Combatting Chicken Little (Is the E-tailing sky falling?)



Everyone is buzzing about the New York Times article from last week that suggests that we are entering the “Dot Calm” era. In a nutshell, sales growth was at 25% online last year, but seems to be slowing.

The article correctly notes an important trend–the multi-channel shopping experience that shoppers seem to like. They want to use the web for information and then go to a brick and mortar store to actually pick up the product. This spells trouble for online-only retailers but signals an opportunity for retailers that are involved in multi-channel or are developing their own brands.

All in all, I think that the reaction to this article is far overblown. We all knew that online sales growth would slip because almost everyone that can be expected to shop online is now connected to the Internet and shopping away. The maturation of online retail was inevitable.

Of course, this maturation does not mean that e-tailing is dead any more than retailing is dead in the much slower growing offline market. However, as I have written many times, it does mean that success will be a bit harder. With that in mind, here are a few thoughts about long term strategy.

1) As busy as most people are and as high as gas prices are, I do not believe for one second that people are “fatigued” by the online buying process (as hinted at in the NYT). So, don’t expect customers to trade online buying for mall traffic. However, the multi-channel concept is valid and illustrates a real point. The Internet is a great medium for gaining information about products but cannot replicate the buying experience that people are used to. For example, as hard as Land’s End tries with its “Virtual Model” concept, it will never take the place of actually trying clothes on.

So, if you are an online-only retailer, you should consider whether a move to a multi-channel strategy makes sense for you. It does not make a bit of sense to me why people want to order online and then drive to a store to pick up the order (rather than having it shipped directly), but they do–just ask Wal-Mart. If you are only an e-tailer, you might find yourself losing too much business from customers who use you only for research before visiting a physical store.

2) Prepare to go to war for the existing market. When we first got started online, there were plenty of customers for everyone (at least that is what we thought). No more–if you want to grow your market share, you are going to have to take customers from your competition.

3) Invest in creating a shopping experience online that emulates a physical shopping experience as much as possible. I have been discussing new technology in recent articles that helps customers find what they need–that is the future or e-tail. Too many online stores feel like an empty Wal-Mart–overwhelming choices and no employees to help you.

The fact is that the New York Times is late on this story. Those of us in the trenches have known for a long time that the market is maturing. But we also know that there are strategies to grow and prosper in a mature market.

  • http://www.lff.com Fitness guy

    Good article. We should have known that the virtual market place was subject to a finite number of users and the hands on experience would have to be overcome with intuitive websites.

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