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TECHNOLOGY EDGE (COLUMN): Coping with the carnage

Opening the technology section of the paper the other day, I ran across an article sounding what has become a familiar note in 2001. Titled “The Carnage Continues,” the report chronicled the latest failures in the arena of e-commerce. It noted that 55 dot.coms shut their doors in April 2001 alone, compared to just one such failure during the same month the previous year.

Indeed, black clouds seem to hang over Silicon Valley, where the once-bullish technophile culture stands on its head: The Wall Street Journal recently described how many founders — once the envy of the world — now struggle to get dates, and sites such as now offer visitors “online graveyards” replete with somber images of tombstones for expired tech ventures.

Such dire news might lead the world of conventional retail to wonder whether e-commerce is worthwhile at all. A recent report by PricewaterhouseCoopers' E-retail Intelligence System offers an interesting perspective. While urging caution, “World Wide Web: E-commerce Across the Globe” also notes that e-commerce, including e-retail, is growing rapidly worldwide. By 2004, for example, e-retailing revenues are expected to reach $428 billion. Shopping Center World recently interviewed the report's author, PricewaterhouseCoopers principal consultant Jackie Pollok.

SCW: The report notes e-retail and e-commerce are growing rapidly worldwide. Do you think U.S. retailers pay enough attention to these emerging markets?

Pollok: Most e-retailers are still working to refine retailing strategies and operations here in the United States. Until they've been able to achieve and sustain profitability here, I don't believe it is in the best interest of a retailer to begin expanding elsewhere. In emerging markets, or those where Internet penetration is still relatively low, it is simply too difficult for retailers today to attain critical mass for online stores built to suit.

SCW: Do you think brick-and-mortar retailers, rather than e-tail pure players, will come out on top at the end of the current shakeout of business failures and acquisitions?

Pollok: There is room for both bricks-and-mortar retailers as well as pure-plays, and I don't believe being a pure-play automatically eliminates a company's chances of being successful. However, I do think bricks-and-clicks players have some advantages over pure-play counter parts. For example, a bricks-and-mortar retailer who has added an online store already has an established brand name, an existing customer base, and can offer shoppers additional value.

SCW: Do you believe conventional retailers should continue to regard selling goods online as a necessary part of their business?

Pollok: Yes, but only if these retailers are truly willing to invest the right level of resources in an online store. This means being willing to invest in a well-designed site, strong back-end fulfillment capabilities, and good customer service support. Poor execution of an online store could well hurt the retail brand's bricks-and-mortar stores.

SCW: Any other thoughts on how e-retail might affect the health of U.S. shopping centers?

Pollok: One of the most powerful aspects of Internet retailing is the synergy an online store can create with bricks-and-mortar stores. Online stores can provide customers with an avenue to “preshop.” Shopping centers can work with their tenants to create a site that piques customers' interest and brings them into the shopping center. Conversely, shopping centers may direct shoppers (via signage) to an Internet site for special offers or advance notice of sales or other shopping center events.

Keys to success

Jackie Pollok, principal consultant with PricewaterhouseCoopers, notes an important lesson of the shakeup — new technologies only work for good merchants.

“Successful online retailers in general seem to have mastered the ‘eight S's’ of the online shopping experience,” Pollok explains.

Such firms offer online shoppers:

  • Selection (broad or deep selection with an adequate choice set for the target customer);
  • Substance (compelling content);
  • Savings (fair price or low price);
  • Simplicity (intuitive site navigation, streamlined order and return processes);
  • Sensory appeal (adequate visual and other sensory detail about merchandise);
  • Speed (availability of real-time stock position, expedited delivery options, delivery tracking capabilities);
  • Service (customer help available 24/7 by multiple methods);
  • Security (shoppers not required to divulge personal information unless recognizable need or benefit for them to do so. Credit card security, clearly stated guarantees and privacy and return policies).
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