February 6, 2001, 12:00 AM

NRF: Navigating Retailing`s Future

Need evidence that the Internet is transforming retail chains? The National Retail Federation`s annual conference had plenty.

To the casual visitor, last month’s National Retail Federation Conference & Exposition, retailing’s premier annual event, must have seemed like just another Internet show, the kind conference organizers have been churning out fortnightly to cash in on the Internet business wave.

All of the general sessions and a good many breakout sessions had an e-retailing theme. There were reports on the growth of Internet retail sales, consumer surveys of on-line shopping trends, and panels of retail chain executives anxious to discuss their web merchandising strategy. The exhibit hall at the cavernous Jacob Javits Convention Center likewise was filled with exhibits that would have been at home at an Internet World event. The POS systems vendors, which once focused on linking stores using data networks, were now featuring e-commerce packages to link established retail operations to the web. Some were using their POS systems as platforms for total e-commerce networks that link stores, kiosks, web sites, and customer data files, into “a multi-channel retailing solution,” a buzz phrase which itself is a by-product of Internet retailing. The CRM folks were in the hall, too. This time they’re selling personalization systems that track every move a visitor makes on a site in order to produce a detailed customer profile, which in turn is used to tailor the look of the Internet store to the preferences of that shopper, when she next visits the site. And, of course, there were the new e-returns specialists, trotting out systems that track and direct packages from the moment the web shopper clicks the “return” button.

So what gives? This is the number one show for store-based merchants. Produced by the official association of the retail trade, whose flagship publication is Stores magazine. Why has the NRF annual become e-centric?

It’s because e-retailing is fast becoming mainstream retailing. All of the growth in retail sales-all of it-is coming from the Internet. Despite the mid-year collapse of scores of dot-com pioneers, Internet retailing sales doubled this past Christmas season. The web accounts for 2% of retail sales today, but it will account for 12% to 15% by 2005. Furthermore, e-retailing is rapidly transcending its low-margin foundation-books, CDs and computers-to the high-margin items that make old-line merchants drool. According to a survey of on-line buyers conducted by Ernst & Young, apparel last year moved from obscurity on the web to the # 4 position in type of merchandise sold on-line, and women accounted for 60% of web shopping, compared to 50% just a year ago. Anthony Noto, the retail analyst for Goldman Sachs, told the NRF conventioneers that on-line shopping won’t become a mass-market phenomenon until it penetrates 25% of households. But it’s knocking on the door with a 17% penetration, and female apparel buyers are poised to make it a mass market sooner than anyone expected.

In short, the NRF, to its credit, is converting its Big Show to a webfest for the same reason that mall construction is dead-the Internet is the future of retailing. Anyone who doubts the power of the Internet in retailing should have heard the collective gasp that went through the general session crowd on the second day of the conference. It came when Toys “R” Us Chairman Michael Goldstein related this anecdote: When the top toy merchant put the PlayStation II up on its web site last fall, it sold 5,000 of the video game systems at $500 a pop in 23 seconds. Twenty-three seconds. It is with such lightning speed that the Internet is changing the face of retailing-and its biggest show.

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