Death of a Salesman: A resurgent Internet is transforming e-commerce
You’ve heard it all before, right? Circa 1998. The Internet, with its 24×7 hours and minuscule overhead is going to put American retailers out of business. It’s just a matter of time before operational efficiencies triumph over brand and physical location, and quaint stores disappear faster than Diamondbacks’ pitching.
Well, it didn’t quite work out that way. The wisdom of online purchase and subsequent shipping of 50-pound bags of dog food doesn’t seem as sage today as it did then. Anyone want to buy a sock puppet for cheap?
But, even though the initial exuberance of the e-commerce revolution didn’t pan out as anticipated, the survivors of the bust and their progeny are powering a second Internet boom – and this time they’re doing it right. According to Business Week, nearly 60% of all public Internet companies posted a profit in the 4th quarter of 2003. Not exactly the sure thing of banking or utilities, but the financial metamorphosis of the still-standing dot coms over the last four years is staggering.
From a consumer e-commerce perspective, many of yesterday’s leaders are today’s leaders, but now come with a cherry on top called profits. Amazon.com, eBay.com, ticketmaster.com, dell.com, and the online arms of brutish retailers like Wal-Mart and Best Buy are collecting large chunks of the $53 billion Americans consumers spent online in 2003 – roughly equivalent to the gross domestic product of Peru.
Like evidence against Michael Jackson, the big e-commerce players get stronger every day. Their historic focus on goods that require low touch involvement by purchasers (media, electronics, appliances, tickets) – makes buying their wares online as easy to digest as gringo-ized Mexican food. But at the heart of the new Internet revolution is the next wave of e-commerce players that are shaking down industries previously thought to be impervious to the transformational effects of Web-based purchases.
The ground is vigorously shaking under the feet of businesses that feature significant amounts of consumer research and information exchange. Look at real estate (anyone not research a home purchase online?), travel, mortgages and loans, insurance, and even golf with its proliferation of online tee time reservations. They’re all categories where traditional players are being forced to compete with nimble online insurgents that can provide instant results for consumers while also offering lower costs by slashing commissions.
But perhaps the most amazing aspect of this Internet renaissance is consumers’ willingness – eagerness even – to buy expensive, considered purchases online – a notion deemed as ridiculous as Carrot Top just a scant few years ago.
To steal directly from Chris Rock, it’s a strange time indeed when the best rapper is White, the best golfer is Black, and the biggest seller of automobiles is eBay Motors. That’s right, a Web site that started out as a collection of PEZ dispensers sold $7.5 billion worth of vehicles world-wide in 2003. It wasn’t long ago that a primary debate surrounding the upside of e-commerce was consumers’ fears about providing credit card information online. Now, you can buy (with PayPal natch) a 2004 Bentley Continental GT for just $198,500 on eBay.
The phenomenon doesn’t end at cars. Blue Nile sold $129 million worth of diamonds online last year, and Phoenix-based Equine.com sold $40 million worth of horses. Attention parents: if your child is bugging you for a pony, your excuse is going to look pretty flimsy when the fruit of your loins logs on to equine.com and finds no fewer than 131 Shetlands, starting at under a grand.
This dramatic rise in online luxury purchases is a result of a confluence of factors. First, the Internet is main stream. According to research firm eMarketer, 67% of U.S. adults will be online by 2005 – more than have cable television.
Second, it’s perhaps no coincidence that we’re called Internet “users”. Sites like amazon.com have provided great experiences on relatively low dollar purchases for tens of millions of people, and these smaller buys serve as gateway drugs that result in larger and larger purchases – as long as the customer experience remains positive.
On a related note, the preponderance of major players in the online vehicle, jewelry, and horse businesses have invested significant resources into comforting user interfaces, reliable software systems, bullet-proof Web servers, and unflagging customer service that glues it all together. They may not be the biggest companies in each industry, but their online operations have a pervasive air of legitimacy that coaxes credit cards out of wallets and onto Web sites.
Joe Schubach, owner of Schubach Jewelers in Scottsdale is an example. While Schubach retains a small show room in an upscale office building, the vast majority of his revenue comes from his six well-designed online stores. He’s no Blue Nile, but the schubach.com enterprise oozes professionalism, and that’s what separates the e-commerce winners from crazyhectorsworldofgems.com.
Third, the dramatic rise in broadband connectivity has enabled high dollar online retailers to provide a litany of product data across a variety of media types. Equine.com allows sellers to showcase their stallions with photos, interactive slide shows, video clips, and more. Most eBay Motors listings contain no fewer than 25 photographs of the vehicle from every conceivable angle, including some you’re not likely to see again even if you bought the car. (Checked your glove box hinges for scratches lately?)
This kind of wall-to-wall visual information goes a long way toward blunting the “am I going to get what I paid for” syndrome that can occur with any purchase not made in the flesh. And unless you’d like to go out for a bite to eat during download, viewing those 25 photos on a dialup connection is impractical at best.
It’s a trend that’s not going to abate. Sales of the kind of vaguely nice but palpably cheesy sport coats worn by car and jewelry salesmen will be plummeting soon as more and more Americans get comfortable buying their most treasured possessions in just two dimensions. And as the Internet becomes truly ubiquitous in the coming years and access via every imaginable device becomes commonplace, we will hit our nadir as a society when we can buy a horse from our cars, and a car from upon horseback.
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