Windows of E-Commerce Opportunity
The Web’s so-called portal sites, such as Yahoo, Excite, America Online’s AOL.com and Netscape’s Netcenter, have leaped onto the e-commerce bandwagon, hoping to influence online shoppers’ buying habits, sell advertising along the way and, incidentally, take over one of the major roles of a retailer.
To them, retailing is just another feature to offer their visitors, like free e-mail, stock quotations, news feeds and search engines. While most of the portals don’t directly sell products, they do provide shoppers with information about products, help them choose which item they want and select a retailer.
“They really are trying to become retailers themselves,” said Ken Cassar, a digital commerce analyst with Jupiter Communications in New York. “They are trying to do everything a retailer does.”
Everything, that is, but actually sell, deliver and support the product.
The portals’ push into retailing creates a potentially formidable rival business model for the branded online retailers. While portals say brand, customer service and consumer loyalty will continue to play important roles online, their own retailing efforts may create pressure to lower prices and could undermine customer loyalty, particularly for smaller retailers that don’t have strong brands yet but need the traffic the portals provide.
Both portals and online retailers “are trying to own the customer experience, but it’s not necessarily an exclusive relationship,” said Tim Brady, vice president of production and executive producer of Yahoo. “We’re doing the best we can to make the user feel like they can come to Yahoo to find information about any product.”
The customer experience that everyone wants to own includes guiding people through the buying process, from the time they enter the store, walk the aisles, scan the racks, try on the clothes, compare cuts and cloths, check the price tags and, finally, pull out the debit card.
In the real world, the data, accumulated through years of market research, help retailers determine how to stock and organize their stores as well as advise customers on future purchases.
Online, data are collected in significantly greater detail, and many believe they hold the key to clearing up the murky art of designing a Web-based store.
From the portals’ point of view, they’re simply trying to sell eyeballs to advertisers, and if that means providing a shopping service or any other function that appeals to Web users, so be it.
The cross-uses of these functions can be quite compelling. For example, Excite offers a free, Web-based event-reminder system that prompts a member when, say, his mother’s birthday is coming up. Combine that with an online shopping service and an e-mail box, both offered free from Excite, and a shopper may feel he has little reason to leave the portal.
“The name of the game is to develop a long-standing relationship with the customer, and to maintain that through commerce if necessary,” said Joe Kraus, co-founder and senior vice president of Excite.
Retailers have a wealth of information about their products, such as reviews, consumer testimonials and price-comparison tools, that they give their customers to help them decide what to buy. In many cases, the portals have been able to buy access to similar information, as Yahoo recently did with books.
Once the customer has decided what to buy, a shopping robot scans the Web and returns with the names of merchants selling that item, along with the price.
Each portal does retail somewhat differently, with Lycos, for example, accepting the payment, although it does not actually have an inventory. Most portals hand off the consumer to the eventual retailer, which consummates the deal.
The portal-commerce model can give an online retailer access to traffic it might not otherwise get. But it also could undermine their efforts to establish customer loyalty, since the actual “salesman” role has been taken over by the portal.
But shopbot companies discount the idea that they cause prices to go down, even in commodity goods such as books.
Of the people who use the My Simon shopping robot, less than half select the lowest-price vendor, said Josh Goldman, vice president of marketing for MySimon Inc., a Santa Clara-based shopping agent company. Instead, Goldman said, customers have shown a tremendous amount of brand loyalty in frequenting companies with familiar names.
Still, big-name online retailers such as Amazon.com have declined to cooperate with many of the portals’ efforts to develop retail malls.
“It’s not only about finding the best price, it’s about all the other aspects of being the most comprehensive music service online,” said Jon Diamond, chief executive of N2K Inc., who believes that shopbots that emphasize price do not accurately assess the value offered by his company’s music store.
Because N2K’s Music Boulevard is the online music retail partner of Excite, the portal does not include music as one of the categories in its shopping agent.
“If you’re a second-tier player and you’re looking to get traffic, you’ll play the portal game,” said Tom DuBois, chief executive of Active Research, a San Francisco firm whose technology helps people select consumer electronics such as digital cameras, camcorders and DVD players.
The Active Research tool, which has been licensed to several Web sites that specialize in photography, can easily be linked to shopping robots that would then find the online or local real-world retailer that sells the camera at the best price.
“The real issue is that the power is shifting to the consumer,” DuBois said. “I’m not saying that people won’t have brand loyalty, but they’re going to be more informed.”
And everyone wants to be the informer.
“The risk that portals run is that they’re trying to be too many things to too many people,” said Chris Lochhead, chief marketing officer of Scient Corp., a San Francisco technology consulting firm. “Think of a superstore. You can find anything you want, from dog food to stereos, but if you want to buy a stereo, chances are you’ll go to a store that specializes in audio.”
Times staff writer Jonathan Gaw can be reached via e-mail at jonathan.gaw@latimes.com.
