Retailing of Goods and Services
from Internet Business
While Net-based retailing today accounts for of order 0.01% of total retail
sales, even this tiny fraction is measured in hundreds of millions of dollars
and clearly has scope for significant growth before it has any visible effect
on established retail channels. It is expected that most of the early growth
will be in areas where the Internet offers significant potential advantages
over traditional outlets, such as the Computer
User Services. Several other advantages of Net-based retailing are identified
in this section.
Those sectors of retailing which are heavily dependent on use of classified
advertisements or printed directories are particularly amenable to the searching
and updating capabilities of computers. These include real estate, motor
vehicles, second hand goods and the hospitality industry, as well as other
local traders and service businesses which depend heavily on telephone business
directories to attract new clients.
The Internet promises low cost entry into the retail market for new product
lines, with a 'shop front in cyberspace' costing significantly less than
a first 'shop front on main street' and being much less expensive to scale
up if the new lines gain acceptance. Such businesses may need to use the
services of specialised fulfilment houses which will gain economies of scale
as they service an increasing diversity of product lines.
The Internet has significant potential as a first point of call for delivery
of professional services, where the primary interaction between client and
provider is conversational or where a chain of specialist referrals may
be involved. Immediacy of access in a crisis and load balancing are likely
to give significant advantages to providers of such services.
Another capability of the Internet which matches general market trends is
the greatly increased capacity to individually configure products and services
to meet personal needs and tastes. In anything from building a house to
booking a touring holiday, the ability to call up and process information
on vastly more possible components will enable individual needs and tastes
to be much better accommodated. The development of technologies to underpin
Design and Prototyping of complex configurations
and schedules is discussed in a later section.
Routine business purchasing of goods and services will increasingly be done
over the Net, even in areas where most private purchasers continue to value
'going shopping'. The formalised mechanisms of electronic data interchange
(EDI) which underpin core business supply arrangements in many industries
will at first be complemented by the use of less formalised Net-based purchasing
of peripheral supplies. The printing and stationery area is likely to experience
accelerated uptake, building on its established use of electronic transmission
of design and layout information.
Retailing over the Internet will usually be developed as an adjunct to a
conventional retailing, distribution, service provision or manufacturing
business. Part of its attraction will be seen as shortening the channel
to market. In reality what it will do is transfer some of its margins from
the conventional middlemen of the supply channel to the providers of Internet
services on which it depends, such as the Financial
Transaction Processing, ideally with significant savings. It will be
successful where retail clients see a benefit to themselves.
The cost of establishing a retail service will be comparable to that of
setting up any other kind of Internet Host Service.
However, the returns are likely to include and may eventually be dominated
by a commission structure based on the value of sales made using the service.
Such commissions are likely to be single digit percentages for commodity
retailing, but significantly higher for specialty retailing where the Internet's
capacity for accurate targeting is expected to become a major advantage.