InformationWeek

Take Staples.com, the online arm of Staples Inc. in Framingham, Mass. The company's push to compete and improve online customer service prompted a complete revamp in early May of the office supplier's 18-month-old site. Staples .com streamlined the checkout process, installed two new search tools, added several small-business services, and improved purchasing management. It also created a centralized one-stop rebate center in response to complaints that tracking down forms and information around the site was difficult.

"We've listened to customers and collected consumer feedback since the first launch," says CIO Mike Ragunas, adding that Staples used user focus groups, an in-house users group, and an independent survey to identify customers' needs.

Many other brick-and-mortar companies are also working feverishly to enhance the customer experience. This spring, Toysrus.com Inc. revealed plans to double its staff and expand operations during the next year, including building two new fulfillment centers. J.C. Penney Co. relaunched its plus-size apparel site for women in March, offering a browser tool that lets shoppers create a replica of their body dimensions, which then models clothing choices. And Barnes & Noble Inc. unveiled a "university" in late May, offering its customers a customized site for online learning.

On the dot-com front, many pure-play online retailers have felt the heat of increased competition, falling stock prices, and lackluster sales. In the past few months Toysmart.com; upscale E-retailer Foofoo.com; Europe's top site, Boo.com; HealthShop.com; Craftshop.com; ToyTime.com; and Nickelodeon's Red Rocket all closed their virtual doors.

"Dot-coms face a lot of competition with the return of the retailers," says Thomas Johnson, a principal at KPMG Consulting. "Last year, brick-and-mortar companies laid down the vision, put very few SKUs on their sites, and then stepped back a bit. This year, they're adding more SKUs, and big bucks are being spent."

Just because the business-to-consumer Internet pure-plays are failing doesn't mean the business-to-consumer market is dead. Shop.org, an online retail trade group in San Jose, Calif., says the business-to-consumer E-commerce market will grow by 85% this year, topping $61 billion. And a recent Commerce Department report says online retail is strong in many industry categories, including computers, cars, books, sporting goods, and catalog sales. What's significant is that many analysts predicted a sharp drop after the Christmas season-but that didn't happen.

This is welcome news for the surviving E-retailers and downright encouraging for brick-and-mortar companies stepping up their Web efforts. Brand-name retailers Dress Barn Inc. and Saks Inc. are just two examples of brick-and-mortar companies expanding Web storefronts in the coming months.

"We saw what happened with the first wave in retail E-commerce, and in some ways dot-coms did have an advantage because they weren't dealing with integration issues," says Robert Dykman, chief technology officer at Saks Direct, a subsidiary of Saks that's managing the online channel. "And the first retail click-and-mortars weren't as focused as they needed to be."

SaksFifthAvenue.com went live last summer as a static storefront where customers could only request catalogs and get store locations. The upscale clothing retailer, best known for its high-profile store in New York, spent the past several months mapping out its E-commerce strategy. Saks' big advantage online, says Dykman, is that consumers of luxury clothing items are underserved on the Web.

"There's no one serving this marketplace, so we see a real opportunity,'' he says. "Our goal is to provide the same experience our shoppers have when they visit our New York store. Our customers are affluent, and they want to buy online. We're working hard to provide technology that not only builds buyer confidence, but draws in new customers.''

continued...page 2, 3