Can Internet really change the way consumers behave?

Online customer satisfaction=1 ; offline customer satisfaction=0

A good idea, some technology and a lot of financing, these are the elements that one needs to make a great deal of money on the Web.

In any case, that's what many start-ups used to think, but they are now not only facing a big drop in their shares value but they are also confronted to the fact that online final consumers never really supported their concept in the first place.

That's how three websites that were engaged in furniture marketplace, UrbanDesign Online (BtoB), Furniture.com and Living.com (BtoC) just went bust.

Their failure is due to a lack of customers but also to their inability to create a business model that would have proven profitable in the long term.

I remember commenting on what the manager of the top American home-furnishing merchant store, Furniture Brands International, said in June 1999: "We will not sell our products online".

His opinion seemed rather awkward at the time in the Interned media, since this was precisely the time when Furniture.com was making all the headlines because of its revolutionary concept.

As for the NY Stock Exchange, it did not forgive such statement since Furniture Brands International shares went down at the time…

And yet, a little more than one year after his statement, we must admit that Mickey Holliman, Furniture Brands CEO, was quite right to delay his online presence.

Despite what Furniture Brands CEO said, all the company's brands are now online but a great emphasis is put on the group's on/off line synergy, which helps consumers to find the show room that's closest to their homes, for instance.

Online postage business also happened to be a strong disappointment but that one came as no surprise.

e-Stamp announced officially that it would phase out its Internet postage business model.

The site, after new staff reductions, opted for a different kind of business model and decided to launch its entrance into the supply chain management business.

Will e-Logistics manage to save e-Stamp.com? Investors might well remain impervious to this new strategy since trust disappeared as the stock plunged: shares are now trading at 41 cents… when the stock soared as high as £40 earlier this year!

What we know for sure is that American consumers have not been tempted to buy their stamps online.

E-Stamps mainly expected to convince small and medium-sized firms to use their services instead of relying on the good old postage-meter machines to send out their mail. But it seems that these small and medium-sized firms have decided to remain faithful to the "traditional" methods to send out their mail.

Even though Stamps.com might well be the next online stamp victim, it goes without saying that it organized its diversification more efficiently, partnering with high-standard brick-and-mortar companies in order to offer a secure method of delivering value-bearing documents over the Internet.

To be more precise, Stamp.com just created a new private company called Encryptix.com and key strategic investors such as American Express, Sabre CRS (Computer Reservation System), Galileo CRS and Tickets.com can be found among its partners and shareholders
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Encryptix will enable custumers and travel agencies around the world to purchase and instantly print travel and event tickets using a PC, Internet connection and laser or ink jet printer.

Not only will travelers be able to print their tickets from any Internet-connected PC but they will also gain the ability to e-mail tickets to others.

Sites might even have the opportunity to increase promotional selling via Internet-printed tickets, discount coupons and vouchers.

These two examples prove that it is rather difficult to change consumers' habits on the Internet when you are not able to provide them with a product that holds a real economic or practical interest in return.

Buying an armchair online when you're not able to sit on it but only to see it in full view on your PC, buying stamps online when they already exist virtually in postage-meter machines, these services are not good enough to convince a sufficient number of consumers to adopt them.

Even though new sales method might be presented in an entertaining way, this is no longer enough to convince consumers to change their daily firmly rooted habits.

On the contrary, the fact that they might be able to print their plane, event, sporting or movie tickets instantly from the convenience of their home would represent a real asset for consumers since they would no longer need to queue to get it. Additionally, such system would even give the sites the opportunity to offer discounted prices since the traditional physical process will no longer be used.

That's the reason why I think many online business models that are not or will not be able to offer this combination of "reduced costs/eService", will probably meet with the same fate as the online furniture and postage sale.

Source : Techserver.com

According to the last report released by the American Customer Satisfaction Index, customers are usually more satisfied making retail purchases online (78%) than they are shopping at traditional brick-and-mortar stores (72%).

