E-tailers Finally Shedding Image as Crash Dummies

With the 2001 holiday shopping season entering the homestretch, it seems safe to say that most Internet retailers have put to rest their ghosts of Christmas past — namely the ghosts that used to go crash and boom on computers nationwide.

While online merchants were forced to contend with a host of problems during the post-Thanksgiving crunch in the late 1990s (costly Web site outages, inventory shortages, delivery misfires and shoddy customer service), this season by all accounts is shaping up to be a relatively uneventful affair.

“The story here is that there is no story,” Andrew Bartels, research leader for e-business applications and strategies at Giga Information Group, told the E-Commerce Times. “And that’s good news.”

“This is becoming a more mature channel, with more mature players who’ve done this two, three, or four seasons in a row, know what’s involved, and built their technology and business systems to make sure that they don’t go out,” he added.

Lessons Learned

According to Forrester Research director Kate Delhagen, the primary reason why online retailers have encountered so few “train wrecks” thus far boils down to one critical factor: experience.

“People have literally learned from their mistakes or the mistakes of others,” Delhagen told the E-Commerce Times.

“I count the 1997 holidays as the rookie season for most companies; 1998 was still a major learning curve; 1999 as a year of a lot of volume and a lot more mistakes; and 2000 as a fairly mature year when there weren’t many mistakes other than that there were a lot more players,” she added. “This is the fifth holiday season and retailers know from those prior seasons what went wrong.

“In the scheme of things, that’s a short lifecycle, but in the world of e-commerce it’s actually a long time.”

Pressure Cooker

Industry analysts also point out that the shakeout of weaker players who were not able to perform and meet objectives, as well as the absence of new entrants rushing to market for the holiday season, has leveled the playing field, putting considerable demands on the remaining companies to execute.

“They are not only making the case for online retail as a viable channel, but they are also really feeling pressure to perform, knowing that, if they don’t, they too could be out of business, whether they are a pure-play or an online channel of a larger retail entity who’s under the spotlight,” said Delhagen.

“This fear factor has caused people to pay more attention to the right things, including high performance Web sites that surface merchandise that’s in stock, and fulfillment and service of orders in the time frame customers expect,” Delhagen added. “It sounds simple, but so many things can go wrong.”

Managing Growth

An additional factor contributing to the overwhelming absence of performance and operational glitches is the fact that the explosive growth rates in traffic registered in previous years has slowed to a much more manageable level.

“We’re not seeing the year-over-year growth rates of 200 or 300 percent that we used to see before,” said Bartels. “Now it’s more incremental and that means there’s less risk of companies hitting an incredible spike in demand that they hadn’t expected.”

To this end, GartnerG2 research director David Schehr noted that compared to a few years ago, when it was not uncommon for online retailers to become overwhelmed by consumer expectations — the basic mechanics of running an e-commerce site have become “fairly mundane.”

Helping Hand

Schehr told the E-Commerce Times that the current marketplace is at a point where a third of American adults buy online within any three-month period.

“Large numbers of retailers have built up their infrastructure and their Web servers to handle demand, and the fluctuations just aren’t as drastic as they were in the past,” Schehr said.

The continuing integration of the offline and online channels has also greatly helped propel many retailers beyond the growing pains phase.

“A lot of the volume now is actually shifting to traditional mail order companies and retailers that have approached their Internet activities with the same diligence around customer service and support they’ve applied in their other stores,” said Bartels.

Selling Synergy

For instance, Schehr points to the interaction between catalog marketers and their Internet sites, which often allow users to directly enter catalog item numbers without having to wade through numerous pages, as an example of how marketers are making their online arms more efficient and enticing for shoppers.

“Most consumers aren’t necessarily looking for all the bells and whistles,” said Schehr. “They just want a clean, simple site that they can navigate, that they can get into and get out of.”

Moreover, analysts maintain that such synergistic operation is as important to online consumers, who are often looking for an integrated and flexible shopping experience, as it is for marketers.

“Retailers are getting over the fiefdom effect and realizing that they should just push consumers to their brand, regardless of the channel,” said Delhagen.

Making Strides

The combination of these dynamics has lead many analysts to believe that previous operational gaffes are, by and large, a thing of the past.

“It’s looking like a nice, stable year of organic growth in the U.S. and [Internet retailers] are just going to build on the success of last year,” said Schehr.

In fact, industry watchers say one of the only major issues that’s cropped up this holiday season involves inventory shortages, a problem that has little — if anything — to do with Web sites themselves and more to do with cautious retailers that did not want to get stuck with overstocked merchandise in a sluggish economic cycle.

Refocusing Energies

In addition to offering a more satisfactory customer experience, the widespread elimination of functional blunders can allow companies to strengthen current business propositions and cultivate other viable revenue sources.

“Look at Amazon,” said Delhagen. “It frees them up from the front-end stuff, which they’ve already figured out, to focus their energy on other opportunities. Maybe they can be a back-end fulfillment provider for companies like Target, Borders, or Toys ‘R’ Us.”

Retailers will also have a greater opportunity to concentrate on analyzing the operational metrics of their business.

“The first year or two anyone was selling online, 98 percent of the energy was spent just keeping things up and running,” added Delhagen. “Now, people can devote more time to optimizing their business rather than just figuring it out, which is a clear sign of a maturing channel.”

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