SUPPLEMENT: THE INTERNET; Bye-bye anoraks hello profit

Now that the early excitement of being able to shop in cyberspace has faded, it’s time to get on with the serious business of using the Net to make money, writes David Murphy

Now that the early excitement of being able to shop in cyberspace has

faded, it’s time to get on with the serious business of using the Net to

make money, writes David Murphy



Anyone in any doubt as to how much commerce has permeated the Internet

need only instigate a search using the keywords ‘online shopping’. Using

the ‘Yahoo’ search engine, it will yield something in the region of 500

matches. Indeed, the most recent estimates suggest that online shopping

is now worth something in the region of pounds 200m a year, and rising.



For after a couple of years in which companies struggled to get to grips

with the Internet - creating glossy, but one-dimensional Web sites, as

much to satisfy the managing director as their customers - the Internet

is now fully open for business.



And as many companies have realised, a retail outlet that never closes,

doesn’t have problems with shoplifters or vandals, and which can be

accessed in seconds by anyone with a PC, a modem and the right kind of

software, is one that has lots of appeal.



The transition of the Internet, from a nerd’s playground to a

sophisticated business tool which no company can afford to ignore, has

come as no surprise to Martin Hill-Wilson, managing director of

telemarketing and consultancy/training company, The Merchants Group.

Merchants was quick to spot the Internet’s potential and act on it,

designing a seminar - ‘Integrating the World Wide Web into your

communication centre’ - dealing with issues relating to doing business

on the Internet.



‘Now the initial euphoria of the promise of the Internet has evaporated,

people are re-evaluating its role within the business,’ says Hill-

Wilson. ‘The first flush is over. People are now asking how they can

make money out of it.’



As they seek the answer to this question, Hill-Wilson believes,

companies are identifying real benefits in trading over the Net. Among

the most obvious of these are: a reduction in overheads compared with

traditional retail outlets or manned customer support centres; round-

the-clock access; and the Internet’s global reach.



The computer manufacturer Digital was the first Fortune 500 computer

vendor to construct a Web site, 20 years ago. It conducted a staggering

pounds 0.6bn worth of business with its resellers over the Internet in

1994-95 and another pounds 100m in direct sales to consumers.



Digital was also able to drastically cut the cost of its reseller-

support service by scrapping its telephone and brochure-based

‘PartnerNet’ programme in favour of a Web-based service, ‘PartnerWeb’.

Price and parts files were uploaded to Digital’s Web site, along with

configuration tools to allow Digital resellers to configure equipment

online, rather than having to call the support line for advice on an

individual piece of equipment.



Digital spent pounds 16,000 on setting up the programme, including help

for the resellers to access the site. This pales into insignificance,

however, when compared with the pounds 160,000 a year cost of the

original PartnerNet programme.



Digital’s European Internet and Intranet manager, Clive Watts, is

fulsome in his enthusiasm for the Net as a business tool. ‘A salesman

who has a meeting with a customer the following morning can log in at

midnight the night before to get the latest news on a new product,’

explains Watts.



‘Our partners can get the information they need where and when they want

it. With fewer people manning the phones, we’re providing a higher level

of service and the end-users are getting much better service and

response from our resellers.’



Telephone support is still available, but because the resellers know

they are likely to find the answers they need on the Web site, the

personnel manning the phones only have to deal with questions which the

Web site can’t handle. ‘It cuts out the wally questions,’ says Watts

succinctly.



Of course, the World Wide Web, though it tends to grab the headlines,

isn’t the only reason why companies go online. Richard Woods, corporate

communications consultant at Internet service provider Uunet Pipex,

claims that the majority of its business customers specify e-mail as the

main reason for making the buying decision. In a period where postal

strikes have become a regular feature of the commercial landscape, the

appeal of e-mail is obvious.



But while e-mail might reduce costs and increase efficiency, the Web is

where the hard cash is being generated. Virtual Vineyards is a company

that only exists in Cyberspace. From its Web site

(http://www.virtualvin.com) the company runs a home-delivery wine

service which elicits nothing but praise from all who use it.



In the UK, Tesco’s business is still very much rooted in terra firma,

but it is dipping its toe in the waters of online shopping, offering a

range of wines and flowers for sale over the Internet.



The company still describes the exercise as a trial, but was

sufficiently encouraged, after initially offering the service to

CompuServe subscribers from April 1995, to extend it to full Web access

in September of the same year.



Payment for goods is made through a credit card, using 40-bit

encryption, the maximum permitted outside the US. The retailer says

there have been no credit card security breaches.



