Everyone in my family is in retail, except me — unless you consider this journalism gig equivalent to selling snake oil. My mother and sisters have run wearable-art galleries and design-centered shops for a couple of decades, and they seem to be pretty good at it. They travel around the United States and the world, looking for distinctive items to show and sell
I’ve been nagging them to check out cyberspace and perhaps even open a store front, but they’re holding out. Their reluc isn’t the product of technophobia: They have been using computers for inventory, accounting and other back-office stuff for years. More to the point is the business itself: retail items for walk-in customers. It is hard for them to think beyond the geographic boundaries of their existing market.
That’s understandable: They prospered in an era in which the retailer’s mantra was “location is everything.” But it might be time for a mental readjustment. After all, they travel a lot in search of products, and many of their customers come quite a distance to see the goodies they discovered on those trips. Geography might be a lot less relevant than they think.
To try to get them to change their minds, I’m sending them excerpts from a new special report by Merrill Lynch, “e-Commerce: Virtually Here” (the executive summary is available at www.research.ml.com). It’s one of the most comprehensive surveys available and might oblige even my stubborn siblings to change their minds. (Rivalry? Us? Never.)
The study highlights the “extraordinary growth rates” in e-commerce. It concludes, “if there is a consensus, it is that e-commerce (retail sales) on the Internet should be between $35 billion and $75 billion by 2002, vs. about $8 billion in 1998, or a growth rate of 34 percent to 75 percent per annum.” In comparison, the U.S. GDP grew 3.25 percent in ’98 and Merrill Lynch analysts forecast overall retail-sales growth of about 4 percent annually.
If opportunity doesn’t tempt my family to make the plunge, maybe fear will. The report also notes that just about all the major retailers expect to be selling online by next year. The word here is “feverish.” With 40.3 million Americans expected to be shopping online by 2003 (a fivefold increase over 1998 and more than 75 percent of the online population), a retailer can’t afford to not be in cyberspace.
Family dynamics being what they are — and with my credibility at stake — I’d happily introduce my siblings to Marc Adler, an Internet consultant in Atlanta, to make my point. Recently he explained, “If a business isn’t online, it still has to ask how it will compete with those companies that are.”
Adler’s thoughts are worth pondering for several reasons. First, he’s been helping businesses deal with new media since 1992, when he founded Macquarium Intelligent Communications, an interactive consultancy, while he was still in college. (And that was before the Internet was flavor of the decade.) According to Adweek, his Atlanta-based firm is now one of the top 50 U.S. interactive agencies. Macquarium has done work for clients ranging from IBM to MGM, from John Deere, the farm-supply company, to the high-powered law firm Akin Gump Strauss Hauer & Feld.
Adler is bullish about the Net, but he cautions that “it isn’t the be-all and end-all.”
A company needs to figure out what it needs and what best fits those requirements. “If executives know what they are trying to achieve, then everything else follows,” says Adler. He asks clients why they need a Web site; often they discover they can get more value from another interactive device, such as a kiosk or a CD-ROM. My sisters might decide that it makes more sense to put a virtual catalog of the artists they carry on a disc, thus offering a wider selection without having to stock all the items.
The decision to go online forces a businessperson to focus on where value is added. Is it service? Volume? Price? How does a virtual presence change or enhance those aspects of shopping? How does it alter other standard procedures, such as delivery, returns or customer service?
That last item is critical. There’s a lot of talk about the Net flattening margins and causing deflation. But the Merrill Lynch study points out that companies that are successful at e-commerce “have focused more on the quality of the service they provide. Accurately and speedily responding to purchasers appears to be something that buyers will consider in choosing a supplier on the Net, relegating price to a lower priority.”
Another reason I trust Adler’s opinion is that he has put his money where his mouth is. In April, he opened MisterArt.com, the world’s largest online art-supply store.
For a guy with a state-of-the-art digital theater in his headquarters, art supplies seem like a step back. Adler doesn’t see things in those terms.
“Art supplies are a high-margin business dominated by mom-and-pop stores. We’ve got 40,000 products at wholesale prices. With all the bargain-finding bots, being a price leader is critical. Simply put, the store with the best selection and the best price wins.”
Adler ticks off the market characteristics that compelled him to make the leap: It’s a $10 billion niche industry, in which the products are nonperishable consumables. That means inventory-maintenance costs are low. Brand recognition is high, but substitutions exist; a computer database puts choices at customers’ fingertips. And those customers make up 3 percent of all U.S. consumers, an easily identifiable direct-marketing target. Moreover, being first to market after two years developing an online presence gives MisterArt.com a significant advantage over the competition.
That’s the sort of reasoning a business needs to use when contemplating the Net. In fact, I expect my sisters to take the plunge fairly soon. They’ve made their first tentative forays into cyberspace and seem pleased with the results. I’d never say, “I told you so,” but it’s nice to be right for a change.