The early analysis for B2C (business to consumer) e-commerce was obviously based more on wishful thinking and speculation than on well-researched business plans or demonstrated results. Claims that the Internet leveled the playing field for the "little guy" and that building an online only retail presence held a distinct advantage over traditional brick and mortar retailers was an enticing proposition for many entrepreneurs. It provided a breeding ground for venture capital backed online retailers who falsely believed that extensive advertising, building a large customer base and selling out after the IPO were more important than generating a profit.

The result of this equivocation might ironically be summed up in one word, "boo." Boo.com is the haunting story of a UK based sports and streetwear Internet only retailer that burned through $135 million in venture capital in less than 2 years on a site that generated sales of only $680,000 during it’s first quarter.

The site featured state-of-the art technology that would allow shoppers to zoom in on a product, spin it around and view it from different angles, or see how outfits look on a virtual mannequin. Another key feature of the site was Miss Boo, a personal shopping assistant at the ready with shopping advice and witty banter. Critics argued it was the over reliance on bells and whistles technology that often failed to work as a major contributing factor to the failure of the site.When asked what surprised him most about running his online company, founder Ernst Malmsten replied, "the technology. It took a long time to develop and took so many people to maintain."

Boo.com was one of many examples presented at International Quality and Productivity Center’s E-Apparel Conference in San Francisco in late June to demonstrate that technology is not the only challenge to online retailing. Customer acquisition and marketing costs, customer service and returns were but a few of the challenges cited as a examples of how and why the results are proving to be in favor of the "click and mortar" (online and offline) retailing approach. As the statistics are demonstrating, the most successful online retailers of apparel and related products, are traditional retailers for whom the Internet is just another channel of distribution.

The numbers are enticing. B2C e-commerce sales for 1999 reached between $25-$38B and are expected to double annually according to Discount Store News. 1999 online sales for apparel reached $878 million and are projected to reach $1.9B for 2000 and $11.7B by 2003 according to Forrester Research. It is interesting to note that the percentage of women and men who have browsed the Internet for clothes has raised 80% for women and 40% for men over the past year.

The numbers also demonstrate that the online distribution channel has many obstacles to overcome. According to an NPD 1999 study of 2,399 people, nearly half those interviewed said they never plan to buy clothing online. More than 40% of experienced Web users in the survey, many of whom had bought a fashion item online and had a good experience, said they would avoid buying apparel on the Web in the future. 88% of those polled for the NPD study said they were concerned about not being able to try on the clothing before buying it. Return policies were an issue for 70%.

In defiance of projections that B2B (business to business) e-commerce will be 10 times greater than B2C e-commerce, the conference was very heavily focused on the B2C sector, leaving manufacturers and suppliers with many unanswered questions. Omissions aside, there was a wealth of valuable information for anyone involved in the industry.


Building a Best of Breed Retail Website

It is obvious there are opportunities as well as challenges for the online retailer. It is also apparent that the product AND the technology are equally important. With this in mind, what constitutes a best of breed website? Lauren Freedman, President of the e-tailing group in Chicago, IL and keynote speaker at the E-Apparel conference, provided several key points to consider. Armed with 15 years of traditional catalog and retail buying and merchandising experience for department stores and specialty catalogers, her firm’s experience in providing strategic and e-commerce solutions to online merchants provided a wealth of cyberspace retailing experience.

According to Ms. Freedman, exceptional customer service and unstoppable fulfillment with post-order customer satisfaction are key. Gap.com offers a broad range of online customer service including a getting started tutorial, a guide to "everything you need to know about shopping online," size charts, and how to return items. With convenience and not cost claimed to be the primary motivator for shopping online, the ability to easily return items is important to the e-apparel buyer. This is where the brick and mortar retails have pulled ahead, allowing online customers to return items to the store. Another successful click and mortar retailer Coldwatercreek.com, will send out pre-addressed Priority Mail envelopes for returns and exchanges, which allows the customer to simply drop the items into the envelope and into a mailbox. The cost of the shipping is billed directly to the customer’s credit card.

A user-friendly site with easy to follow navigation (the online version of a well laid out store) that performs with peak traffic and isn’t slowed down by security will prevent visitors from both leaving the store, or worse, being unable to enter. While victoriassecret.com appears to follow most of these tenants, they can’t quite seem to satisfy the demand for their annual online fashion show. One million people stampeded the site on the evening of Feb. 3, 1999. The deluge slowed the Webcast to a crawl for many viewers while others just got an eyeful of error messages. The 2000 show, with state-of-the-art streaming video merely underlined the vulnerability of live-media technology. Despite new streaming media technology and the benefit of experience, the results were the same. The problem, according to analysts, is that the Internet simply isn’t built to handle such traffic.

A best of breed site should promote impulse buying opportunities up-front to drive customers further into the site. Check out macys.com, nordstroms.com, and bostonproper.com, each of whom offer promotional merchandise from their home page.

An effective site offers a combination of interactive tools and value-added content to create a destination for shoppers. Alloy.com doesn’t just sell clothes for Generation Y, it is a destination where they can read targeted beauty, entertainment and sports articles, get advice, post on message boards, chat and more. It’s a virtual shopping mall.

The best of breed website implements personalization and loyalty programs into the shopping experience for customer retention purposes. Neimanmarcus.com offer s gift reminder service that notifies registrants when a special event is coming up and offers gift suggestions. Landsend.com supports virtual model technology that will allow a visitor to see a 3D rendering of selected products on models that closely match the visitor’s profile. Purpleskirt.com recommends clothes based on the visitor’s profile.

