In the vast new world of Internet commerce, virtual reality and real-time communications, retailers and wholesalers are facing on every front core challenges to long-held business processes and strategic assumptions.
ew distribution challenges? What role will the Internet and World Wide Web play?
Perhaps no single issue presents distributors today with greater opportunity -- or potential threat -- than the massive changes now unfolding in the realm of Internet-driven commerce and home-shopping programs.
Here's what retailers and wholesalers had to say about industry changes in this area:
SN: What role do you see home shopping, especially via the Internet, playing in the industry?
Don Reeve: The trend toward home shopping will grow considerably over the next five to 10 years. The impact will be greater for traditional retailers than supermarket operators. But no matter how slow it may occur, it's certain to grow.
Ed Oertli: Home shopping is moving quickly and becoming a reality. By the year 2000, it'll be very big for consumers. Some people are experimenting with it, but I don't see it being a major part of the business for most companies before the year 2000.
David Reed: It's a competitive issue like everything else. If you don't have it, the guy down the street will. What we're finding is we're catering more to business organizations that have a lunchroom, for example. We see those things picking up in home shopping each month.
Tom Dooner: Home shopping doesn't necessarily have to be done over the Internet, but it's the same basic concept of a virtual reality and a physical reality. They're both realities. When people think about the virtual world they often think of a pretend world. But a virtual world can be very real. The lines between a virtual and a physical experience, and the kinds of things that technology will enable consumers and business people to do, will become somewhat gray.
A consumer can feel empowered through the use of a home-shopping situation. It gives people a feeling they can get what they want when they want it. It's empowering and enabling, and it's very convenient.
The concept of this technology becoming more acceptable is probably well founded, considering the wave of children and young adults accustomed to using the computer and acquiring information over the Internet. The next step is they'll be more willing to acquire goods over the Internet.
SN: What about the threat to traditional retailing?
Dick Lester: The industry is going to evolve and is already evolving into a highly convenience-oriented business.
If we can offer prepared meals that are value-added -- that are more than just pizza -- maybe coq au vin delivered to your door, it could be significant. But I've yet to see a silver bullet where somebody knows how to make money on the Internet other than selling information-access subscriptions.
Reeve: It seems apparent that customers are willing to pay extra charges for the convenience of home shopping and delivery as long as there's added value. I believe the future will bring a large number of cyber-shoppers. But we need to remember there's a big difference between ordering a watch or a tent vs. a basket of groceries.
Dooner: Whether it'll pose a serious challenge to traditional retailing in the future is anyone's guess, but I don't think it will in the foreseeable future. The people who are going to do that aren't the core grocery shoppers at this time.
Lester: It's not likely we're going to sell a lot of Campbell's soup or pork and beans over the Internet. But you're going to see retailers try a lot of things.
Oertli: Home shopping is definitely here and is going to grow. It is always going to be a threat. Either you embrace it and become a part of it or you let it be a threat and take away a part of your business. There are a lot of people selling vitamins and those sort of products over the Internet. Home-shopping clubs on television are another effective tool capturing quite a bit of retail business from clothing to electronics. We need to be aware of it. If you see a threat, then you turn it into an opportunity by addressing your market segment with your own solution. The most valuable asset all of us have is time, and people's time is becoming more and more stressed. With home shopping, they can have someone else pick the product and even deliver it. They don't have to spend 45 minutes or so going through the store.
Reed: We have to manage expectations of what can happen today and what can happen tomorrow and be consistent in our objectives and in following them. In the future, instead of shoppers having to come to the store, they may shop a virtual store, a nonretail outlet or a miniwarehouse.
SN: What issues still must be addressed with regard to selling to consumers via the Internet?
Dooner: The big issue is bandwidth and communications capabilities. Consumers can't wait 20 minutes for a video to download. It has to be more like 20 seconds. That must happen. There has to be much more speed in the communications downloading aspect of the Internet before it'll have a major widespread impact. That will happen, but it'll take a few years.
Oertli: The consumer end of it is quite a bit behind the curve because the pipeline is slower. I have ISDN at home but most people don't. ISDN will help as will cable companies' involvement in speeding communications. When that happens, more and more people then will jump in and utilize it.
SN: What about security issues over the Internet?
Lester: Frankly, it scares me to death. We tend to get caught up in the hype and forget about the day-to-day operational requirements, the security provisions, protecting people's confidential information, personal financial information, things of that nature.
When you're on the Internet you think you're talking to another person in a chat room when in fact there are millions of people that could be listening in on the conversation or on that transmission of information.
Security is something we're taking much too lightly on the Internet and it's up to professionals in the IS industry, within any retailer or wholesaler group, to raise the flag and make sure that doesn't become a donnybrook. You can see disasters happening with private information all of a sudden becoming public because one of us did not take proper precautions. There's potential for disaster.
SN: What other innovations do you see coming down the road in this area?
Reed: I've got a dream, maybe one day we'll have 'smellavision,' where if you log on to an Internet catering page and look at a prime rib, you can simulate the sizzle and imagine the smell coming out of the back of your computer. People think that's far out, but think about it. Many years ago the future was portrayed in the movie, "2001: A Space Odyssey." A lot of things in that movie are reality today.
SN: Could you talk about some of the logistical hurdles that may have to be overcome to make home shopping feasible?
Dooner: We have a physical supply chain today. It might be interesting to speculate on what an electronic supply chain would look like and how various participants in an ECR electronic world would participate. We know what the physical distribution chain is. How might different players in the electronic channel support each other in distributing information as well as goods?
The need to develop alternative order picking and other methods is part of the picture. Picking direct from each store location may not prove cost effective or feasible.
Oertli: You have to design your store or facility to pick the merchandise effectively.
Lester: The basic problem with any of these things has to do with the fact that we sell real product, not information. You can sell information easily over the Internet. When you're selling product you're only creating the transaction. The physical logistics of moving that product from wherever it is to the person's home or business is something that can't be done over the Internet.
The logistics problem of sales of real product has to be solved individually. Perishability and merchandising and all of those things have to be addressed before we really start leveraging this thing.
