E-tailing 101��post Internet fever - internet retailing to see possible decline - Brief Article - Industry Overview

Twelve months in Internet retailing time is a virtual eternity. Since this time last year, players have come and gone, deals have been made and broken, and some of the best laid plans were hatched--only to run out of steam before they ever got off the ground.

But the biggest change in the last 12 months has little to do with IPOs or rounds of investment. Rather, what has slowly gripped the industry and turned it on its head is the new mindset that when it comes to retailing, the Internet is not the panacea it was once made out to be--and that slowly but surely it's evolving into little more than a modern, high-tech tool.

No incident serves as a better example of this new view of Internet retailing than the recent news out of Bentonville, Ark., that Walmart.com was closing down shop for a few needed repairs. What's most remarkable about this "temporary" shutdown is that the retail community barely took notice. That's right, the world's largest retailer shut down a branch of its retail operations in a move that 12 months ago would have sent investors into shock, caused heads to roll and led to an irreparable drop in stock value. And yet today, such news is a mere blip on the radar.

It's not as though the honeymoon of Internet retailing is over. Plenty of companies--Land's End, JCPenney and Office Depot to name just a few--are still pushing the envelope and raising the e-commerce bar. It's just that many retailers, especially the public behemoths that have to answer to Wall Street, can no longer afford to buy into the pipe dream that the Internet is a guaranteed road to riches.

The consequence of this new view is that retailers have altered their approach to e-tailing. The if-you-build-it-they-will-come mentality has given way to "How can we best use the Internet to serve the core needs of the company?" And in answering that question, they haven't come up short on solutions.

* Kiosks: When the industry cried out for a way to build upon site/store synergies, kiosks gave retailers the means to bring the Internet directly to the store shopper. The marriage made for a perfect fit at stores like Home Depot, whose commerce-compatible site is still a work in progress. When faced with the challenge of how to offer 2,000 skus in home appliances, the home center rolled out an in-store kiosk program in June to two-thirds of its stores. Other promising programs include RadioShack's "Ask the Shack" on-line information kiosk, Staples' airport store kiosks that link travelers to Staples.com and Best Buy's AT&T broadband service kiosks.

* Internet Service Providers (ISPs): Once the e-tail community realized that traffic was as much a key to e-tail success as commerce itself, every site operator in the industry thought of ways to attract users--from coupon promos to lotteries. But it wasn't until Kmart created the Bluelight ISP, borrowing a page from the British model of free Internet access, that they finally got it right. In the past year, other prominent mass retailers such as Costco and Barnesandnoble.com have rolled out free Internet access programs

* B2B: From the Worldwide Retail Exchange to GlobalNetExchange, the surge in popularity of business-to-business networks serves as the greatest evidence of a shift in retailers' Internet priorities. Where they failed in transforming their Web sites into profitable commerce machines, many retailers have succeeded in turning their Internet savvy into a highly productive supply chain tool.

The search for an on-line profit formula has only just begun. New companies will try new methods for years to come. Maybe even Wal-Mart--once it's back on line--will have a few answers of its own in that regard. But an important hurdle has been cleared in the minds of many e-tailers. By unplugging its site a month before the holiday crush, Wal-Mart helped put to rest the belief that if you're not on line, you're dead in the water.

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