The Internet Decade
How retailing has changed
What's next in e-commerce
'We've barely scratched the surface'
Last Updated: Tuesday, December 15, 2009 | 8:08 AM ET
By Peter Evans and Dave Simms, CBC News
The internet has changed everything about retailing in the last 10 years, and nothing.
"Right now, the internet is at the level of black-and-white televisions,” University of Toronto professor Tim Richardson, a specialist on e-commerce, told CBC News. “We're all very impressed with what we're seeing, but we've barely scratched the surface of where it is going."Shopster.com CEO Sarath Samarasekara believes social networking will transform e-commerce. (Dave Simms/CBC)
In the first decade of the 21st century, e-commerce has gone from Tech Wreck to Cyber Monday; from an investment black hole to an annual promotional blowout that brings in billions in revenues.
From humble beginnings, online merchandising has grown to capture six per cent of U.S. retail today, according to Forrester Research, and is expected to exceed $300 billion US in sales by 2012.
We're not yet at the point where suburban malls become ghost towns as shoppers migrate online. But some experts say that could change in the years to come, and a whole lot more besides.
Clicks over bricks?
A decade ago, e-commerce was in trouble. When the concept of online shopping took hold in the late 1990s, a slew of players moved into the space, eager to capitalize on a market with seemingly boundless potential.
"In the early days it was very bare-bones," Richardson said. "The early adopters seemed innovative, but looking back they weren't doing very much."
'The internet is at the level of black-and-white televisions.'—E-commerce lecturer Tim Richardson
Few lasted long. An estimated 150 U.S. dot-com firms went bust in 2000 alone. The industry lacked the critical mass of regular customers to sustain many of the upstarts, and hacker attacks led consumers to worry whether it was even safe to shop online.
Those fears largely abated as broadband internet spread, and more and more customers dipped a tentative toe into the e-commerce water. Businesses now can't do without an internet presence, even if they don’t actually transact online.
“People need a place to get your information quickly. They don’t want to call you anymore,” said online entrepreneur Sarath Samarasekara, CEO of Calgary-based Shopster.com. “They’re going to find that information and then decide if they want to talk to you.”After explosive debuts, 150 U.S. dot-com firms went bust in 2000 alone. (CBC)
Even some of the big players have made false starts. After several years of selling products from its website, Toronto-based retailer Canadian Tire recently stopped selling online.
"We're focusing resources that we used to have devoted to online selling towards giving our customers more information on our website,” said Lisa Gibson, associate vice-president for media and public relations.
"Trying to ship a patio set to Whitehorse is not always the best way,” said Gibson. “We've found customers often want to see and touch our products first."
Internal research prompted Canadian Tire to post more photos and reviews of products on the site, so customers come into its stores armed with more information on the merchandise they're interested in, Gibson said.
Indeed, for many, shopping is a tactile experience. Tom Keenan, an environmental design professor at the University of Calgary, foresees the day when technology — perhaps some kind of holographic visualization — will enable us to try a product out before we order, without leaving home.
That day may be some way off, but for now, e-commerce is still just a variation on the theme of a retail market dominated by a few large players.
U.S.-based Amazon.com is the 800-pound gorilla of the space. Founded in 1994, the company soon outgrew its origins as a mere bookseller. After an initial public offering of shares in 1997, the firm had gained the heft to join the S&P 500 in November 2005. It raked in almost $19.2 billion US in 2008.Amazon.com workers separate packed boxes for shipping at the retailer's 800,000-square-foot warehouse in Goodyear, Ariz. (Ross D. Franklin/Associated Press)
Quite simply, you can't talk about selling online without mentioning Amazon.com, and the company knows it, Richardson says. Amazon spends almost no time or effort turning people who are wary of online shopping into loyal customers. "They are almost completely focused on their existing customers as opposed to finding new ones," he said.
“It’s really, really tough to compete with the Amazons of the world,” said Samarasekara. But his website, now five years old, is premised on the assumption that this is going to change.
Shopster is an example of “distributed commerce.” It brings together individuals who have their own online retailing sites — similar to those who sell on eBay — with bricks-and-mortar merchants and distributors.
The individuals don’t have to pay to hold their own inventory. They just sell for the merchants and distributors, who in turn get a commissioned salesforce without paying employment costs such as pensions, fringe benefits and income tax collection.
Samarasekara predicts that as more online entrepreneurs collaborate on bringing down costs, they will be able to compete with the big players.E-business is forecast to bring in $300 billion US in revenue by 2012. (CBC)
“It’s important to understand that Wal-Mart only carries 250,000 products online,” he says. “And that sounds like a lot but when there are millions and millions of products out there then what does mean for the consumer when they are only given access to a narrow bandwidth of products online?”
An innovative e-commerce strategy isn't only useful for finding new customers, Richardson says. Often, a well designed web presence can let new suppliers find out about sellers, which can help drive down costs on the supply side.
Samarasekara believes social networking will transform e-commerce, and that the businesses that succeed in the future will take advantage of talent outside the firm, commissioning everything from technology development to marketing campaigns to outside groups in what’s called crowd-sourcing. The only limitation will be the speed at which new technologies emerge.
Take the example of Toronto-based mining firm Goldcorp Inc.
'We've found customers often want to see and touch our products first.'—Canadian Tire spokesperson Lisa Gibson
It's not a retailer, but in 1999, it took the unheard-of step of publishing all its geological data on its property in Red Lake, Ont., online, offering $575,000 for the best proposal for mining the site.
Denounced as lunacy at the time, the "Goldcorp challenge" proved to be a runaway success. The $575,000 in prize money it used to entice amateur geologists was easily paid for out of $3 billion worth of gold it found as a result.
It's yet to be decided what new implicit partnerships may evolve between the digital media and industries whose markets turn out to be complementary, Richardson notes.
"There is a rich history of new media driving the sales of new products and vice versa,” he said. “Look at cars. The automobile industry in the 1950s was almost single-handedly responsible with saving radio, because every new car that was sold had a radio in it. And radio advertising was heavily populated with ads selling cars for that reason."
"We haven't seen the online equivalent yet,” he said, “but it may come."
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