Retailers React To Pressure from Online Shopping

Business-to-consumer (B2C) e-commerce was a paltry two percent or so of overall retail sales in 1999. Nevertheless, industry experts are telling brick-and-mortar companies in the $2.7 trillion (US$) retail industry that they must jump online quickly or risk being left behind.

At the National Retail Federation’s (NRF) 2000 Conference in New York, consultants from Big-Six accounting firm Deloitte & Touche told retailers that they need to speed up the process of establishing their online presence.

According to Ed Carey, a consultant in Deloitte & Touche’s global consumer business practice, 49 of the top 100 retailers have already built Web sites that are capable of taking customer orders — up from 30 in 1998. Carey said the remaining leaders have to move fast to keep pace.

“It’s not too late, but it soon may be,” Carey said. “Retailers must provide multiple ways to shop. Through stores, kiosks, call centers and catalogs, they must provide seamless experience across all channels.”

Impact on Store Construction and Shopping Center Rents

Irwin Cohen, managing director of the Deloitte & Touche practice, believes that the online industry will have an unexpected impact on retailers.

“The Internet is the only channel that will grow at a double-digit rate,” Cohen said. “This is going to slow store construction, force creativity of store formats to go to the Internet, and impact rents in shopping centers as consumers switch to online shopping.”

Shopping Mlls Prepare for Online Onslaught

Retail shopping malls across the country are already taking proactive steps to address the increased competition from the Internet. Simon Property Group, one of the largest shopping mall operators in the U.S., has formed a new unit called clixnmortar.com that is exclusively devoted to forming new Internet ventures for retailers.

By next year, Simon expects that its 176 malls will be wired for high-speed Internet access, allowing stores to add multimedia kiosks, Web videocasts and other online marketing tools. Much of clixnmortar.com’s effort will be aimed toward allowing its retailers to compete with the convenience factor of Internet shopping.

One of its first projects is a system called YourSherpa.com, which was unveiled last month at the Lenox Square mall in Atlanta, Georgia.

To use the system, shoppers register in the store by leaving a credit card number. They are issued a Palm III personal organizer that is equipped with a scanner, and are invited to scan products as they consider buying them.

Those products are listed at the shopper’s personal Web site, and can be bought and picked up at the mall or delivered to the shopper’s home. Selections can also be held at the Web site until the customer decides whether to buy them at a later date.

E-tailing Coming On Strong

When successful brick-and-mortar companies like Simon Property Group go to such lengths to become interactive, it becomes clear that the threat of e-tailing is being taken seriously. According to the recently released American Express Retail Index, last year’s online holiday sales generated revenue somewhere between $5 and $10 billion. The report says that e-tailing doubled — and may have tripled — compared with the previous year.

“Consumers are clicking,” said Valeria Soranno, American Express vice-president and general manager for retail industries. “They are overcoming fears of security on the Internet and as this happens, we will see very steady growth.”