(#2 in a series of reports)
Date: November 28, 1999
Red Herring's "NDA '99: Where Business Is Going" was held October 31 -
November 2, 1999 at the Four Seasons Resort Aviara, Carlsbad, California
Dear Readers, Clients, Partners, Friends:
Shortly after the opening remarks Monday morning, NDA got right to
the nitty-gritty with a look at where online shopping is going from
the perspective of several top names in the industry. This as the
much-touted '99 online holiday season was fast approaching, while
Amazon's stock had just taken a big drubbing after announcing a
higher than expected quarterly loss.
The session began with a technology investment bank research director
setting the stage, then leading a panel discussion of execs from three
leading e-tailers, a major Silicon Valley VC, and a large web consulting
Moderator Dan Rimer, managing director of research at Hambrecht & Quist,
spoke of the phases e-commerce has been going through and what's working
now: thinking big, absolute customer centricity, extending brands across
multiple products (as Yahoo has done), and the power of community.
"Network intelligence" is a key barrier to entry, he said. "And it's
inexcusable not to be continually mining and filtering customer data,"
Rimer continued. "That will be the biggest differentiation."
On the subject of what's next, he cited three things. First, "the
meaning of brands will morph," noting that, on the web, they're much
more individualized, and based on "collective intelligence." Secondly,
infomediaries will play a larger role. And, thirdly, "high-touch in
the future may be bicycle messengers and trucks, not stores."
The e-tailing panel included the CEOs of AutoWeb, MP3.com, Onsale,
and Drugstore.com, plus the CMO of Scient and VC Bob Kagle of
Kagle talked of how e-tailing is finally getting to "me-tailing,"
or personalized shopping. Chris Lockhead of Scient called the
coming holiday shopping season "the beginning of revenge for the
bricks-and-mortars." But there will be lots of returns and site-access
problems, he predicted. Look for next year's Christmas season to be
the big one, he said. Mike Robertson of MP3.com even predicted a lot
of "double gifting" this season, as online buyers who have no idea
where their orders are will panic at the last minute and run to the
mall to buy a gift, only to have the recipient receive the online gift
a few days later as well. [Sounds familiar -- happened to me last year.]
He also thinks it's much more important now, instead of looking at
online buying revenues, to be watching how people are changing their
buying habits. Peter Neupert of Drugstore.com thinks it's still very
difficult to find a good shopping experience on the web, so he's still
expecting a lot of disappointment in the near-term.
"Too many sites equate taking an order with getting a customer," said
Jerry Kaplan of Onsale. "It's about relationships." His firm has found
that initial purchases can be price sensitive, but if the experience
was good the first time, "the customer doesn't mind paying more the
Dean DeBiase of AutoWeb said it's easy to pick the two online companies
who'll do the best this holiday season: "AOL and Fed Ex!" [Not to speak
of the newly public UPS.] This Christmas, he said, is about e-tailing
coming into its own, evolving. "And consumers will vote with those who
make the process *faster*." They've never had so much money, Dean said
-- "They just don't have time."
So what's the recipe for a better relationship with the customer? Kaplan
of Onsale said it's critical how fast that first order arrives. And the
idea is to minimize customer contact, yet provide top service -- "become
an ATM of the web," he said. It does not require human interaction.
Chris Lockhead of Scient thinks we still have a ways to go before the
"happy accident" of the browsing shopping experience occurs in a big way
on the web. Bon Kagle of Benchmark agrees that "surgical" shoppers, as
opposed to "serrendipitous" ones, are having the best experiences now
in shopping online, but the latter will come.
"Lots of companies are doing $10-20 million ad campaigns," noted
Robertson of MP3. But he thinks the bigger question is: How do you
get customers to come back?
On the subject of what parts of their business to outsource, DeBiase of
Autoweb said "good companies know what their core competencies are and
what to outsource." Scaling is a much harder issue. Robertson of MP3
reminded us his company was only six people in January, before going
public. They only have so many people and so much time--so they're
constantly weighing "inside or out?" Kagle of Benchmark noted that
Toys'R'Us decided to purchase their fulfillment function for speed.
Which prompted Scient's Lockhead to comment on the "legacy financial
metrics" that bricks-and-mortar companies are tied to, implying these
can not only affect decisions about outsourcing but also can hamper
the speedy decision-making required in the online world.
Speaking from the decided perspective of the dot-com startup, MP3's
Robertson then blurted out the bold statement that "The laws of
financial economics are changing." Just the people issue alone for
traditional companies is huge, he said. "There's a brain-drain from
these firms that can't be ignored. They're coming to us--it's not
hard for them to jump."
Graeme Thickins, Founder & Principal Consultant
GT&A Strategic Marketing Inc.
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