News Sites' Role in Dept. Store Shopping

By: Steve Outing The hype this holiday season about online shopping is reaching fever pitch, in case you didn't notice. (Unlikely!) The numbers of people buying on the Web and the growth in those numbers are impressive, albeit still a tiny slice of the total retailing revenue pie.

Online shopping is making these gains mostly in items like books, music, videos, software, computer hardware, gifts (gadgets, games, puzzles, etc.), and toys. (If the catalog retail industry is any indication, online retailing in those and related sectors will grow to be a substantial business. Direct-mail catalogs are now a $50 billion industry in the U.S. alone; online Web retailing is projected by Forrester Research to reach $7 billion by 2000. That's a nice business, but to give you an idea of the power of brick-and-mortar retailing, catalog revenues represent only 2.5% of total U.S. retail sales excluding automobilies, according to a recent report in Forbes.)

But there's one area of retailing that many analysts believe will never make huge inroads in online transactions ? fashion and apparel. The reason is simple enough: The majority of clothing buyers would still rather go to their local department store or mall clothing shop to try on items and make sure they fit.

What's likely to happen, say retail industry experts, is that retail Web sites offering items like clothing ? where the in-person experience of the merchandise is so important ? primarily will serve a "shopping research" role, where consumers go online to find out which stores carry their favored brands, check for sales, pick up discount coupons, then plan shopping expeditions with information in hand.

It matters to newspapers

That's the basis of the business model being plied by John Carragee, founder and president of PinPoint Communications of Philadelphia, which develops online shopping directories, who points out that the retail clothing trend is especially relevant to newspaper companies.

Why? Consider that the typical local newspaper gets a large percentage of its retail advertising from national and regional retail chains in support of their locally based stores. Last year, Federated Department Stores (parent of Macy's, Bloomingdales and other chains) spent $450 million on newspaper advertising alone; May Department Stores spent $360 million on behalf of Lord & Taylor, Hecht's and Robinson-May stores; and Sears spent $227 million with newspapers and another $300 million on other local media.

Yet for all that money to keep local newspapers afloat, barely a drop of department store chain ad money has gone to online newspaper sites. The big department stores are primarily clothing retailers, since other sectors where they used to be successful ? appliances, stereos and televisions, sporting goods, etc. ? have been usurped over the years by strong niche retailers. Department stores' bread and butter remains fashion and apparel, a segment that doesn't lend itself to online purchasing.

The department store chains can and should have a presence online, Carragee says, but banner ads on local media Web sites don't work. As is well documented, the average banner ad clickthrough rate continues to drop and is below 1%. Retail executives are looking for something better if they are to shift some of their advertising largesse to locally based Web sites.

Carragee believes that the way for newspaper Web site publishers to get some of those department store dollars is to support directories of all the retail malls in a city. A Web site for a single mall is not nearly as effective a consumer tool as is a directory of all the malls in a consumer's area, he says. In an ideal world, a user of a local newspaper Web site might click on a "Shopping" icon and be directed to an area shopping directory, where he could select a particular mall or search for a store that carries a particular brand. (Carragee, who comes out of the retail industry, is convinced that in the apparel/fashion category, there is not much of an opportunity for an e-commerce play where consumers actually purchase clothing and accessories online.)

Privately funded PinPoint has spent the last three years building up a database about all the shopping malls in the U.S.; what stores are in the malls; and what brands those stores carry. The idea is that a consumer looking for Donna Karan clothing, for instance, can find out which stores at which malls carry that line. A visit to a mall Web site can give the shopper information to plan a shopping trip and efficiently find what she's looking for once she physically arrives at the mall.

PinPoint tracks the retail chains' print advertising in order to determine what brands they carry; and it sends people into the stores themselves to see what they sell. (The database applies the rule that most chain stores carry the same product lines; PinPoint does not try to go into stores in every city.) For now, its database tracks brand names only. Down the road, the service is likely to expand so that a consumer can find stores that carry specific brand sub-levels ? e.g., "Tell me which stores carry Armani purses."

Carragee says that for the Web to serve mall department stores and national/regional niche retail mall stores, this sort of information is what's required to present to the consumer. But it doesn't make economic sense, he says, for competing publishers in a single market to each go out and gather data on what local stores carry and which stores have sales in order to create their own directories. PinPoint makes that data available through its online mall directories, which it offers to publishers in a co-branded environment.

Sale information is extremely important. In the print world, it's estimated that 80% to 90% of department stores' ads are promoting sales or special offers. The same should be true of Web retail sites, so the malls directory must be the place where consumers can go to see the full range of sales taking place throughout the malls in their communities. (PinPoint allows stores to enter sale data into the database for free.) Online discount coupons also will give shoppers the incentive to visit the cyber-mall before the brick-and-mortar mall. (Carragee's cyber-malls won't do coupons directly, but rather will be an intermediary stop for consumers that points them to online coupons produced by other companies for stores in the malls.)

The national department store chains are interested in using the Internet to drive more foot traffic, Carragee says. The trouble is, newspapers, the media entities that offer the best avenue to reach local online customers, can't yet offer a "one-buy, one-invoice" system for getting, say, Macy's sale ads in Web retail directories in all the markets where the company has stores. For now, the Macy's and The Gaps of the world are instead putting some of their money into national "online malls" like Yahoo! Shopping Guides.

The opportunity; the challenge

Carragee argues that newspaper sites must offer comprehensive local shopping directories, encompassing the full array of local malls and major retail chains. "In no major city of the U.S. does one mall developer own all the major malls, much less the downtown shopping districts," he says.

Very few news media companies as yet have a serious online shopping strategy. The department stores' money is there for the taking, however. "Online newspapers must deliver superior and measurable advertising value to the large chain retailers to win their business from the cyber-shopping venues such as Yahoo! Shopping Guides," says Carragee. He says that in PinPoint's experience, clickthrough rates on a deep retail directory site "consistently run 4-10%" for clients such as The Sharper Image, Eddie Bauer, Sam Goody, The Disney Store, Macy's and FAO Schwartz.

The PinPoint management team recognizes that what it has set out to do will be difficult. "We have no illusions about the coordination issues involved," Carragee says. "With 1,500 regional malls, 12 to 15 major newspaper chains, and 120 major retailers who would both contribute content on sales events and pay for featured positions in the directory. At the same time, we see that the prize is worth the effort with chain retailers spending about $20 billion on local advertising today ? and virtually nothing being captured by current online newspaper efforts."

PinPoint currently is seeking a large media company to invest in it as a strategic partner, and carry the concept out to the larger local news media industry. The ideal partner, Carragee thinks, would be a large newspaper chain or a company like Zip2 which could offer the service to the entire newspaper industry. PinPoint has been funded up to this point by "angel" investors. The company has scheduled a test of the concept in cooperation with a major U.S. newspaper company beginning in January.

In March, Carragee says PinPoint will be ready with a shopping recommendation engine, which will make suggestions to online shoppers based on their Web choices. (On subsequent visits to the cyber-mall, the "Center Court" featured retailers on the site will change to reflect the consumer's interests.) In addition to reacting to shoppers' self-selected profiles about what they are interested in, the company will use market research data to perform intelligent personalization ? for example, a Banana Republic shopper might see featured ads about Victoria's Secret, because retail researchers know that consumers who shop at one store also tend to frequent the other.

Contact: John Carragee,

No column on Christmas

Stop The Presses! will not be published this Friday, due to the Christmas holiday. The column will return on Monday, December 28. Happy holidays!

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This column is written by Steve Outing for Editor & Publisher Interactive. Tips, letters and feedback can be sent to Steve at


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