The e-retailer reports a $126 million net loss, stemming from a $640 million year-over-year increase in spending in the quarter on technology and content ...
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Bugle Boy, which outsources much of its Web store operations, also has improved the transfer of orders from its Web store into its mainframe system. Once the company gets the orders from its Web host, it sends them to its warehouse, where workers have learned to handle smaller orders.
The online store is part of Bugle Boy’s retail division, which also operates 280 factory-direct outlet stores across the country. Though declining to give details, McCarthy says he expects the Internet store to top sales at its outlets: “By 2003, we think 3 to 7% of our total sales will be online.”
Online sales also are gaining importance at Timex, says Michael Floros, the company’s manager of e-commerce. Timex, which has sold watches online since 1997, cast a vote of confidence in its e-store by investing in a redesigned site late last year. The old site, produced by the watchmaker’s information technology department, was simply an electronic version of a catalog aimed at retailers. Today, product development and marketing teams have molded the site to consumer tastes, says Sally McKenna, the company’s Webmaster.
Site development teams even went back to the drawing board and revamped product categories when research showed that shoppers weren’t finding what they wanted on the old site.
Few customers, for example, were familiar with one of Timex’s most popular lines, the Expedition series, by name. But that’s how the old site listed its selection of casual weekend watches. Now, a category simply labeled “Outdoors” cues customers to the collection. “The biggest challenge for manufacturers is to change the thought process,” Floros says. “When you sell direct, you have to worry about the message that is going out to the end user.”
What Floros and a host of other manufacturing executives stand to gain is hands-on experience with their customers at every stage of the sale; a primary reason why many will become online merchants. With their own Web stores, for instance, manufacturers take total control over what consumers see. Timex can display its watches in groupings it can only suggest to retailers, Floros says. And the company can supplement product listings with pages and pages of content. In contrast, retailers often don’t have the space or the time to distribute such in-depth product descriptions.
Timex also has found that its technology watches sell much better online than they do through traditional retail channels. Floros says retailers haven’t been big supporters of the company’s pager and data link watches (the latter uses Microsoft software to store appointment and address information). “Our technology products have done extremely well on the Web because of the type of consumers shopping on the Internet,” he says. “And because people can find them.”
VF also sees the Web as an ideal way to learn more about its customer base and to offer them more-an advantage that will drive the development of additional Web sites showcasing its brands.
Healthtex, for example, displays its entire product line inside the ever-expandable walls of its Web store, and it uses online contests and other promotions to collect more information about its customers than it can offline. “The Internet gives us, a chance to play an entirely different role,” Robinson says.
Strengthening relationships with customers is what will lead more manufacturers to sell their products on the Web, according to Mainspring’s Gerlach. That’s especially true for companies that make high-image products like cosmetics.
Clinique and Avon already are finding that their customers know what products they want to buy, says Wolhandler, and many want the convenience of buying them directly from the manufacturer online.
But many industry observers question whether manufacturers can have it both ways. Can they protect their relationships with retailers while capitalizing on the Internet revolution?
“Manufacturers are treading very carefully,” maintains Ernst and Young’s Reynolds. “They are trying to understand how to do this without creating conflict. They don’t want to do anything that is going to jeopardize their brand equity or the relationships they have with retailers.”
To protect relationships with retailers and meet customer needs for strong fulfillment, manufacturers are getting creative. Some feed Web orders from their sites to retailers, who then complete the fulfillment process and ship the orders out.
Others are creating new brands-and new Web companies that can start a fulfillment system from scratch-to sell products online.
Proctor & Gamble has teamed with a venture capital firm to launch a new line of personalized cosmetics at Reflect.com. And VF uses e-commerce to connect with retailers in new ways. The company’s priorities are to launch more business-to-business Web sites than consumer sites.
Retailers who sell Healthtex, for example, could go to a Web site to view the product line and place orders well before consumers could. Plus, VF will provide electronic data and images to retailers that sell VF clothes on their Web sites.
Merchants also can leverage the new e-commerce fulfillment area VF has set up in its warehouse-which can ship one item at a time-to fill their own Internet orders. “We’re going to stay focused on serving retailers for most of 2000,” says Robinson, “because that’s our core competency.”
In PC sales, consumers meet makers
Iffy relations with traditional retailers and confidence in brand names have combined to send would-be PC buyers direct to manufacturers. “Computer manufacturers started shipping direct because stores weren’t knowledgeable about their products,” says Harry Wolhandler, vice president of research at ActivMedia, a consulting firm in Peterborough, N.H.
By logging on to a manufacturer’s site, consumers nonplussed by the help they get in computer or office supply stores can peruse page after page of product information. On top of that, says Wolhandler, retailers add too much cost to computer sales, especially as prices continue to fall.