eTailing - isn't it simply mail order online?
By stephendavis on Sep 22, 2006
Continuing the theme from yesterday around the hype and excesses of dot com start-ups in the period leading up to the bubble bursting in spring 2001, I remember taking part in a brainstrorming session (with my previous employer) in New York looking at potential new business partners among technology start-ups.
At the time, my 'old economy' company was being approached by a stream of Internet start-ups, mainly it seemed so that they could be publicly associated with a large multinational organisation with its own dedicated sales force around the world. As I recall however, the joint go-to-market discussions never seemed to progress beyond North America.
Many of these start-ups were convinced that online retailers were in the process of re-writing all the rules of retailing rules. This was a view shared by most of my colleagues. In their view, it no longer mattered what product category was being sold, consumers would over time naturally prefer to buy online from sites that offered them greater product choice and price transparency than visiting a store.
Surely, I argued, wouldn't the new online model follow the conventional mail order rules? Was it not a case of simply transferring the contents of a printed product catalogue online? In the end, its still all about proximity to the store, shipping costs and shopping experience. Nobody else agreed. I was simply too European and lacked vision.
Firstly, certain product categories are simply not suited to eTailing. These maybe heavy, low cost bulky items. Using an extreme example such as cement, the delivery costs form a large part of the pricing. As pets.com later found out, cat litter and dried dog food also falls into this category.
Secondly, online retail sites are not suited to the luxury shopping experience. I am told that part of the pleasure of buying a Rolex is the visit to the store and being pampered by the sales staff. Displaying Rolex watches alongside other brands removes a certian amount of the brand's supposed exclusivity.
Thirdly, the demand for mail order goods depends on the customer's own proximity to a retail store. Customers living in remote villages in the American mid West or the Highlands of Scotland should have a higher need for mail order (displosable incomes notwithstanding) than someone who works and lives in downtown Manhatten.
It always surprises me when I see Amazon.com referred to as an Internet company. Without doubt, the design, functionality and usability of its web site has re-defined online shopping, but at its core, its business centres around managing a successful low margin retailing business including pricing and discounting, inventory control and predicting consumer demand.