Express shopping features to convert convenience shoppers into repeat shoppers have proven to be a strategic advantage for sites like amazon.com, which offers its patented one-click check-out. With statistics claiming that over 40% of shopping carts are abandoned because they are confusing or poorly executed (or aren’t on a secure server), the check-out process is an extremely important part of the equation.

A site that provides a communal aspect allowing loyal customers to interact with one other will keep them coming back. At lucy.com, visitors can "chat with stellar women - athletes, writers, moms, sisters, movers-and-shakers..." Much like alloy.com, this creates the virtual mall.
According to Ms. Freedman, it is simple merchandising and not hi-tech bells and whistles that make for a successful online storefront. "It’s a stretch to make this a romantic medium," she says. "The technology is still limiting."

There are many emerging innovative technologies that will enhance the online shopping channel. Virtual Model Technology will render 3D images of product in the customer’s actual measurements, ZOOM Server Technology will allow for close-up visualization of fabric and yarns, color management systems will dramatically improve the accuracy of color rendering on different monitors, and Expert System based technology (artificial intelligence) will supply applications that can be programmed to do the shopping for you. While these technologies alone will not dramatically change the landscape of e-commerce, they will fuel the growth of online shopping by improving the customer experience.

You can view a copy of Ms. Freedman’s entire keynote presentation here.

Managing Channel Conflict

While early analysts claimed the Internet to be a channel conflict that would cannibalize existing channels of distribution, this has proven to be yet another equivocation. As demonstrated by the success of the offline catalogers and traditional retailers, the Internet has proven to be a powerful channel against which to leverage their brand, their marketing and their store or catalog presence. Online, the retailer can leverage their brand with additional products, expanded sizing, exclusive brands, and pricing specials. As Steve Kernkraut, Sr. Managing Dr. of Bear Sterns states, "The Internet is simply another channel the retailer has to manage."

The key to successfully integrating e-commerce into a multi-channel environment, is a lesson that most online retailers have had to learn the hard way. Processes including returns, pricing, markdowns, policies and sizing must all be consistent. Systems must be aggregated and linked, sales and inventory must be planned in mass, and the merchant must plan for both item and assortment businesses.

While catalogers had hoped that the Internet would eventually reduce printing and mailing costs as customers moved online, the printed catalog has proven to be a very cost effective vehicle for advertising the online store. Multi-channel merchants are learning that advertising and promotions benefit, re-enforce and complement all channels, which ultimately results in a lower customer acquisition cost for the multi-channel merchant.

The results from cross-channel merchants are demonstrating that today’s savvy customers shop multiple channels, with convenience being their number one motivator. That convenience includes the ability to shop at home in the middle of the night. The merchant with the strong brand identity that is marketed across multiple channels is likely to be the destination that comes to mind as the customer drinks a cup of coffee and lets her fingers do the walking.


E-Tailing for the Manufacturer

Managing channel conflict can be a greater challenge for the manufacturer who wants to sell products directly to the consumer online without alienating existing distribution channels. Julie Chaiken, President of the "young designer" clothing company in San Francisco, CA which bears her name, has developed a winning formula that has allowed her products to be sold online through a select group of online merchants who reflect the company’s image and target audience. As Ms. Chaiken states, " I choose my online merchants with the same scrutiny I do the brick and mortar stores." With online merchants offering a range of business propositions that include varying consignment arrangements as well as buying goods outright, Ms. Chaiken advises manufacturers to consider all of the fulfillment and customer service requirements before signing up with an online merchant to sell your products.

As mentioned earlier, the numbers are far more compelling to manufacturers in the B2B sector than B2C. Jupiter Communications predicts that by 2005 online B2B trade in the U.S. will be worth $6 trillion, or 42% of the total U.S. B2B non-service market. Currently 92% of the trade takes place in the "direct channel" model, i.e. one seller, many buyers. Jupiter says that by 2003 35% will have shifted to Net markets with multiple buyers and sellers, or "exchanges".

There are currently over 80 apparel and textile related exchanges, each with differing value propositions. The primary benefits for participating in these exchanges, or "eMarketplaces" are the ability to negotiate better pricing, the reduction in transaction costs and the broader reach of customers and suppliers. It is estimated that almost 70% of the industry will participate in these exchanges, with more than 50% expected to join between 2 and 4 exchanges, as no single marketplace serves all needs.

For manufacturers, B2B exchanges will create an open market where processes dominate organizations as opposed to the current business model where organizations dominate processes. These exchanges will create opportunities to collaborate on processes like inventory management, customer service, account management, order management, logistics and fulfillment, and procurement. The exchanges will allow manufacturers to exploit market opportunities and reduce costs through reduced inventory and lower transaction costs. Bottom line, these exchanges are expected to dramatically improve supply chain management, a significant determinant of competitive strength.

In interviews with 20 retailers about their perspective on sharing processes via the Net, Forrester Research learned what retailers really want from their vendors: real-time information to reduce cycle times. Retailers want manufacturers to approach Internet connections to retailers as a collaborative venture. As stated by a manufacturer to Deloitte & Touche, "Improving our supply chain connections is more important than boosting Internet sales."


©2000 Teri Ross - Teri Ross is a writer, speaker and consultant focusing on CAD/CAM technology, e-commerce, and process improvement strategies for the sewn products industries. She is owner and President of Imagine That!