dayton Hudson's president of credit and new business.

"Our belief is that multichannel retailers, in the long run, have a tremendous set of advantages," Storch said. "We're going to take our share and more."

Though Internet shopping now accounts for just 1 percent of all retail sales, land-based retailers want to get online now to be prepared to grab a share of the $184 billion that Forrester projects shoppers will be spending online by 2004.

Only then will the true "clicks vs. bricks" standoff take place, some experts say. But some of the winners and losers in the fight for wallet share are likely to emerge after this holiday season -- expected to be the best gauge yet of online shopping.

It's also viewed as a test of whether retailers selling online have adequately fixed glitches that angered customers last season, said Natt Fry, a managing principal in retail consulting with IBM Global Services.

At this point, opinions differ on who is best poised for success -- companies with an online or offline heritage.

The "pure plays," or Internet-only companies "are going for spaces where there are no clear physical matchups, trying to exploit the inventive capabilities of the medium and put an offering out there that is truly unique to the customer," said Steve Louis, a partner with Andersen Consulting during the National Retail Federation's inaugural e-commerce conference late last month in Philadelphia. "There is no predefined boundary about what they can and cannot do. They are able to define the brand as they see fit."

Though they spend 70 percent to more than 100 percent of revenue on marketing customers and suffer losses as a consequence, they have the advantage of getting to the Internet first, Louis said.

They understand the importance of good, quick customer service, in many cases better than traditional retailers, and often have a better grasp of leading-edge technology, such as the floor-planning program at Furniture.com, Williams said.

"For us, it wasn't about bricks-and-mortar or Internet," said Ken Seiff, chief executive officer of Bluefly.com, which sells off-price designer clothing on the Internet, during the conference. "What we really liked about the [Internet] opportunity was the traditional retailers were not tackling the space."

On Bluefly.com, consumers can choose favorite brands, categories and sizes, he said.

"Instead of digging through rack and bins, we were able to create a technology, which we call My Catalog, that allows consumers to come in and enter all their preferences, and then we show them only what they want to see," Seiff said. "We were able to redefine the way consumers were able to shop for off-price."

But Internet-only companies are far from invulnerable, and many are overvalued, analysts say.

"What happens when the true gorillas of retail really step up their efforts?" Louis said.

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