more bullish news on e-commerce
Tuesday February 3, 8:37 pm Eastern Time
FEATURE--E-commerce reshapes U.S. retail landscape
By Jose Paulo Vicente
NEW YORK, Feb 3 (Reuters) - The Internet is quickly reshaping the U.S. retail
landscape as online commerce blossoms, firms streamline their businesses and
consumers grow more comfortable with shopping in cyberspace, analysts said.
''Personal computers and the Internet are changing the way people shop,'' said John
Challenger, executive vice-president at outplacement firm Challenger, Gray &
Christmas, Inc.
''There is almost nothing that cannot be purchased over the Internet today -- from
groceries and clothes to plane tickets and cars,'' he added.
Online shoppers should double their spending to $4.8 billion in 1998 from the $2.4
billion recorded in 1997, according to a recent survey published by consulting firm
Forrester Research Inc [Nasdaq:FORR - news]. The report predicted online sales
revenue would skyrocket to a whopping $17.3 billion by 2001.
''The clear trend is that online consumers are converting from window shoppers to
buyers,'' said Kate Delhagen, senior analyst for people and technology strategies at
Forrester Research.
THE CYBER BUYER
So who are these Americans shopping online?
In a nutshell, the Forrester survey found they are almost evenly split between men and
women, relatively young, married, college graduates at least, earning more than
$40,000 a year, and predominantly white.
These consumers are lured into virtual stores by four main factors, in this order:
Convenience, ease of research, better prices and rich selection.
The idea of having a 24-hour service with easy access, wide selection and prompt
delivery is especially attractive to the cybernetic consumer, who seems constantly to
be struggling with the scarcest commodity of the late 90's -- time.
''This online channel is really proving itself with a certain group of consumers,''
Forrester's Delhagen said, adding that the convenience factor has overshadowed
previous worries about the safety of electronic commerce.
RETAILERS GROWS THINNER
Traditional retailers, for their part, have been streamlining to cope with stiffer
competition from telephone and online shopping outlets.
The retail sector sacked 55,393 workers in 1997, according to a recent survey
conducted by outplacement firm Challenger, Gray & Christmas.
That figure was up 32 percent from 1996 and crowned retailers with the highest layoff
rate of all sectors of the economy in 1997, far ahead of the second-place industrial
goods sector which dismissed 38,249 workers in 1997.
''Retail today is being transformed,'' Challenger said. ''Companies that are prospering
are doing so at the expense of those shrinking.''
An example of such a trend was detected last week when software and computer
retailer Egghead Inc (EGGS - news) decided to shut its 80 stores around the country
and shift its sales entirely to the Internet.
The firm, which will be renamed Egghead.com, said it would eliminate 800 of its 1,000
employees in a bid to capitalize on the burgeoning growth of Internet commerce.
Other retail heavyweights have also jumped on the World Wide Web bandwagon, albeit
still keeping their old business in place. They include book seller Barnes & Noble Inc
(BKS - news), flower shop 1-800-flowers and clothing store chain Gap Stores Inc (GPS -
news) among others.
BORN IN CYBERSPACE
Recent studies show, however, that the most successful online retailers are usually
those that were born in cyberspace and share no counterpart in the ''real'' world.
Book seller Amazon.com Inc (AMZN - news), which claims to be the largest book store
on Earth, is one of the prime examples of commercial ventures on the new medium,
analysts said.
''It's interesting to see that the most successful firms online were, for the most part,
born online,'' John Doerr, partner at venture capital firm Kleiner Perkins Caufield &
Byers, said at a recent economic conference in San Francisco.
THE ECONOMIC CHALLENGES
But what are the implications of this change in the retail scenario to the overall
economy?
One potential problem is the difficulty the Commerce Department may have in
tracking online commercial transactions, which could, in turn, distort key data
closely watched by financial markets.
''The increase of Internet commerce could possibly distort the retail sales data,'' said
James Blumenthal, an economist at consulting firm MCM MoneyWatch Inc.
The retail sales report, issued monthly by the government, is an important gauge of
economic activity that helps many gain a better feel for the U.S. savings rate.
The Federal Reserve also looks at this indicator, among others, when setting its
monetary policy.
''We're aware of growing Internet commerce and its possible impact on the data. But I
don't see that as a major concern at this point. If it grows more, I'm sure the Commerce
Department will make adjustments to the data,'' said an economist at a regional
Federal Reserve Bank who asked not to be named.
Another area where rising online commerce could affect the economy is on the
inflation front, since stiffer competition and lower operational costs are expected to
translate into falling prices.
''More and more people are going to shop online and make it harder for the middle
man to charge anything but what the market is, maybe less due to competition,''
Challenger said.
U.S. retail inflation rose 2.2 percent in 1997, the lowest level in 32 years. |
