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An Electronic Bridge To Customers


Buying and selling on the Internet's World Wide Web isn't a dream. Somebody tell Bill Gates.
By Clinton Wilder
Issue: Jan. 16, 1995

In public appearances, Microsoft Corp. chairman and CEO Bill Gates likes to screen futuristic videos in which computers are harnessed to assist all kinds of everyday activities. But for his next speech, Gates might consider the car-buying experience of Cory Van Arsdale, a Microsoft staff attorney who recently purchased a new Volvo 850. Every phase of the sale--excepting Van Arsdale's test drive--was handled on the Internet's Wor ld Wide Web.

Van Arsdale bought the car from Rood Nissan/Volvo in Lynnwood, Wash. It's the pioneering dealership behind Dealernet, a Web home page where potential auto buyers can view different car models and even fill out online registration and financing forms. Dealernet lists about 30 dealerships just in the Seattle area. Marty Rood, CEO of both Dealer Internet Services Corp.--Dealernet's parent--and Rood Nissan/Volvo, plans to expand to 100 U.S. cities in the next two years.

Whether Dealernet will revolutionize the car sales nationwide is debatable. But one thing is clear: Technology and business managers in dozens of industries are busy getting their companies' World Wide Web home pages--a series of hypertext documents that often includes multimedia elements--running. By some estimates, three quarters of the Web's current home pages are only two months old. "The Net has become much more mainstream," says Cathy Medich, executive director of CommerceNet, a Menl o Park, Calif., consortium of 75 companies exploring Internet business opportunities.

Sell Or Tell?
But can the Web evolve into a viable forum for selling products and services? Or will it act primarily as an information resource? "I'm confident this will become another place where business happens," says Steve Painter, electronic commerce marketing manager for Digital Equipment Corp. in Marlboro, Mass. "In the last two years, we've watched the typically upward slope curve for selling electronically go almost vertical."

Computer equipment is a big draw on the Net. Digital alone has sold "hundreds of millions of dollars" worth of equipment, says Painter. But for traditional consumer products, the electronic selling equation is more complicated.

Total online retail sales in the U.S., including commercial online services such as Prodigy Services Co., will reach about $120 million this year, according to systems integrator EDS Corp.'s management consulting services group. While tha t doesn't sound bad, TV's Home Shopping Network sells $2.5 billion worth of zirconium bracelets and other goodies each year, while TV infomercials sell another $2.5 billion worth. And all that's still just a fraction of the total U.S. retail business, now worth some $2.1 trillion a year. "The typical buyer is not using the computer to shop," says Harris Gordon, an EDS consultant in Cambridge, Mass.

Still, the Web has its share of retail success stories. Many are small, specialty merchants, such as the Racquet Workshop, a tennis equipment store in Houston that receives 100,000 accesses of its Web home page every month. Similarly, book publisher Harcourt Brace Jovanovich Inc. (HBJ) and the Lexis-Nexis database search service both plan to sell goods through Open Market Inc. , an online shopping service in Cambridge, Mass., set to launch this month.

What works on the Web, and what doesn't? "People come to the Internet for information, so companies that post a lot abo ut their products are going to succeed," says Cliff Kurtzman, president of Tenagra Corp., a Houston consultancy that helps companies establish a Web presence.

Speed Feed
The need for high information content, while true of all online selling, is intensified on the Web because of hypertext links that allow users to access related topics through graphical browsers like Mosaic--and enable "tie-in" sales. An online listing of a tax preparation software program, for example, could contain links that would allow the user to order books on tax-free investments or general financial planning.

Open Market, formed last October, expects to go live this month with some 30 sellers. CEO Shikhar Ghosh's formula for successful Web selling is simple but radical: Use the power of the Internet to change the way you sell. One example: Jem Computers, a liquidator of excess computer inventories, will sell via Open Market with "interactive pricing." Prices will drop as goods remain unsold, but bargain hunt ers risk missing out on an item they want if they wait too long. On the Web, sellers will be able to change prices as often as they want.

For some products, sellers can also break the boundaries of the product itself. HBJ's online customers will have the option of purchasing only the textbook chapters most relevant to their work, rather than the entire book. "The idea is to take something that in the past has been treated as a paper-based product, digitize it, and use it to reorient your business," says Open Market CEO Ghosh. "The constraints against that change inside most companies are far greater than the constraints of the technology to enable it."

In other words, selling on the Web can create an opportunity to reengineer a business--rethink relationships with customers, distribution systems, even the nature of the product. For example, Dealer Internet Services, with fewer than 20 employees, designs Web sites for the U.S. units of three large automakers: Toyota, Volkswagen, and Mercedes-Benz. "If we waited for all the manufacturers to act, it would have taken us forever to do what we did," says CEO Rood. "It really is a new world."

'Cool Thing To Do'
As they would be with any new technology, companies considering selling on the Web should be wary of the hype, experts say. "A lot of people are putting up Web sites just because they can; it's the cool thing to do," says Lynn Bolger, VP of corporate media at ad agency Foote Cone &Belding (FCB) in New York. "At many sites the execution isn't very good, especially with fancy graphics that take forever to download. In the long run, the Web has to save the customer money and add value."

The Web is becoming very crowded very fast. That's because companies recognize that "the potential market is huge, given the installed base of computers," says Bolger of FCB. "But there are a lot of channels on that frequency called the Internet."

That said, a company's Web site had better be well-planned and well-executed. Because changing cha nnels on the Web is almost as easy for potential customers as clicking the TV remote. Stay tuned.