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A Revolution 'Under Construction'

The revolution of the Internet Age is proving to be an amazing work in progress. Many of us surfing the Net click on sites that are “Under Construction,” a term that is becoming a metaphor for Internet retailing as a whole.

For retail marketers who dream of a digital universe of e-tailers replacing traditional ones, the good news is that the real world is still far better for establishing retail branding.

According to a June report by eMarketer Inc., in the almost six years since the inception of U.S. retail e-commerce, e-tailers have learned valuable lessons about how to attract and keep customers. Shoppers' reasons for not buying over the Net have changed over the past few years.

An initial key concern was the security of their transactions, and this continues to plague online newbies. Now, other factors have come into play including customer service and privacy. A recent study by Yankelovich Partners reinforces this reticence to buy online with findings showing that consumers are hesitant about releasing information such as telephone numbers, addresses and credit card numbers on the Web.

How does this affect direct marketers? For the past four years, the Direct Marketing Association has conducted an intensive survey of Internet use by its members. Results show that direct marketing companies in the United States have been cautious to adopt the Net. Their lack of adoption ties back to the Yankelovich study because direct marketers have not been as proactive in allaying consumers' privacy fears.

However, at the outset of retail e-commerce, the direct response industry quickly embraced the Internet with visions of a marketplace of infinite transactional potential. How could they not be dazzled by the most enticing potential for business building as eBay, Travelocity, major airlines and hotel chains, among many success stories, have discovered. And the subscription-based model, a fundamental building block of direct marketing, is proving its merits on the Web, representing the backbone of AOL and other profit-making Web enterprises.

So, what of retail branding? As an extension of brand support built in the analog world, the Web can provide reinforcement of the imagery, positioning and, most importantly, customer service and sales. Customer service on the Web is still limiting. With their established infrastructure, traditional direct marketers can use their existing customer service fulfillment technology and realize economies of scale when conducting Web business. But, developing a cache in digital space is proving as elusive as the digits themselves.

And, perhaps marketers can find satisfaction in that the establishment of a world-class and lasting brand identity is ultimately a human experience. The construction of retail environments with a unique ambiance and attention to service is what makes a Nordstrom or Neiman-Marcus a distinct experience — one that the consumer is willing to pay for. Plus, the concept of Sam's Club or Payless Shoes is a different positioning in which the customer understands the price/service trade off and makes that choice as well.

But price rules on the Web, especially as search engines make price comparisons simple for the consumer. The ability to charge a premium for the same merchandise in digital space is not a winning strategy.

So, how does success look? Many companies have tried to gauge the effectiveness of their Web marketing strategy using measures such as sales/lead generation, hits on the home page and return on investment. Though Web marketers can now measure the incremental growth and profitability of their business, will this provide the direction for future business investments?

And, with margins paper thin, e-tailers face the challenge to sell unique product — similar to how The Sharper Image sells — or develop demand in the real world using the Web to complete the sale and provide information and service to their customer base.

Direct marketers hope to own e-tailing. Unfortunately, the learning curve for direct marketers and electronic commerce has been steep. Those most successful are direct marketers with the industry knowledge and understanding that customers must be attracted by their value proposition, called to take an action and given superior service. Plus, no surprises here in choice of personnel to steer the ship — e-tailers on the Internet have been among companies lacking experienced personnel from the direct marketing industry.

The jury is still out on Web marketing, as standards and protocols on best practices for marketing and advertising continue to emerge. Many companies understand that much needs to be learned to make their operations more efficient. Traditional marketers will not ignore this tool. However, it is clear that they will continue to refine traditional direct marketing tools to complement this emerging medium.

For now, I'll just see you at the mall.

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