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Toys R Us’s CFO says online retailing still offers great potential, but that bricks-and-mortar retailers should not assume they`ve won the battle for e-retail sales.
Toys R Us CFO Ray Arthur says that online retailing can work and debunks three myths of online retailing. Arthur, who spoke Monday afternoon at Jupiter Media Metrix’s Retailing Forum in Chicago, says the three myths are:
--Bricks-and-mortar stores have won the online battle,
--E-commerce can’t be profitable,
--E-commerce is not the great market the industry once thought it was.
Arthur says that while bricks-and-mortar stores may be emerging as major new players, they are far from dominating the online space because they have much to learn about making online retailing work. “Bricks-and-mortar retailers can succeed eventually but they’ve not gotten it right yet. It’s really hard to translate the mass merchant approach online,” Arthur says.
He also notes that while the profitability projections have dropped, the Internet still can be profitable. “It just takes longer than expected,” he says, adding that overcoming the costs of infrastructure is one factor that delays profitability initially. But once those costs are paid, the market is wide open. He cited the company’s deal with Amazon.com as a way Toys R Us was able to rein in infrastructure costs by outsourcing the web operations to Amazon. Arthur says the deal helped Toys R Us eliminate the 40 cents for every dollar it would have spent on building an online infrastructure.
And e-commerce still is a huge opportunity for retailers, he says. Research that predicts total online sales to be 7% to 10% of all retail sales by 2005 indicates that online retailing has a future. “The bubble may have burst, but people still shop online,” he says. “E-commerce will continue to grow, we’re just at the bottom of the growth curve.”