Chuzz: DELL is VERY SMART to aggressively migrate its business to the web...
<<Jupiter Communications: Digital Commerce Growth Will Be at Expense of Off-line Dollars Incremental Growth to Represent Less than 10 Percent in 2002, Forcing Traditional Merchants to Use Internet to Defend Market Share
NEW YORK August 4, 1999—A new report released today by Jupiter Communications shows that less than 10 percent of online commerce dollars in 2002 will be incremental, and anticipated sales gains will largely occur in lieu of sales that traditional channels would have captured otherwise. The new research, which was delivered to Jupiter's Strategic Planning Services clients, advises that traditional merchants must build unified ventures that take advantage of their off-line assets—an existing customer base, a trusted brand name, customer data, and sales and distribution infrastructure—or risk losing sales to Internet-only merchants.
"With few notable exceptions, traditional merchants' Internet strategies have been paralyzed by indecision and the merchants continue to watch Web upstarts seize the early momentum," explains Ken Cassar, an analyst with Jupiter's Digital Commerce Strategies. "Business leaders have rationalized that sales generated through their Web site will cannibalize sales that they otherwise would have captured in their traditional channel, negating the value of their Internet investment. Since Internet sales largely represent sales shifted from traditional channels, the Internet is a threat to existing businesses and must be evaluated accordingly. Merchants must accept that cannibalized sales are better than lost sales."
According to Jupiter's research, only 6.0 percent (or $720 million of the expected $11.9 billion) of online commerce in 1999 will represent incremental sales—those that would not have occurred otherwise. Jupiter estimates that the percentage of incremental sales will grow only slightly, to 6.5 percent (or $3 billion of the expected $41.01 billion) by 2002, with growth dependent on merchants' ability to target offers and promotions. Product categories, with the following characteristics will become the most likely to drive incremental sales: maturity, a low price point, high discretionary basis, high likelihood of impulse purchase, and high product counts.
Internet merchants should be very concerned that Internet sales will not be incremental, according to Cassar. Merchants' efforts to seize opportunities and use the Internet to capture new customers, or increased wallet share from existing customers pale when compared with the risk that existing customers might move to online competitors.
Sales tax considerations and internal challenges—such as a lack of experience in dealing with fulfillment and customer service issues—have driven many traditional merchants to separate their off-line sales channels from the Internet. Now, merchants must combine their traditional assets with Internet assets to provide a buying experience that leverages the inherent advantages of each channel. In fact, these channels should have a symbiotic relationship in which each benefits the other—and together should form an entity that is more valuable than the sum of its parts.
Jupiter Communications is a leading provider of research on Internet commerce. Jupiter's research, which is solely focused on the Internet economy, provides clients with comprehensive views of industry trends, forecasts and best practices. The company's research services are provided primarily through its continuous subscription product, Strategic Planning Services (SPS). Jupiter also produces a wide range of conferences that offer senior executives the opportunity to hear first hand the insights of its analysts and the leading decision-makers in the Internet and technology industries. Jupiter Communications is based in New York City with operations in London and Sydney, Australia.>>
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