This holiday, brand names count online

In a reverse of last Christmas, e-tailers aren't expected to fare as well as traditional stores online.

When Rosemary Harty shopped for a Christmas present for her seven-year-old daughter, she thought she'd venture online.

An Internet novice, Ms. Harty was excited when she got an e-mail ad from an e-commerce site promising a discounted price on the Barbie "Shop With Me" Pretend Cash Register, the toy her daughter wanted. But when she went to the Web page, it was sold out.

"They say they'll send me an e-mail when the item's available," she says, "but I'm more likely to drop by Ames .... and pay the extra five bucks and have the thing in hand."

Online shopping, once the new frontier of American consumer culture, is starting to lose the swashbuckling cachet that convinced investors to pour millions into Internet startups the last few years.

And this holiday season, as more first-time users like Harty try to purchase their gifts with the click of a mouse, it is the more traditional shops and retailers that are starting to shape the e-commerce landscape.

As Internet stock prices plunge and a host of once-heady dotcoms shut their servers down for good, big-name stores like Wal-Mart, Barnes & Noble, or Gap are most poised to take advantage of the Web.

According to a survey by the New York-based Online Retail Partners, 79 percent of users say they have greater confidence shopping on sites affiliated with known brands.

Yet for some, the promise of Internet commerce was to allow smaller merchants to reach a broader consumer base, and therefore bring unprecedented competition with big retail chains. Dotcom startups were inventing a "new" economy and Internet technology was revolutionizing business with more effective marketing tools and streamlined business practices.

In the end, however, many of the new companies lacked the traditional "brick and mortar" capabilities to fulfill the crush of last year's orders, and consumers began to be wary of the unknown.

"I don't know that it's a big surprise to many of us who have been in the Internet for a long time," says Dan Odette, vice president of marketing at Excite@ Home. "As the more traditional retailers, the bigger brands of the world, finally got involved in the Internet, it wasn't a big surprise that you'd see a shakeout, because their physical distribution capabilities are not going to be matched by many startups."

Despite last year's problems, more users are expected to shop online this holiday season. According to Jupiter Research, a New York-based Internet market-research firm, 35 million US residents will purchase gifts online this year, up from 20 million last year.

"More people are going to the Web to buy, but they are more distrustful of the lesser-known companies," says Jay Sinha, professor of marketing at Temple University in Philadelphia.

"The major problem last year was fulfillment - a lot of complaints about deliveries not coming in time, or not coming at all, and a lot of these companies had privacy problems - they don't protect their database, or the credit card numbers of their customers."

The result has been fewer companies devoted to selling strictly online, and larger companies using the Web to complement their other modes of selling.

In fact, according to a survey by Verizon's SuperPages.com, most people who go online use the Web to research products, and then go to a traditional store to make the purchase.

Some brand-name retailers are partnering with online companies, combining their relative strengths. This summer, Amazon.com and Toysrus.com joined together in a strategic alliance, in part to solve last year's holiday disaster. After Toysrus.com could not fulfill many of its holiday orders last year, it faced fines from the Federal Trade Commission, along with six other sites including Macys.com, KBKids.com, and CDNow.

"Success in the coming holiday season will require a combination of new-economy and old-economy skills: innovative Web marketing supported by basic merchandising, customer service, and logistics capability," says William Grenoble, executive director for the Center for Logistics Research at Penn State University. "In this regard, the Amazon/Toys 'r' Us alliance for online toy sales will be an interesting convergence model to watch this year."

This evolving landscape is also leading many local stores - who otherwise have no intention of competing on a national or global scale - to start simple Web sites. "Mom-and-pop retailers - the corner florist, the butcher - want to augment their traditional business by having a Web presence," says Mr. Odette.

"They include their site on the traditional things they do - flyers, or even business cards."

Like most consumers, Harty sees online shopping as one option among many.

She's made a few book purchases, as well as a Halloween costume. "In both cases, I was fairly satisfied with quick service." Online merchants are hoping to hear this throughout this holiday season.

(c) Copyright 2000. The Christian Science Publishing Society