Retailing 2005: Electronic Malls, Virtual Shopping Carts
PITTSBURGH — TODAY'S Christmas rush at the mall will become tomorrow's on-line stampede.
Buyers will order more goods remotely: from catalogs, home-shopping television shows, and on-line computer services. They'll visit stores proportionately less. It amounts to a significant change in the retail industry. If it happens quickly enough, it will be a revolution.
Michael Killen, president of his own market-research firm in Palo Alto, Calif., believes in revolutions. This year, he estimates that the world has spent roughly $4.6 trillion buying goods and services. Nearly nine times out of 10, people and businesses bought these things in the traditional, face-to-face manner. That's why today's malls and retail stores are doing a booming business, and newfangled on-line shopping services are not.
But don't grab for that shopping cart. By 2000, Mr. Killen says, more than one-quarter of consumer shopping will be conducted remotely; by the year 2005, one-third will be.
Many retail analysts agree a transition, albeit a slower one, is under way. ``I wouldn't sound the death knell of retailing right now,'' says Maxwell Sroge, a catalog consultant based in Evanston, Ill. But ``when on-line shopping becomes available ... it's going to have tremendous impact on the nonstore marketing business.''
Retailers, catalog companies, on-line providers, and telephone companies all seem to agree.
Many are lining up for Killen's report on electronic commerce, which is due out in a couple of weeks. Meanwhile, they are announcing a raft of new experiments.
* Next month, MCI Communications Corporation in Washington will offer an on-line shopping service called marketplaceMCI. Running on the Internet, a worldwide web of computer networks, the service will allow shoppers to use a computer to push a virtual shopping cart through an electronic mall. They'll be able to buy a toy for Junior and select bed linens from their home computer. Purchases, made by credit card, will be secured using special encryption technology.
* Three weeks ago, America Online launched its own shopping service - 2Market - in partnership with Apple Computer Inc., in Cupertino, Calif., and Medior, a software firm. The service allows shoppers to view offerings on-line or on a CD-ROM catalog. (CD-ROMs are similar to audio compact discs and carry computer-readable sound, video, and text.) Cutting-edge retailers, such as Lands' End and The Sharper Image, have already jumped on board.
* Several cable-television companies are also jumping on the on-line bandwagon. Time Warner Inc., in New York City, plans to deliver marketing brochures to the home via a printer that sits on top of the TV set. QVC plans an on-line service called Q-Online. Comcast Cable Communications in Philadelphia is reportedly considering offering shopping among its upcoming introduction of Internet service via TV.
* Jewel Food Stores and Ameritech in Chicago have teamed up to put grocery shopping on-line. Using a computer, or paper forms and the phone, Chicago-area residents can put in their weekly orders and have them delivered directly to the home. Jewel intends to roll out the service nationally.
But not everyone believes on-line shopping will take off as fast as Killen suggests. ``There's been a lot of hype on interactive shopping; but the reality is that no one's selling anything,'' says Stephen Hamlin, vice president of operations with QVC's interactive division.
For example, CompuServe Inc., in Columbus, Ohio, which runs the granddaddy of electronic malls, has yet to reach $100 million in annual sales. SIMBA Information, a Wilton, Conn., research firm, expects on-line purchases to grow to somewhere between $2.5 billion and $5 billion a year by 1998. That total is dwarfed by the $830 billion that the nation's 38,000 shopping centers rang up last year. ``It's just a speck on the landscape,'' says Mark Schoifet, spokesman for the International Council of Shopping Centers.
The catalog industry packs a far more potent punch than the on-line services. Last year, it sold $53.4 billion worth of merchandise; by 1997, the total should grow to $69.5 billion, according to the Direct Marketing Association, a New York-based trade group.
Another rival for the traditional retail dollar is interactive TV. Time Warner, for example, on Wednesday launched its long-awaited interactive trial in Orlando, Fla., where viewers will be able to buy goods from Spiegel Inc., Eddie Bauer, and other retailers directly from their TV sets. Today's home-shopping shows are primitive by comparison. But even they are racking up some impressive sales gains. Between 1991 and '92, notes one study, the percentage of US adults who bought from a home-shopping program jumped from 3.7 to 5.5.
Killen says on-line commerce will show the most-explosive growth in the coming decade, especially on the Internet. Enough retailers seem to be trying out the new technology now that the idea has gained currency. ``The electronic media is a terrific idea, and everyone sees the need to explore it and develop it based upon the future expectation of its growth,'' says Matthew de Ganon, president of Online International, a consulting firm for digital marketing and publishing in Yonkers, N.Y.
Eventually, analysts say, catalogs, on-line services, and interactive TV will come together, giving shoppers many ways to make purchases. These technologies may be mutually reinforcing. ``There is that synergy,'' says Katie Muldoon, president of Muldoon & Baer, a New York-based catalog consulting agency.
Shopping districts will have to adapt. Specialty shops could benefit by expanding; department stores may face more obstacles.