Exclusive Interview: America Online, Patrick Gates, Vice-President of E-Commerce

The giant merger between Time Warner and America Online is poised to change the business landscape forever, and e-commerce is going to play an integral role in that transformation. In fact, AOL President Robert Pittman was quoted as saying that the merger will allow the two firms to “blow the roof off” their respective e-commerce packages by allowing unprecedented cross-marketing opportunities.

In the following exclusive interview with AOL Vice President of E-Commerce Patrick Gates, conducted just days before the merger was announced, the E-Commerce Times explores the industry through the eyes of its now-undisputed standard-bearer. Q What does AOL consider to be the major e-commerce industry trends? A One of the trends that we saw was that when you talk to e-commerce players or owners of Web sites, product was way down on the value chain — they kept talking about technology, and this and that.

We took a different approach. If you look at our site, especially the shopping areas, you’ll see it is very akin to an offline catalog or a magazine, very brand friendly. We didn’t get so far ahead of the consumer adoption curve that we were playing to the “gee whiz” technologies out there that people neither understood nor used.

We had over 2.5 million people shop online for the first time. We don’t want to necessarily assume that they know what a shopping cart is — what a checkout process is — so what we tried to do was give them the imagery and navigation that was intuitive and comfortable to them and then help them with various mechanisms like “Shop 123.” If you go to our service, you’ll find it explains and shows you what a shopping cart is, what a search function is.

Q What is the approximate demographic breakdown of AOL online shoppers?A We have found that there is a huge difference between AOL, Netscape and Compuserve. AOL is very much family oriented. I don’t specifically remember the median incomes and those types of things, but what we found is that it’s a much broader demographic, much more in line with the national average than the Net audience. Netscape is much more professional, and Compuserve is a much more technical audience.

If you look at the growth of online users last year, we acquired almost 50 percent of all new online users, so we have a fairly dramatic piece of the expansion.

Q Will there ever be a comparative shopping service offered that will allow consumers to compare pricing and features on similar products from among all of AOL’s online stores? A I am a little skeptical of some of the comparison vehicles available — because if it is an independent vehicle, then there has to be a business model — there has to be a revenue stream. So how do you remain neutral and unbiased when somebody is coming to you and wanting to pay you money?

The luxury that we have is that we build comparison services that are purely consumer based. I think that this is a benefit to both the merchant partners of AOL and the consumer, who is gaining the best possible overall picture of the company that he or she is about to do business with and the types of products being purchased.

Q As you look to the future, what do you see as the key issues that AOL needs to address with respect to e-commerce? A I think that we did a great job of addressing them this year. We anticipated the crunch, and I think we were really well geared to deal with the influx of shoppers over the holiday season.

While everyone was anticipating increased traffic, we were thinking about the level of service. It needed to be on par with the offline experience and [the fact] that last year it was somewhat of a novelty to shop online and people were somewhat willing to put up with inferior service or delivery.

This year, it was crucial that every one of our partners had a return policy, a privacy policy, 24-hour customer service, all of these types of things.

So I think that that was something that we addressed and took care of. I think that from the consumer aspect we need to make sure that shopping is a completely intuitive and easy experience.

Q What sets Shop@AOL apart from such major competitors as Amazon.com, Yahoo!, MSN and others? A Shop@AOL was designed to revolutionize how consumers shop online. We believe it’s the easiest and most convenient shopping experience on the Internet. The Shop@AOL marketplace builds on AOL’s unparalleled understanding of the online consumer, gained through more than five years of research on member buying habits and extensive analysis of consumer shopping behavior.

Along these lines, we’ve found that consumers are looking for brands that they know and trust while shopping online. So, instead of offering links to thousands of merchants, which can be a dizzying, overwhelming experience, Shop@AOL features products from 300 best-of-breed merchant partners, laid out in an intuitive, easy-to-navigate format. We also offer unparalleled 24-7 customer service through e-mail, Instant Messenger and phone.

Q Is there room for another service like AOL?A While clearly there will be other shopping services that spring up on the Web, newcomers will have a hard time replicating AOL’s unique understanding of the consumer. We’ve been in the e-commerce game for more than five years and we’ve been the catalyst for bringing a record number of consumers online to shop. In fact, we estimate that two-thirds of our membership are shopping online. This knowledge of the consumer gives us a clear advantage when developing new online shopping features and services.

Q What impact do you see wireless devices having upon e-commerce? A I think that if you look at the United States as opposed to the European communities, there are some pertinent distinctions in how wireless is used.

I believe that in Europe, cell phones and PDAs outsell computers approximately five to one. Also, the application of how they use those wireless items is a slightly different application than the way in which we use them here.

I think about personal finance as probably being a good candidate initially for wireless e-commerce. As technologies continue to improve, we will continue to look at it. Right now, there is not a huge value proposition in trying to shop off of a Palm Pilot.

Perhaps if the consumer is a highly technical person they may be inclined to do so, but for now I think that for the general population that we serve, we are a ways away from that.

However, I do think that the ability to both send and receive e-mail and voicemail are crucial. We are watching it (wireless) closely like we do everything else, but we think that there are a lot of other things that we can do prior to that.

Q What percentage of AOL’s overall revenue is currently being attributed to e-commerce? A I can’t give you a specific answer because, as you know, we are a media company. That figure is an overall piece of the advertising revenue.

1 Comment

  • I just watched the Subject interview on CNN and wanted to provide some feedback hot off the press concerning a recent purchase I tried to make online…
    I recently searched online to purchase a Sony HDTV and found that the "Best Deal" was offered exclusively online via Circuit City. When compared to local stores the savings were significant – over $300.
    Instead of completing the order online, I instead called the company and received an additional $108 in store coupon which was awesome. Once the order was complete, I was transferred to the staff that handles the delivery and that’s when the problems started.
    The staff were actually folks overseas (India?)that spoke unclearly (had to ask them to repeat themseslves and was asked myself to repeat my information over and over) and had a difficult time locating my information that was already provided to the original sales clerk.
    The original sales clerk told me that my TV would be shipped no later than 3-business days – shipping was included in the deal. Not only did the delivery personnel have a rough time figuring out what I bought but they told me that I had to wait for an email confirmation (don’t recall being told that by the sales clerk) of my order prior to scheduling a delivery date – they told me to call back tomorrow. Well, tomorrow came and went and so did the next day and the frustration level began to rise.
    I figured that the TV and warranty service that I had just purchased which ran just under $3K warranted a higher level of service than what I was receiving so I called and cancelled the order.
    I went to a local Best Buy store with all of the information I had downloaded online. Best Buy price matched the exact product listed on the Circuit City website that had to be purchased online to get the same deal. Additionally, they gave me another $270 in the form of a rebate, the 4-year service plan only cost me $250 versus $499 from Circuit City and they promised the TV would be delivered on Friday – a 3-day turn around.
    I was also told that Best Buy has a "No Lemon" policy which means if they come and have to fix the new TV 3-times they will just replace it with another one!!!
    Without making a generality, I would beg to say that E-commerce still has bugs to work out – that’s as PC as I can get, I would like to use a few other choice words about my experience but will refrain.
    Taking the time to research the product you intend to purchase online is key. Once you’ve gathered all your information, head to a local store and show them what you’ve found and ask them how they might accomodate your purchase and "sweeten the deal" so that you might actually buy it from them and you may be pleasantly surprised at what they come up with.
    Happy Holidays and Happy shopping – it’s your hard earned money!
    Sincerely Matthew

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