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To: Eric D. Moody who wrote (3888)	5/3/1998 11:46:00 PM
From: Candle stick	Respond to of 164684

"Making Money Online/ A Cyberdream" May 1, 1998 Inter@ctive Week via NewsEdge Corporation : Despite merchant optimism and the encouraging growth in the number of consumers shopping online, one fact remains about the retail market on the World Wide Web: Few merchants, if any, are making money online today. That situation is not likely to change for some time, say even merchants that claim to be doing a booming business on the Web. "There are two big costs associated with doing business online: engineering costs and editorial costs, " says Chris MacAskill, president of Computer Literacy (Bookshops+Online), a technical bookseller with four brick-and-mortar storefronts and a heavily trafficked online store (www.clbooks.com). Though Web sales have been growing at about 50 percent per month, while brick-and-mortar sales remain flat, MacAskill says the engineering costs associated with running a constantly evolving commerce site and producing the high-quality editorial content that Web users demand far exceed the costs associated with doing business offline. "Occupancy costs at our stores are -- relative to book sales -- lower than all the engineering costs," says MacAskill, who says the 30 percent profit margin Computer Literacy earns on books puts it in a better position to turn a profit than the mass-market online booksellers, such as Amazon.com Inc., that are building their brand names through price wars that leave them with slim margins. "We don't expect to make a profit on the Web yet, but that's where all the action is. The number of new consumers coming online is very encouraging." It's that promise -- and the chance to build a loyal customer base while carving out a market niche before the Web gets crowded with other specialty merchandisers -- that makes MacAskill and other merchants willing to wait out the market. How big the consumer market will be remains a matter for debate. In its 1998 Online Shopping Report, Jupiter Communications LLC (www.jup.com) estimates there are about 16 million online shoppers today, with that number expected to reach 45.2 million by the year 2001 and more than 61 million in 2002. Forrester Research Inc. (www.forrester.com) predicts a similar market size; it estimates there will be about 15 million online shoppers in 1998, growing to 43 million shoppers in the next three years. The amount spent online is expected to grow exponentially as well. Jupiter estimates that shoppers will spend about $5.8 billion this year online, with that amount more than quadrupling to $24.5 billion in 2001. Forrester estimates consumers will spend more than $4.8 billion online in 1998, with that number more than tripling to $17.3 billion in the next three years. International Data Corp. (www.idc.com) is the most optimistic: It predicts business-to-consumer sales will tally $12 billion this year and grow to $59 billion in the next three years. In the year 2002, IDC predicts Web shoppers will spend $94 billion. Though online consumer shopping will be relatively small compared with the amount estimated for business-to-business transactions -- IDC pegs such online transactions as totaling $22 billion in 1998, rising to $338 billion by the year 2002 -- merchants acknowledge that a multibillion-dollar marketplace is not something to ignore. Paul Graham, president of Viaweb Inc., runs an online hosting service that lets Web merchants design and create their stores remotely using point-and-click Web software Viaweb (www.viaweb.com) designed. The company hosts more than 800 stores today. "By the end of 1998, it will no longer be optional for a retailer or catalog company to sell online. Consumers will expect to be able to buy from any well-known company online," Graham says. "The rule of thumb is, if your store in the physical world could survive next to a Wal-Mart, you can survive on the Web. We say pick a niche -- that's how you succeed. On the Web, everyone is right next to one another, so you're either going to be the dominant thing in your niche -- the Amazon.com of flight simulator software -- or you're going to be fighting a price war, and then you're nothing," he says. But having a store is no longer enough, according to Lauren Freeman, president of the E-tailing Group, a Chicago-based market research firm (www.e- tailing.com). Her company just completed a "Mother's Day Shopping" survey of the Web, shopping at 50 high-profile Web merchants and then documenting the experience. The E-tailing Group found that merchants leave much to be desired in the area of customer service, with only 66 percent of those surveyed allowing customers to confirm orders in real-time and 21 percent allowing Web customers to check the status of orders online. "If a customer has a bad experience at your store, they're not going back," says Freeman. Online Shopping Revenue: Making Predictions Market Research Firm 1997 2001 Forrester Research Inc. $2.4B $17.3B Jupiter Communications LLC* $2.5B $24.5B International Data Corp. $5B $59B * Does not include online car or real estate sales How Merchants Fare Based on a survey of 50 online retailers by the E-tailing Group Customer Service Yes Shopping success on first try 86% Toll-free number for customer service 82% Posts customer service hours 52% Requires you to become a member to purchase 26% Real-time order-confirmation* 66% Order shipping confirmation* 21% * Based on 47 sites <<Inter@ctive Week -- 04-27-98>> [Copyright 1998, Ziff Wire]