Looking Ahead
George Matyjewicz -- Gifts & Decorative Accessories, 12/1/2000
The year 2000 was disappointing to many e-tailers, as the glamour of the World Wide Web faded substantially. But rather than discuss the failures of 2000, I'm going to go out on a limb and make some predictions for 2001. Here they are:
B-to-b trading hubs and portals will fail. I'm not speaking of the b-to-b sites in which one supplier services many retailers. I'm referring to the portals or trading hubs in which many suppliers try to service many retailers. This concept just doesn't work online!
Many companies thought they would be doing retailers a big favor by setting up an online trading hub. No more going to trade shows, no more dealing with pesky salespeople, no more reading trade magazines.Right? Wrong! Folks still need all of the above-not just for buying, but for social and trend information purposes as well. With these online hubs creating gigantic cyber catalogs full of wares from many different suppliers, how on Earth are retailers supposed to determine which are the best products for them?
These b-to-b sites tout their growth figures, showing that the number of visitors to their Web pages has been increasing each month. But the true measure of success for a b-to-b is the same measurement that has been used by the U.S. Census Bureau for decades: same-store sales. Don't measure growth by how much b-to-b business has increased in a month (or a quarter, or a year). Rather, look at how the established businesses represented in the hub or portal grew during the year, compared with the year before.
A "community," "marketplace," "trading hub," or whatever you call it is an added expense to the supplier and does little to increase business, especially when the company's products are buried in a gigantic cybermall akin to the Yellow Pages. The supplier still needs a sales force, and still has to pay commissions on top of what it pays for the b-to-b opportunity.
A national value-added or sales tax will be imposed on Web-based sales. Municipalities need tax money to function. Either they will have to raise property taxes (which would be unfair to homeowners), or there will be a national value-added or sales tax on Web sales. Also, as matters stand now, e-tailers have an unfair advantage over brick-and-mortar stores, which have to pay the local sales taxes (8½ percent in New York City, for example).
M-commerce will really take off. M-commerce, or mobile e-commerce, is already happening in Europe and Asia. For example, in Sweden and Switzerland you can buy a Coke from a vending machine using your cell phone. Also, watch for a new wireless desktop telephone that will have Internet capabilities as well as normal telephone and credit card authorization capabilities. It is being developed by Atlanta-based Smart Voices and Olivetti, of Italy. I have seen the prototype, and it will revolutionize business as we now know it.
A new form of online advertising will evolve. Many people are predicting that there will be a resurgence of banner ads on Web sites. I disagree. I'm not sure what the new form will be, but it will come. Look for it in m-commerce.
Also, advertisers have to get away from the stupidity of measuring "results." I love the "click-through" method of measuring success. Counting click-throughs is like counting the number of direct mail envelopes that are opened. And the "visitors" measurement is a joke, especially if there is free information on the site. Visitors go to the site for the freebies! The only successful and accurate measurement is how much business a site does. Who wouldn't want 100 visitors who become 50 customers, rather than 1,000 visitors who become 5 customers?
Private digital currencies will become more prominent. Free-flowing international e-commerce is really hampered by the shortcomings of the current system: It relies on credit cards (which were designed for face-to-face purchasing), and it has to deal with different banking laws in every country. Private digital currencies, or PDCs, are pre-funded and thus provide instant settlement. There are currently more than 50 types of PDCs now in existence (most of them in the U.S.), but they aren't backed with any security. This is why you should be on the lookout for gold-backed PDCs; they are especially useful for international transactions. One company in particular, Atlanta-based Standard Reserve, is building a network of agents worldwide to distribute gold-backed PDCs. (For more information on PDCs, see "E-Tailer's Digest," October 2000, page 32.)
CueCat barcode readers will die a slow death. CueCat is a marketing tool that involves attaching a device to the serial port of a computer. It looks like a cat, rather than a mouse, and consists of a barcode reader. The manufacturer, Dallas-based Digital Convergence Corp., is scheduled to give away 50 million CueCats through Radio Shack stores and various magazines by the end of 2001. Publications such as Forbes and Parade are running barcodes in articles and advertisements, which the reader scans with a CueCat to be taken to a manufacturer's Web site. Since most people don't read magazines while they're at their computers, it isn't practical. It's a solution looking for a problem.
A new innovation will make transaction processing more efficient. To answer those who say, "impossible," it's already in the works, and at the patent office. Those who have seen it, including executives from major companies and financial institutions, say that this is the first time they have actually seen the Internet being used as it was originally intended. They like the idea of the instant settlement of funds (not the three-to-ten-day settlements that banks currently provide), the instant flow of funds from one party to the other, and the proportionate distribution of funds according to the participation of each party in the transaction. It will take years to implement this, if it ever totally is.
A revolutionary new point-of-sale system will be developed. We need tools that will help us learn more about customers, and learn how to turn browsers into buyers. My idea of the perfect point-of-sale system is that, when retailers scan a purchase at the store, they should see on screen everything the customer has purchased in the past and suggest what she might need but has forgotten. And they should be able to compare the customer's purchase, age, and lifestyle with those of other people in the same demographic and be able to suggest other purchases.
Smart cards will not become popular in the United States. Smart cards are prepaid, PIN-based cards that contain a chip (rather than a magnetic strip). They are big in Europe, where the Mondex card (partially owned by MasterCard) is the leader. In Sweden, you can purchase a newspaper or pay for parking at a meter with a smart card.
The smart card was introduced in the U.S. at the 1996 Olympics in Atlanta, and then died. One major problem is the cost of the infrastructure or equipment needed to read it. To enable consumers to use smart cards, each parking meter and Coke machine needs to have a card reader. Even when smart cards are used on the Internet, both the buyers and the sellers must have card readers.
Remember, you read it here first!
George Matyjewicz of GAP Enterprises Ltd., a management and marketing "solutioning" firm, can be e-mailed at georgem@gapent.com . E-Tailer's Digest is a moderated Internet retail discussion forum, located at www.gapent.com/etailer/.