But while Tesco is pleased with the way that the trial is going,

spokeswoman Karen Marshall believes online shopping won’t eat too far

into the company’s traditional business. ‘We don’t anticipate there will

be a huge shift in emphasis towards home shopping via the Internet’ she

says. ‘We believe customers like to visit our stores and choose their

own purchases. Online shopping won’t replace that experience.’



But financial investments, which might involve a commitment of many

thousands of pounds, require a little more planning than the weekly

supermarket run.



In this respect, placing useful reading material on the Web for

customers to peruse at leisure is one obvious way in which financial

advisers can add value to their service. The careful investor who might

have trailed round the branches of half a dozen financial advisers a few

years ago, can now compare products and services using the information

on company Web sites - and in much less time.



A good example is Legal & General’s Web site (http://www.legal-and-

general.co.uk/lg/). It offers useful, generic background information on

how mortgages and pensions work and the relevance of different types of

savings plan to different needs. In the financial services market in

particular, the ability to study this kind of information at home,

without the pressure of a salesman, is particularly useful.



‘The great thing about the Net is that it puts the buying process firmly

back where it should be - in the consumer’s hands,’ says L&G’s marketing

communications manager, Neeta Patel. ‘A hard sell puts people off.

Visiting a Web site allows customers to get unbiased information in

their own home, at a time that suits them.’



Many financial services sites, such as the Sun Alliance Web site

(http://www.sunalliance.co.uk.sunalliance) also offer an e-mail

quotation facility. The customer fills in the relevant personal details

on a form and e-mails it back to the company. The quote is e-mailed back

to the customer a matter of hours later.



Many private investors now trade stocks and shares over the Internet.

The Cambridge-based company, ESI (http://www.esi.co.uk) claims to be the

first to have established such a service a year ago, in conjunction with

ShareLink, the provider of non-advisory share-dealing services and

investment information.



ESI’s service includes company share prices and charts, the latest FTSE

Index and trends, and online trading in all UK listed shares. The ESI

site currently registers around one million ‘hits’ a month and has

25,000 registered users, a quarter of whom are resident outside the UK.



At the other extreme, companies such as Great Universal Stores, which

operates the Kays, Great Universal and Choice catalogues, are running

Internet versions of their mail-order catalogues alongside the

traditional printed ones.



During its first two months of trading, GUS’s online service, Shoppers

Universe (http://www.shoppersuniverse.com), which offers 4000 lines of

merchandise, registered 500,000 hits.



It appears likely that in the very near future, consumers will be able

to buy almost anything over the Internet that they can currently obtain

from traditional retail outlets.



But the extent to which online transactions will replace conventional

ones will depend on how successful the Cyberspace salesmen are in

tackling the problems surrounding online commerce.



Not least among these is that of security for credit-card payments.

Credit card operators Visa and MasterCard are working with a number of

technology partners on a standard to safeguard payment-card purchase

over open networks such as the Internet.



The specifications for the SET (Secure Electronic Transactions) standard

were first published on the MasterCard (http://www.mastercard.com) and

Visa (http://www.visa.com) Web sites in February and the final standard

is expected to be finalised for Europe by the end of the year.



In a separate development, Uunet Pipex claims it has developed a low-

cost system for credit-card purchases over the Internet which is more

secure than using a debit or credit card in conventional fashion.



Bandwidth is another hurdle. Most people accessing the Net from home do

so at speeds which are extremely sluggish. But here too, progress

beckons. Software giant Microsoft has recently committed to a six-month

trial of GTE’s Asymmetrical Digital Subscriber Line (ADSL) modem

technology in Washington. The technology is able to transmit at around

ten-times the speed of an ISDN link, which makes it around 45 times

faster than a 28.8 kbps (kilobits per second) modem.



In addition, as the Internet ceases to become a purely PC-based medium,

the possibilities of faster access times through cable or digital

satellite television, or other media, open up.



The software company Netscape, whose Navigator program dominates the Web

browser market, has formed a new company, Navio Communications, to put

its Internet software into new devices which will be used to access the

Internet.



These new devices, as well as an increase in public-access points to the

Net, such as libraries, ‘cybercafes’ and Internet kiosks, will also

broaden the appeal of Internet shopping by increasing the chronically

low penetration of Internet access, particularly in Europe.



While most Westerners have heard of the Internet or the World Wide Web,

according to a recent survey conducted by the Belgian market research

company International Research Institutes, access to the Internet from

home remains at or below 5% in Europe and reaches only 10% in the US and

Canada.



With these levels of penetration, the Internet is never likely to

completely replace traditional methods of distribution, although

according to Hill-Wilson, no one should expect it to. ‘You might well

find that the Net downsizes, but doesn’t eliminate other channels,’ he

says. ‘It takes its place in the mix.’



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