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Commentary: E Tail: Gleaming Storefronts With Nothing Inside


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Commentary: E-Tail: Gleaming Storefronts with Nothing Inside

What's really ailing e-tailers? Even before the rest of the market fell, investors had been hammering stocks of Internet retailers. From pet food sellers to virtual fashion boutiques, the entire category is under fire. These are the same companies that just six months ago were hailed as the merchant princes of the New Economy.

Despite what the Internet pundits say, these companies are not suffering from a failure to create strong brand images. In fact, much of the marketing that came out of these outfits over the last year has been far too successful for e-tailing's own good. Consumers were treated to some very creative and alluring messages. To be sure, some ads were off the mark, but many more hit the bull's-eye. Last year, online shopping sales soared 120%, to $33 billion, according to Boston Consulting Group Inc. Marketing got people online.

But now it looks as if the marketing may have overshot its handlers. Unlike their slick TV commercials, many virtual retailers proved not quite ready for prime time. Take cosmetics seller beautyjungle.com. It developed visually stunning print ads. But while the ads seem to shout avant-garde attitude, the site itself is downright ordinary. "I typed in the site thinking, `wow, look at this ad, this is going to be great'--and it was, well, mundane," says Wendy Liebmann, president of WSL Strategic Retail, a New York consulting firm. "It's as though they put all their money into the ad, and nothing was left over for the shop."

In fact, a lot of e-tailers seemed to pursue the same strategy: pour an industry-wide $2 billion into advertising and let the retail part of the business take care of itself. Now, e-tail is littered with companies with great ads trying to make up for online stores that are at best works in progress. Pets.com has launched the career of the world's most famous sock puppet. But similar rivals now abound. Pets.com is left with a distinctive marketing image and a less distinctive retail experience.JUST NET. The ultimate fate of e-tail is fodder for much debate, especially among leading Net consultants. In the space of a week, Forrester Research Inc. has predicted the demise of most e-tailers in the next year, while the team at Boston Consulting Group and trade group shop.org say online profitability--for those that survive the current shakeout in the market--is just around the corner. But both firms agree lavish marketing isn't enough.

Going forward, many of the Internet retailers who have been so enamored of the television world might take a page from some of their less flashy competitors. ITurf Inc., a network of teen-oriented e-commerce and community sites including gURL.com, TheSpark.com, and dELiAs.cOm, shuns TV, opting for Internet marketing efforts. ITurf just beat analyst expectations for its fourth quarter, and in February passed MTV.com in audience size. "We are building a brand at a much lower cost," says Renny Gleeson, senior vice-president for marketing.

What's more, e-tailers should pump money into building a reliable retail business. EToys Inc. is trying this. Over Christmas, it had an array of lovely, evocative ads showing children engaged in the wonder of discovery and parents helping that happen with a late-night trip to the virtual toy store. But while the ads got consumers to the site, fulfillment and customer service were problematic. Now the company says it will focus more on these aspects, reducing its reliance on outside provider Fingerhut Cos. and bringing the responsibility of getting packages to the customer in-house.NUTS AND BOLTS. That's a crucial shift in attitude since it is shopping experience, not marketing, that keeps customers coming back. On average, a customer who has a poor first experience shopping online will do so 66% less frequently and will spend 72% less in virtual stores in the future, according to a Boston Consulting Group study.

The nuts-and-bolts work of traditional store management is not as sexy as seeing your icon or logo on network TV. But the honeymoon of being first and being a novelty is over for the e-tail community. They need to ease up on the marketing and do the hard work of retailing.By Ellen Neuborne; Neuborne Is Business Week's Marketing Editor.Return to top


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