Drawing the E-Commerce Battle Lines

Written by Evan Schuman
October 8th, 2004

When America Online recently announced its yawn-oriented shopping portal (“Gee,” asked executives from Microsoft and Yahoo simultaneously, “why didn’t we think of that? Oh yeah. We did.”), it renewed the perennial offline/online e-commerce debate.

Since shortly after the Web came into being and browsers became graphical, the Web was without form, and void and darkness were upon the face of the browser. And Andreessen said, “Let there be commerce.” And Barksdale saw the commerce and that it was good. And Barksdale divided the online from the offline.

Biblical paraphrases aside, the age-old debate with e-commerce has been how retailers should make their online and offline sides play nicely together. In a perfect world, a retailer would do extensive customer research, identify the exact kinds of sales and services that make the most sense for online and those that would work best for offline, and act accordingly.

Division executives would then be compensated on overall growth and would therefore gleefully send sales to another group if that’s in the company’s best interest. Alas, we don’t live in that perfect world.

This leaves us in a world of Web “me-too”s, brick-and-mortars that seem to fight with their online units more than cooperating with them and just a handful of companies that are truly trying to differentiate themselves.

I know it sounds self-serving coming from an columnist, but the best answer to much of this is more sophisticated use of technology. Lands’ End, for example, has for years made an art out of online custom clothing. Using an extensive database and a onetime questionnaire, it provides an accurate, virtual fitting room.

Last week, a group of ink-stained daily newspaper publishers (Gannett, Knight Ridder and the Tribune Co.) tried to extend their display advertising sections onto the Web. Thus far, that’s a pretty obvious move, but what did was create a wonderful amalgam of offline and online.

Instead of the AOL model of using a portal to find other online stores and pay shipping, uses the search and customization powers of the Web to help people find the items they want at brick-and-mortars and at brick-and-mortars that have those items on sale.

Future revs are supposed to be able to add current inventory information as well. Imagine a holiday-shopping effort where the site takes your full list and identifies any local merchants (you set the distance for your definition of “local”) that it have it on sale and in stock. You might even then be able to call and have them put it behind the counter for a few hours while you drive over.

I give that site gold stars because it is using technology not to create a brick-and-mortar or an online merchant, but to leverage the strength of one and to effortlessly marry it to the strength of the other. And as an added bonus, the customer fares better than he or she would have otherwise. (“Oh, yeah. Customers,” mumbled the Costco exec. “Almost plumb forgot about them.”)

On the other extreme are brick-and-mortars with Web sites that choose to keep the two worlds separate. I shouldn’t say this, but there’s a certain refreshingly honest quality to that approach. “We sell clothes and they’re good clothes. You buy from human salespeople. We sell clothes the way our parents did and you can buy them like your parents did.”

Oddly enough, one champion of that approach is the retail industry’s most senior CIO, Mike Prince of the Burlington Coat Factory. In the more than 25 years that Prince has reigned over the technology operations of the company that is today an almost $3 billion retailer, he has consistently been on the cutting edge of technology, from launching a corporate Web site in ’95 to early adoption of Unix, Oracle (Burlington is the single oldest customer of any Oracle application), e-mail, TCP/IP, symmetrical multiprocessing and?most recently?Linux.

And yet here we have this technological pioneer and trend-setter who is proud to use technology where it helps and to not even try where it’s not necessary. Is Prince interested in creating a Web-based tailor program? Nope. His response is the same one my grandfather?a onetime veteran of New York’s garment district?would have given. “You come in, you try it on, and if it looks good, you buy it,” Prince said. “If it doesn’t, you don’t.”

Burlington’s business model has merchandise distributed nationally to some 315 stores in 42 states, but in relatively small quantities. “We do a lot of opportunistic buys so there is not necessarily enough depth to put it in all stores,” he said. “We scatter it throughout the whole country, so there’s not a significant stock in any one location.” That makes fulfilling lots of Web orders difficult.

Even though Burlington doesn’t now allow a lot of integration between its online and offline worlds, Prince’s team is dramatically upgrading IT infrastructure so that it can support integration as soon as the business decides it wants to. “From an IT standpoint, we’re enabling it. Transactions done that way would certainly flow through the system cleanly,” he said.

How’s that for refreshing? Instead of some Web site that uses technology because it can, Burlington can and chooses not to. It’s looking at its customers and its business and deciding that it is confident enough and savvy enough to not deploy without a good reason.

But like Paul Newman’s Henry Gondorff character from “The Sting,” it would be unwise to underestimate Burlington. “Don’t kid yourself,” Newman’s character says to Robert Redford’s Johnny Hooker. “I still know how.”


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