Why Online Stores Are Key to Your Survival

By: Steve Outing When I first discovered the online world years ago, it was communication and community that attracted me. I found a virtual community of people with common interests, and found that to be a powerful force. Later, as the Internet grew, I started using the Internet (the Web and e-mail) as a news medium; indeed, it has replaced many of the printed publications I used to pay to read and lessened the time I spend watching television.

In the Internet's early years (and we still live in them), the experts, pundits and consultants have long harped on the interactive capabilities of the Internet -- the ability to allow people to communicate with each other, and not just be fed a one-way stream of information from the "media." Indeed, I've often espoused that view. Publishers have tended to use the Internet primarily as an alternative news delivery medium, and some have embraced the concept of interactivity as part of that.

Now, I think, it's time for news publishers to embrace a new way of looking at the Internet.

Money, money, money!

First, let me say that I do not mean to suggest that the way publishers have been using the Internet up till now should be cast aside. If anything, publishers need to embrace online community building much more so than most do today. The Internet will continue to grow as a vehicle for delivering news (one-way). But what's going to make the Internet grow to epic proportions is money, and publishers need to figure out how to help their audiences save money by using their Internet services.

I got to thinking about this after analyzing my family's recent spending patterns:

The last time I bought music, I got it from a Web site. There are plenty of music stores here in Boulder, Colorado, and my favorite store no doubt has a good selection of titles by the artists I like most. Alas, had I not bought online I would have paid more per CD, spent an additional hour of my time, and spent money on gas to get to the store. While I feel guilty for having taken away money from a local business, I opted to save money. The last CD I ordered via the Web cost under $15 including shipping -- less than I would have paid at the local music store, which would have charged me sales tax on top of the higher list price. My purchase was based on price first, then convenience. Even with shipping charges, online was still the best deal.

I'm an avid golfer, and have been looking around for new woods. After narrowing down the field of options to one model, I started shopping around for the best price. At GolfWarehouse.com, I found the woods for $150 each. The best price in a local store is from GolfSmith, a national chain -- $180 each. When I go to make the purchase, I will use the golf Web site and save about $90, and the local retailer will have lost $540 in revenue that it would have had in a Web-less world.

Recently, my wife needed several copies of a book for a class she teaches. Our favorite local bookstore only had one copy, and ordering additional ones would have gone past her deadline. Instead, she ordered the number of copies she needed from Amazon.com, for less money. Obviously, "e-commerce" is in its infancy, and many experts predict that Internet shopping is going to become a multi-billion-dollar industry. (Jupiter Communications this week released a new study predicting that online shoppers will purchase $2.3 billion of goods this holiday season, up from $1.1 billion last year.) Based on my own "early adopter" experience, I absolutely believe it. Why? Because the Web will save consumers money, and when it's demonstrated that you can get better prices by ordering online -- by cutting out the overhead that consumers shopping at conventional retailers must pay for in higher prices -- then Internet usage will grow to truly mass market levels.

Consider airline tickets. The major airlines are close to offering the best fares when a consumer uses their Web sites to order tickets. The options for consumers in the future will be this: Book tickets online and get a cheaper fare, or use an airline agent and pay more for the "convenience" of having a human assist you. When more consumers discover this, they will get online if they aren't already in order to save money. (For more on this trend in the airline business, see this story from USA Today.)

This scenario is being played out in many retail sectors -- from music recording to books to drugs to golf clubs to airline tickets. There can be no doubt, Internet commerce will have a major impact on local retailers. In the example of my own family, I've identified about $700 that otherwise would have gone to local retailers. And of course, Boulder's local government misses sales taxes on that amount.

Why this is important to you

Being a local retailer in this environment is going to be challenging. The local music and book stores must figure out how to make up for the book sales made from their community via sites like Amazon.com or CDNow. Those local stores already are being hurt. The amount lost is modest now, but it will grow. For local retailers selling goods that also are being sold on the Web, the outlook is gloomy.

And that's where local news publishers can step in to help. Let me amend that. It's where publishers must step in to help. Local media companies, especially newspapers, rely heavily on the local retail industry; as local retailers decline, so will these traditional media companies.

To compete, local retailers will need to cut prices to compete with the national Web retailers. Local book and music stores, for example, will need to sell online as well, offering competitive prices to the national Web brands. They too must have Web sites where customers can search for authors and artists, order online, and have their orders mailed to them or held at the store for fast pick-up.

When price disparity is not a factor, local consumers will tend to support local businesses over the national Web retailers. I experience that in my own purchasing behavior. I'll go to a national brand in a heartbeat to save $90 on golf clubs, but price being equal I'd much prefer to support my local merchants and ensure that Boulder's tax base doesn't decline because of my shopping habits.

One of the best things that local news publishers can do is to assist local businesses -- especially those in sectors that face threats from national online retailers -- in setting up their own online stores. Beyond simply using a newspaper and its Web site to drive traffic to online stores, news sites can offer to build e-commerce-capable sites for local retailers. Many publishers have long been building sites for local businesses, and many have found this to be an excellent revenue stream to support their overall new media operations. The next step is to gain the expertise to build sites capable of offering online transactions.

Chances are, local Internet service providers (ISPs) or other Internet specialty companies that sell e-commerce advice or design services already exist in your community. If you don't have staff expertise for e-commerce in-house, then it probably makes sense to partner with someone local who does -- and co-market services for building online stores to local retailers.

This is not only a good business opportunity for a local news publisher, it also may be a necessary step for survival over the long term of the news organization and the local retail community.

E-commerce help

Publishers wishing to know more about e-commerce might want to check out Editor & Publisher's most recent research report, "E-Commerce: A Media Money Maker." Written by Peter Zollman, the report is a practical guide for publishers on incorporating online transactions into news Web sites.

(Disclaimer: While Zollman's report is published by E&P, publisher of this column, I have no connection to it and do not benefit from sales of the report. Nor did E&P encourage me to write on the topic of e-commerce. But it is an important topic that I believe should be covered.)

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Steve

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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 steve@planetarynews.com