A new forecast from Forrester Research credits greater online spending by Canadians, lower shipping costs and more selection for the spending increase.
On the Internet, fast is fuel. And these days, nothing spells speed like broadband. Twice as fast as a 56Kbps modem, broadband Internet access via DSL service or cable modem puts muscle behind highly interactive applications that soak up bandwidth, speeding downloads and smoothing out jerky audio, video and animated features.
For e-retailers, broadband promises to jazz up the selling space by making existing bells and whistles work faster and more reliably. On top of that, it opens up new selling avenues via demonstration videos, richer graphics and customized shopping features.
But first, customers must migrate to broadband service-and they haven’t yet. By the end of 1999, only 6% of home-based online users, some 2 million households, subscribed to broadband service. That’s set to change, according to Forrester Research, an e-commerce consulting firm based in Cambridge, Mass. It foresees the number of broadband users more than doubling to 4.7 million households by the end of this year and surging to 16 million by the close of 2002.
What’s holding back the wave is the cost-at $50 per month, broadband service runs about twice as much as standard dial up-as well as the lack of nationwide coverage. Most broadband connections today are limited to large urban markets because outlying areas generally lack the supporting communications infrastructure.
The Federal Communications Commission and local agencies are encouraging the growth of broadband by requiring cable and telephone companies to lease out line space if they don’t plan to offer broadband service themselves. Yet that’s leading to service and support problems, says David Willis, an analyst who tracks broadband service for the Meta Group, Stamford, Conn. “There may be 24 to 48 hour outages and no way to complain to the carrier,” explains Willis, since one company may own the lines, while the service provider is leasing space. “A lot of finger pointing goes on,” adds Jean Schaaf, senior analyst at Forrester.
Even with today’s predominately slower connection speeds, features boosted by broadband are in hot demand for good reason. Clothier Lands’ End, for instance, more than doubled its Internet sales from $61 million to $138 million last year, after adding features that allow customers visiting its site to to fit clothing on virtual models, mix and match various styles and colors of Oxford cloth shirts, and shop the site by linking browsers with a friend or customer service representative. Lands’ End executives stop short of making a precise connection between these new features and the higher sales, yet they say some influence is certain. In e-mails praising the new features, customers have vowed to return to the site or make it it their exclusive online clothier.
Because broadband is currently used by a small segment of online shoppers, retailers typically shoot for the middle by assuming the average customer is connecting with a 28.8Kbps modem. That means most have omitted streaming video and other heavy-bandwidth applications because shoppers won’t have the proper experience. Instead, they’re more likely to see murky blobs moving out of sync with the sound.
For customers with the power behind their PCs, broadband carriers Road Runner and Excite@Home have developed special shopping portals where Lands’ End and other merchants have supercharged their sites with streaming video, 3D imaging and other features. Excite@Home’s 1.5 million customers can point their browsers to an online mall featuring various well-known merchants- including Egghead.com, Amazon.com, Beyond.com, Bloomingdale’s, Gap and Mothernature.com. The portal features videos promoting everything from toys to hand-held drills. Sales increased among all retailers using promotional videos, says Kris Carpenter, vice president of commerce for Excite@Home. “We had to pull some items off because the videos were driving sales beyond inventory.”
Excite@Home is paid through a revenue sharing program with retailers, but Carpenter would not disclose details. The portal also experiments with using 3D animation and rendering to display products. “From something as mundane as a candle,” says Carpenter, “there’s value in seeing the depth and dimension.”
The Lands’ End site within Excite’s broadband portal includes a video showing customers how to measure themselves for new clothing, along with so-called infomercials for specific merchandise. “We’re dipping our toes in the water,” says Jeremy Hauser, research and analysis specialist for Lands’ End, Dodgeville, Wis. “But until we can be sure where this is headed, we’re not going all out.”
Like Lands’ End, most retailers experimenting with broadband are doing so within high-speed portals, and few expect to be running separate sites for broadband and dial-up users in the short run. “You have to program for the least common denominator,” says Jeff Gaus, vice president of marketing at eFusion, a Beaverton, Ore., company that provides voice over Internet service to Cameraworld.com and other e-commerce sites. “People still want a two-second response time with a 28.8 modem.”
Two sites better than one?
Yet as broadband access grows, separate sites may prove to be the best way to serve both segments of customers, says Lisa Pierce, vice president of communications services, network connectivity and telecommunications at Giga Information Group, Boston. Both could be fed off the same server and network infrastructure, she adds.
Pierce and other market watchers expect to see broadband applications boosting categories of goods tougher to sell on the Web, such as electronics, furniture and clothing-merchandise typically relying on touch and feel to close the sale. Those are two compelling reasons behind Your Personal Model and Oxford Express at Lands’ End. Oxford Express chugs through various dress shirt colors, collar and cuff styles, fabrics and cuts, allowing users to select and view as many combinations as they want. The modeling software, which allows women shopping the site to create a 3D figure based on their own measurements, functions as a virtual dressing room.