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Site Aims to Get Up Close and Personalized

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TIMES STAFF WRITER

No one can doubt that companies such as Amazon.com, Dell Computer and EToys have demonstrated that the masses are perfectly willing to shop online--not with electronic commerce revenues forecast to top $36 billion this year. But one crucial element of retail success is still missing from cyberspace--the impulse purchase.

Enter CheckOut.com, the much-anticipated Web site developed by former Disney Online President Richard Wolpert and backed by former Hollywood super-agent Michael Ovitz that is set to launch next week.

CheckOut’s main weapon, Wolpert said, is powerful personalization software that can sift through millions of pieces of data and serve up Web pages that appeal directly to an individual user’s deepest interests, as measured by his or her mouse clicks.

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“Every time a user clicks, they’re telling you something about them, and you can use that,” said Wolpert, 36, the firm’s acting chief executive and founder. “We know what people are interested in, and we use that to combine their entertainment experience with the sell.”

That’s a formula that some analysts believe will kick electronic commerce into high gear.

“Personalization is the tool by which e-tailers will articulate a pretty profound competitive advantage relative to bricks-and-mortar players,” said Chris Vroom, an e-commerce analyst for Thomas Weisel Partners in San Francisco. “To marry e-commerce with superior content and then personalize the site is going to be absolutely the killer app.”

Online retailers clearly need a way to boost their sales conversion rate. According to a study released this month by Shop.org, a national association of online retailers, a paltry 1.5% of visits to e-commerce sites result in a purchase.

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And that’s when most users visit sites with specific products in mind. Companies have had even less success persuading Web surfers to make impulse purchases.

Beverly Hills-based CheckOut.com aims to beat the odds by pitching itself as a portal for music, movies and video games instead of as an online store. The site will entice users with entertainment news, sneak previews, reviews and chat rooms designed to give them lots to do.

As visitors get drawn deeper into the site, the pages become increasingly customized. CheckOut.com’s database contains 3 million pieces of content--ranging from artist biographies to video game reviews--that can be linked in 5 million ways.

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Those linkages, combined with the visitor’s clicks, allow CheckOut.com’s servers to create unique Web pages based on 10 computer algorithms, said Edmond Mesrobian, a former UCLA computer science professor who serves as the company’s chief technology officer.

“The site changes depending on who you are and what you’ve done recently,” he said.

Among the variable elements are sales pitches, which are arrayed along the right side of the screen. As visitors zero in on the content that interests them, opportunities for shopping are more prominently displayed. If a user is reading about country music star Lyle Lovett, for instance, CheckOut.com will offer links to buy his best-selling CDs and videotapes of films he’s appeared in, along with related movies such as “Unforgiven” and video games about hunting and fishing.

Web surfers don’t mind--and often welcome--sales pitches if they are personalized, said Christopher Lochhead, chief marketing officer for Scient Corp., an electronic business services and consulting firm in San Francisco.

“The more personal it can be, the higher the chance of converting their interest into a transaction,” Lochhead said.

Over time, as the firm learns more about customers’ personal preferences, its data cache will become more valuable, said Ken Cassar, a digital commerce analyst with Jupiter Communications in New York.

Although personalization can help drive sales, it is not without risks. Chief among them is the risk of making bad recommendations.

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“It’s good if you can make a good recommendation,” Vroom said. “It’s very, very bad if you make a bad recommendation.”

Web sites must also be careful not to make customers uncomfortable about the amount of personal information they collect.

“You’ve got to make sure you don’t weird out the customer,” Lochhead said. There’s a fine line between, “Wow, they know me,” he said, and “Oh, my God, this is ‘1984.’ ”

Wolpert won’t reveal how much CheckOut.com’s main investors--Ovitz and Yucaipa Cos.--have committed to the 80-person company or when they expect to make a profit. But the partners have made significant investments in other companies that complement CheckOut.com.

This spring they bought Alliance Entertainment Corp. of Coral Springs, Fla., to distribute music, videos, DVDs and games for the new site. Then they took a controlling interest in Scour.Net, a Los Angeles start-up with technology for conducting multimedia searches on the Web.

Yucaipa and Ovitz have also invested in Costa Mesa-based GameSpy Industries and in Campbell, Calif.-based Talk City, the Web chat site. They are expected to announce another content partnership with Entertainment Boulevard of Los Angeles on Tuesday.

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CheckOut.com also may be able to take advantage of Yucaipa’s ties to the supermarket business through part-owner Kroger--parent firm of Ralphs, Smith’s and Food 4 Less. For instance, data from the supermarkets’ frequent-shopper clubs could theoretically be shared with CheckOut.com, though no decisions have yet been made to implement such a scheme, according to Yucaipa managing partner Ron Burkle.

Such an arrangement could be controversial; some consumer groups have questioned whether supermarkets would be invading their shoppers’ privacy by distributing or selling the data they collect on individual customers’ shopping habits. But Burkle said that if Ralphs and the other stores were to share customer data with CheckOut.com, that wouldn’t qualify as a sale because the companies are “affiliates.”

He added that customers should not be concerned about the potential data sharing.

“It’s safe to say we’ll want to do things to make customers more loyal to Ralphs and more loyal to CheckOut,” he said.

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Times staff writer Karen Kaplan can be reached at karen.kaplan@latimes.com.

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