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 ...
We are seeing a notable increase in subscriptions from three groups—web-only merchants, manufacturers and television direct marketers. All three illustrate how the web merchandising market is broadening and diversifying as more organizations discover the opportunity the web has created.
On page 45 of this issue, we publish a form showing the average monthly circulation of Internet Retailer for the last year, a requirement of our periodical postage mailing privilege. But while the form shows that our request circulation averaged 34,178 in the past year, it does not show the industry make-up of that circulation (i.e., the split between retail chains, catalogers, virtual merchants, manufacturers, industry vendors, consultants and educators).
Since Internet Retailer’s launch in early 1999, its circulation has been dominated by retail chains and catalog firms, and that remains true today. Fully 56% of our circulation comes from retailers and another 22% from catalogers-percentages that properly reflect the make-up of the Internet retailing market. But the remaining 22% is undergoing a change that reflects the changing nature of e-retailing.
We are seeing a notable increase in subscriptions from three groups-web-only merchants, manufacturers and television direct marketers. All three illustrate how the web merchandising market is broadening and diversifying as more organizations discover the opportunity the web has created.
This year’s crop of web-only merchants is significantly different from the first crop we harvested three years ago. Then, the virtual merchants that made up 5% of our circulation came primarily from Webvan and other high-profile, Wall Street-financed dot-coms. Following the dot-com crash, this group all but disappeared. But they are quickly being replaced by independent and highly specialized merchants who have discovered they can profitably merchandise their quilts, lamps, fishing reels or any other consumer product to a global market with minimal investment in a web site and no investment in outlets or catalogs. This group also includes what I would call affinity marketers, the same people who a decade ago teamed up with MBNA and other financial institutions to market affinity cards that captured a huge share of the credit card market. Take a look at NFL.com, and you will see that the league sells a lot more than football tickets online, including all the gadgets you could possibly need for a tailgate party.
Some manufacturers are similarly discovering that they can market their branded consumer goods so effectively on the web that they are willing to risk some channel conflict, particularly if their brand is strong enough to overcome retailer objections. Thus, other computer manufacturers have followed the lead of Dell, which gets about half of its $5 billion in consumer product sales from its web site. If the computer boys can do it, other branded manufacturers are concluding, so can they.
That brings me to my third group-TV merchandisers. The History Channel-my most-watched TV station-continually plugs program tapes available on historychannel.com. But click the Store button on that site and you’ll find all kinds of merchandise loosely related to history, including a leather “bomber chair” that sells for $1,500 and is meant to evoke memories of the jackets worn by American B-17 crewmen in WWII. And every TV infomercial directs viewers to a web site where those magic blade knives, abdominal-muscle-building machines, and bread makers can all be ordered. Internet Retailer currently has 18 subscribers from QVC, no doubt all of whom see the growing connection between TV and web merchandising. At a recent e-retailing conference, I asked Robert Meyers, merchandising vice president of QVC.com, what happens to QVC when television and the Internet merge. “You just asked the question that brought me to this company,” he answered.
None of this means that traditional retailers and catalogers will not remain the dominant web merchants and Internet Retailer subscribers. It does mean that the web is changing the rules of merchandising and creating new competition. Retailers and catalogers are ill advised to ignore and fail to respond to these trends.