From AJR, December 1999 issue
Happy Holidays for Online Retailers
Is the Internet the shopping mall of the future?
By David Carlson
David Carlson is a former AJR new-media columnist.
IT WAS THE LATE 1960s before the first shopping mall came to the town where I grew up.
Yes, it was a late arrival compared with many places, but that did not make its effect any less profound. They built it out on the four-lane highway at the edge of town, and, almost overnight, a few of the downtown stores closed. Some of them moved to the new mall, but a lot of them just faded away.
Sears moved immediately. Others, like S.S. Kresge, Montgomery Ward and Woolworth, stayed in their downtown storefronts. But the customers stopped coming. Even though it was farther for nearly everyone in my small town to go to the mall, they did it anyway.
You know the rest of the story. The downtown of my town practically ceased to exist within five years. When I came home, it was a series of boarded-up storefronts. But Kresge and Woolworth didn't just close in Bedford, Indiana; they eventually went out of business nationwide. By the time they realized malls were the wave of the future, they'd been replaced by Target.
History, pundits say, repeats itself, and if forecasters are to be believed, it's about to do exactly that. This time, though, the new "malls" aren't on the other side of town. They're in cyberspace.
I know we've been battered with all kinds of new e-words. We've got e-mail and e-news and e-business. I'm sure Edwin Newman, author of "Strictly Speaking," is writhing in pain. But get ready for a lot more of them, most notably "e-tailing."
The various forecasters of things "e" are falling all over themselves predicting the demise of brick-and-mortar stores and the rise of "e-commerce." Depending on whom you choose to believe, we're talking as much as $1.3 trillion a year by 2003, or 15 percent of the global gross domestic product by 2002. That's serious money in anybody's book.
"Online retailers will have plenty of holiday cheer this winter as more consumers shun malls for online stores--spending $4 billion...between Turkey Day and Y2K," says a report from Forrester Research of Cambridge, Massachusetts.
Forrester's report, released September 24, predicts that some 8.6 million U.S. households will use the Internet to shop this holiday season. Half of them, 4.3 million households, purchased gifts online last holiday season, too. The repeat shoppers will spend an average of $670 online this time--compared with $150 from the novice Web buyers.
The purchases won't stop then. "Retailers may be planning a vacation in January after the dust settles on the warehouse floor," says the report. "However, there will be no rest for Web merchants after the blizzard of holiday shopping blows through--holiday buyers won't taper off once they discover the ease of Net shopping."
I would be skeptical, but similar forecasts are floating around from PricewaterhouseCoopers of New York; International Data Corp. of Framingham, Massachusetts; The Boston Consulting Group; and several others. The figures vary rather wildly, but the consensus is that e-tailing is about to take off in a big way.
The retail trade media are taking serious notice. Women's Wear Daily put it this way in September: "Growing numbers of research studies are hammering home the point That...e-tailing will redefine the retail landscape. Brick-and-mortar retailers that do not adapt may soon start crumbling under the weight of the mounting e-business." The story pointed to a Boston Consulting Group forecast that online sales in North America will top $36 billion by the end of this year, up 145 percent from 1998.
Shopping Center World reported in May that U.S. consumers will spend $28 billion online in 2000, with 60 percent of those sales coming at the expense of traditional stores. The report was attributed to a study by Merrill Lynch of New York.
All the gush seems a bit overblown, since U.S. retail sales total $2.6 trillion a year. Even the most optimistic estimates for e-tailing only amount to something over 6 percent of that total in the next few years.
But I'm seeing it even in my own house. My wife, not a big shopper and indubitably the least wired among us, has spent more than $600 with e-tailers in the past four months.
The concern among retailers, it seems to me, is some consolation for journalists and media companies. We're not the only ones wondering what to do about the threat/opportunity that is the Internet. Perhaps we even can find a way to make e-tailing work for us. After all, newspaper trucks already drive up and down many streets in the world, and it sounds as if there will be a lot of packages to deliver.