Let's remind you that this study only took into account the most important e-Commerce sites (Amazon.com, eBay, Yahoo, Schwab, etc…), which left aside most of the small-sized and less experienced websites where problems are more likely to happen.

Besides, the more complex the products sold, the lower the satisfaction rate, which is easily understandable when you consider how limited web technology still is.

And yet, this figure comes at the right time since it is presently fashionable to laugh at e-Commerce websites (poor logistics, privacy problems, difficult navigability, etc…) but let's keep in mind that it will eventually be up to consumers, and not to financial analysts, to decide whether a site is successful or not.

And customers are now overwhelmingly supporting e-Commerce. According to a study by the Boston Consulting Group (BSG), 96% of the consumers who made an online purchase last year intend to do it again this year even though quite a lot of them (27%) experienced a purchase failure.

How many other distribution channels can pride themselves on such a high customer satisfaction rate ?

It only means that consumers find the online channel more and more convenient, despite the navigability and delivery problems they might experience.

What's most important for consumers who always seem to be in a hurry nowadays is to save time but also to be sure that they are making the best possible choice, as far as price and quality are concerned. Customers do not always seek the most discounted offer, at least not the better informed ones.

Customers will find the answer to all their new needs online, at the cost of brick-and-mortar companies, at least for the most dematerialized products (economic information, plane tickets, books, broking).

But despite the fact that consumers show a keen interest for online purchase, this is not the only explanation. Let's be more specific.

More and more consumers are now giving on / off line synergy nearly the same status and they tend to see less and less difference between the synergies for the brands that can be found in both sectors.

On the one hand, the fact that there still is a physical network with a logo remains an important credibility factor (reassuring as far as the brand lasting quality is concerned, possibility to talk to real people or to go back to the products).

As a result, more than two-thirds of a multichannel retailer's online customers also shop at the retailer's brick-and-mortar store or catalog. This is the so-called on/off line synergy as it is usually meant.

But, on the other hand, websites also exert an influence on the brand. And consumers who buy indiscriminately through the web or in a brick-and-mortal store, will associate a bad experience online to the brand itself. They might be deterred from shopping through the retailer's other channels as well, and this would cause a turnover decline that would be "invisible" for the company.

Such synergy between the on/offline only represents the hidden aspects of the problem that lies in the relationship between these two worlds.

In my opinion, the most important concerns the search for information functions.

As far as this search for information is concerned, the web offers the best possible solution for those who look for fast and exhaustive results and every single Internet user has to resort to these functions.

And this is even the reason why many people get connected at all! What's more, the databases that can presently be found on the net have reached a level that ensures customers reliable results. What I have in mind are things such as job offers, classified property advertisements, car sales. I would also add to this list sites of geographic location or city-guides which have become services that most Internet users use daily (when they want to find a restaurant, or the films that are playing, etc…).

In principle, all these services do not hold any monetary value for the brands which are concerned (restaurants, manufacturers, car dispensers, real-estate offices, firms that are looking for partners). And yet, for all these fields, the pre-selection which is made by the Internet, has already deeply modified the user's behavior

The first consequence is that the services and products that are not part of this pre-selection have little hope of affecting consumers. It goes without saying that a brand can still get round the problem by remaining constantly in the consumers' mind but this implies very high communication and marketing budgets… the same amounts dotcoms have been spending far too fast in the first quarter and for which they are now being blamed.

The second consequence is that the exhaustive aspect of the results that can be obtained on the Internet suppresses the advantage the seller gets over the consumer. The latter, once he has entered the shop, has already invested time and will be ready to make concessions in order not to loose such investment even though he knows that he would have probably found a better and cheaper product somewhere else. On the contrary, the only two arguments a seller has on the Internet are the price and a great customer satisfaction.

As we can see, the Internet modifies habits, especially before the purchase is actually made, and this is a very important factor for the buying phase itself.

All this means that e-commerce goes beyond the turnover that is presently made online and it would be very interesting, for each company with an online presence, to measure the impact such presence has on its consumers.
In my opinion, they would be in for a great surprise!

Source : CyberAtlas