Talk to Your E-Shoppers

Macy’s, a store I’ve shopped at for years, is having sales without me. I

have finely tuned radar that detects markdowns at Macy’s flagship on 34th

Street in New York. But online at Macy’s.com, there’s a different schedule

for sales and specials. For the first time since I was 16 and started paying

attention to such things, I feel as if I’m out of the loop. What gives?

I’m suffering from a disconnect between online and offline stores. The

burgeoning Web operations of traditional retailers are creating new layers of

complexity for consumers. Interacting with these stores–buying goods,

returning purchases, bargain-hunting–is more complicated than it used to be. A

lack of communication between cyber and brick-and-mortar stores didn’t mean

much when few consumers shopped online. But Christmas, 2000, was a breakout

season for traditional retailers with Web stores. Venerable giants such as

Sears, Wal-Mart, and Kmart kicked some serious e-tail tail. These were the sites

that got the best marks for service, selection, and ease of use. While Net-born

merchants struggled to right their finances, companies that were once dismissed

as dinosaurs cleaned up. But if they want to continue their success, they’ve

got some explaining to do to their customers.

I’m not talking about banner ads that say: "Shop YourFavoriteStore.com.

We’re Online.’’ That era of basic information is over. We already know

they’re on the Web. Now they need to tell us what that means. Is the

merchandise different? When do markdowns happen? What are the refund policies?

Part of their job this coming year is to make all this newness make sense. After

all, ads–from TV spots to online banners–are not simply a way to get

consumers to open their wallets. They’re also vehicles to tell consumers what

they need to know to get the best experience from a retailer.

Silence leads to confusion and hard feelings. My friend Amanda returned a

Christmas present to Barnes & Noble (bookstore chain) and was refunded the

amount B&N charges on its Web site, not the (higher) price she saw on the

bookshelf in the store. "Was that a mistake, or is this the new policy?’’

she asks. B&N says its policy is to refund the price that was paid–although

that’s tough for someone like Amanda, who couldn’t say whether the book had

been bought online or in a store. But that’s not the point. The problem was

that Amanda didn’t know what the policy was, and she felt ripped off because

of it. Better communication–not to mention coordination–could have left her

less annoyed.

Some companies have stepped up to the challenge. Staples (stationary store),

for example, is marshaling its marketing forces to keep the customer up to date

on the multi-channel operation the retailer has become. Its latest TV commercial

is a humorous little sketch about a hapless Staples deliveryman, hemmed in by

slow-driving would-be Staples shoppers. But within the gag is a serious message:

the many ways a customer can now shop from Staples. "We place a lot of

value in educating the consumer,’’ says Kelly Mahoney, chief marketing

officer of Staples.com. Instead of focusing on what the retailers need to sell,

marketing should emphasize what consumers need to know to make purchases.

Traditional retailers have a huge opportunity in the coming months to

solidify their hold on the Web buyer. Communication will. Merchants who can help

us understand what to expect and demand from these new hybrid retailers will win

customer loyalty. Those who don’t can expect to be a click away from just

plain bricks again.

By ELLEN NEUBORNE

in BusinessWeek. Copyright 2001 by The McGraw-Hill Companies, Inc

Divine overhaul

Some of the cash-rich, market-cap-poor companies are taking the opposite

approach. Realizing their original business plans were failures, they’ve done

180-degree turns and overhauled their strategies. Divine interVentures, for

example, went public as an incubator and started up more than 50 companies. In

February, with its stock market value lower than the $190 million in cash on its

balance sheet, Divine announced plans to remake itself into a software company–CEO

Andrew Filipowski’s area of expertise. It even changed its name to Divine. The

moves have helped a little: The stock of the Chicago outfit has climbed from its

low of $1 a share to $1.69, although that’s still well off the $9 a share at

which the company went public last July.

In December, the California company, Ventro, closed two of its online

business-to-business marketplaces–the Chemdex market that allowed companies to

buy and sell chemicals on the Net and the Promedix market for medical supplies.

Ventro then said it would change its focus to helping other companies build

marketplace sites. So far, they haven’t convinced investors that its new plan

is any more viable than its last one. Its market capitalization is still only

$50 million, even though it has a treasure trove of $235 million on its balance

sheet.

Then there are those companies that are sticking to their guns. They simply

think the stock market is unfairly punishing them and, if they perform well,

their stocks will recover. Consider Neupert at Drugstore.com. "We’ve made

a lot of changes in the last six months–laid off a substantial part of the

workforce, dramatically reduced marketing plans, and reconstructed the business

model to break even," he says. That’s why he’s confident his business

will survive, even though its stock has dropped from $67.60 in 1999 to $1.31.

Autobytel is staying the course, too. The company, with $82 million in cash

and a $41 million market valuation, expects investors will become bullish once

it hits operating profitability in the third quarter. "We are well enough

established that we aren’t taking down marketing costs, nor are we

anticipating any large-scale layoffs," says CEO Mark Lorimer. "After

all, we’re going to post profits in a few (months)."

Despite the risks, cash can be a powerful lure for potential acquirers. If a

purchase can be completed quickly, the leftover cash can help fund the

operations of the surviving company. The women’s site iVillage acquired

Women.com Networks for stock in February, partly to get its hands on its

one-time rival’s $30 million in cash. The two sites combined some operations

to reduce expenses and now should have plenty of money to make it to the third

quarter when the business is expected to begin generating cash. "The deal

that we cut with Women.com makes sure that we have enough dollars for a rainy

day," says iVillage CEO Douglas McCormick.

There may yet be a handful of deals like McCormick’s in the wings. But it’s

a treacherous market these days and potential acquirers will have to weigh the

risks carefully–before moving licketysplit. The free cash is disappearing

fast.

Pallavi Gogoi–BusinessWeek