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Not so fast. No doubt, traditional retailers can see that the e-tailing game is now theirs to lose. Brick-and-mortar companies no longer have to worry about getting Amazoned by some hot new startup with $100 million in cash and plenty of buzz to boot. Venture-capital funding of e-commerce companies dropped nearly 70% in the second quarter from a high of $1.44 billion in the fourth quarter of 1999, according to fund tracker VentureOne Corp. The dot-com shakeout is in full swing, and the clamor and clutter of pure-play e-tailers is subsiding. What a change from last year, when consumer Net companies spent $3.2 billion on traditional advertising in a furious effort to build brand by waving sock puppets, shooting hamsters, and having petulant models slink across our TV screens. Even with dot-coms' reversal of fortune, brick-and-mortar companies with strong brands can't assume it will be smooth sailing for them online. Sure, faith in the brand gives an online store instant credibility. For instance, you definitely trust what the brand stands for enough to hand over your credit card. The familiarity of traditional brands has been a powerful tool in attracting shoppers to retailers' online sites. Nothing makes that clearer than the example of Toysrus.com. In its first real Christmas online last year, the fledgling online site shot to the No. 3 spot in the toy space, essentially on the power of its brand. FIRST IMPRESSIONS. The meaning of the brand, though, is up in the air once a consumer hits a Web site. The brand's promise still has to be proved, and that's no slam-dunk online because only a part of what established merchants are good at in the traditional world translates to the Net. Merchandising, for instance, is a skill that is similar online and offline. But most of the online shopping experience is about technology performance. The consumer's first impression is of the basics: How fast does a Web site load, and how easy is it to find and look at the items? How quickly can a shopper get through the check-out process, and how easily can they have their questions answered through e-mail or chat? Consumers want to spend a total of 10 minutes looking for and ordering a product online, an experience that very few e-tailers actually deliver, says Elliot Ettenberg, chairman and CEO of Customer Strategies Worldwide, a marketing consultancy. That means that online, more than offline, brand is built through the initial experiences that shoppers have. After all, if customers don't like a site, they click off somewhere else. According to different studies from BizRate and Jupiter Media Metrix, between 13% and 28% of people who had problems buying at a particular store online say they won't return to that site. In the real world, though, you might give a store another chance. You say to yourself: "Oh, that lousy service I got was just from the franchise on Fourth and Vine. I'll try the one on Main Street." CRASHES AND SLOWDOWNS. For better or worse, however, buying online demands a little more than two seconds of popping your head in the door to see how you're greeted by the clerks. As it turns out, some of the headliner bad experiences online have been provided by brick-and-mortar companies. Back to the Toysrus.com experience last holiday season: For all the attraction of the brand, the online toy store wasn't able to deliver on the dependability customers were seeking in the brand. After Toys 'R' Us sent out 62 million copies of its "Big Toy Book" catalog last year, shoppers overran Toysrus.com, causing site crashes and slowdowns. By Dec. 10, the online site couldn't guarantee delivery of toys in time for Christmas. These kinds of experiences help explain a recent study on customer loyalty. According to a survey of 16,000 online consumers by Web consulting firm Digital Idea, brick-and-mortar retailers are less successful at generating customer loyalty than pure plays. Amazon.com had the highest rating, at about 35%, compared with Wal-Mart's 14% or Sears' 5%. So Old Economy companies shouldn't start gloating over the power of their brands. No doubt, traditional retailers have spent a lot of time and money building up their brands and giving them meaning. The only hitch is, those brands were created through interaction with brick-and-mortar stores. The trick that traditional companies now need to master is how to make those brands meaningful in virtual aisles. Green covers the Internet for Business Week in New York. Have a question or a comment? Let her know at heather_green@ebiz.businessweek.com. |
