Why E Tail Will Click

Online merchants that are customer-oriented will do fine

It has become fashionable in recent weeks to predict the demise of e-tailing. More than one pundit has declared the shakeout a death knell for the army of pure-play Internet merchants. But the ones that can weather the storm will find consumers are pulling for them. In fact, e-tail will survive because it differs from its traditional retail counterparts in a crucial way: E-tail sees the world from the customer's perspective. That sounds hokey, but it's the truth.

And it's what will save the industry from fading like a fad.

First crucial difference between retailers and e-tailers: E-tailers care about speed. Speed of access, speed of transaction, speed of delivery--all are critical elements for the e-tailer. My favorite example of e-tail speediness: Amazon.com's one-click ordering. What a great idea, and no store can ever replicate it. The traditional merchant does not want to help me save time, not really. If anything, they're putting the milk in the back of the supermarket to slow me down and maybe sell me more. A spring survey by market researcher Dataquest Inc. found that nearly three-quarters of online shoppers cited convenience as the reason they frequent online stores. No one in traditional retail cares about how little time I have the way an e-tailer does.

Second difference: E-tailers care about community. Again, hokey as all get-out, but true. Certainly, shopping can be a chore. But it's also a community activity, and e-tailers understand that. Delias.com sells fashionable clothing and accessories to young girls--and it offers them a section of the site called The Lounge, where girls hang out and chat about their proms, summer plans, and the coolest trends in music. It's an added dimension few traditional stores try to match. And it's a smart way to build loyalty. One traditional chain that does get this--Barnes & Noble Inc., with its plush chairs and coffee bar--is one that is making good progress as an e-tailer. The attention to community is a dead giveaway.

The last difference: E-tailers care about constantly evolving. The sign of a good traditional retail chain is to come up with a hot concept and hold fast. You don't see traditional merchants constantly changing the merchandise mix, the look of the store, the prices on the products. It would be an unimaginable headache. Yet that's the way e-tail functions, constantly changing. Priceline.com Inc. has made a virtue out of moving and reshaping its offerings and promotions. Where most retail chains are static, e-tail looks for the Next Big Thing. That's part of its allure, says longtime retailing consultant Kurt Barnard. "Whatever is happening right now in cyberspace, it is guaranteed to be light-years different a year from now," he says. This is the great departure from the norm of retailing. "The pace of change, to meet new challenges, is incredibly fast."

To be sure, e-tailers have much to resolve. They have to find a more cost-effective way to advertise than television. And they will have to be more attentive to the bottom line--the market is unwilling to continue shoveling cash into everything with a dot-com suffix. These aren't small problems.

Still, e-tail, as an industry, is not going away. Whatever the criticisms of the financial community, the pure-play e-tailers have indeed invented something new. They have invented the modern consumer-centric retail experience. And while we aren't going to abandon our brick stores for it just yet, we like what we see. And we want more.

Before it's here, it's on the Bloomberg Terminal.