INTERACTIVE: BEHIND THE HYPE/SHOPPING ON THE NET: Why retailers should change their attitudes to the Internet - Retailers are likely to lose share to fmcg specialists who understand the Net’s potential. By Alasdair Reid

A recent survey from the Datamonitor market research company delivers a provocative warning to the big retail groups.

A recent survey from the Datamonitor market research company

delivers a provocative warning to the big retail groups.

The report, entitled ’fmcg on the Internet: from branding to sales’,

shows that 50 per cent of the world’s leading consumer goods

manufacturers now have a presence on the Web - and an increasing number

are using their sites to sell directly to the consumer.

Much of that activity is being driven by US-based companies, but the

impact is being felt in Europe too. Datamonitor predicts that

direct-to-home sales via the Internet in Europe could grow by more than

150 per cent per annum over the next five years. That growth is going to

be at the expense of traditional retailers, few of which have a

significant presence on the Net.

The conclusion? Retailers are being left behind.

Is it true? And how worried should the big superstores be? On the face

of it, the Datamonitor evidence is patchy. It points to Procter and

Gamble’s eight product Websites, plus a corporate site and an online

parenting magazine, all launched within the past six months. Most of its

other evidence derives from the beer, wines, spirits and soft drinks

sectors; and it concedes that, although 37 per cent of beer and cider

manufacturers across the world have Websites, much of the activity is

promotional rather than geared to direct-to-home sales.

But the report makes interesting points about attitude. Even if direct

sales fail to materialise in the near future, at least the fmcg

manufacturers are out there learning about the medium and the benefits

that it can bring in evolving closer links with potential consumers.

Retailers seem oblivious to this potential.

Isn’t it inevitable that, increasingly squeezed by own brands and

limited shelf space, fmcg manufacturers will try to bypass their

conventional routes to market? Adam Leigh, the account director for

Safeway at Bates Dorland, is sceptical. And he rejects the suggestion

that retailers have an attitude problem.

’Retailers are always looking to the next innovation,’ he says. ’Safeway

has had a short-term presence on the Internet and will continue to look

at it. I don’t believe that even the most advanced fmcg companies are

doing more than half a per cent of their business on the Net. When

alternative delivery systems come to the fore, retailers will always be

in a better position to take advantage.’

The most advanced UK retailer currently is Tesco, with its Osterley home

shopping trial. Customers in the Osterley catchment area can order a

CD-Rom listing 20,000 different products stocked by the store. They

choose items from the CD, then go online to put their order through,

indicating when they want the goods delivered. Customers with fast modem

links can do the whole thing on-line. Tesco admits there have been some

teething problems, but indicates that the reaction has been overwhelming

- so much so that the scheme is about to be extended to other stores

across the country.

Charlie Dobres, the head of Lowe Digital, the new-media arm of Tesco’s

agency, Lowe Howard-Spink, says that Tesco has really taken on board the

implications of the medium. ’It really does have an impact on all

marketing disciplines, right down to distribution and pricing policy.

And I think we’ll increasingly see the company integrating its

capabilities in this area into its overall brand proposition as a

retailer,’ he says.

However, as the electronic retail consultant, Budd Margolis, points out,

the threat to retailers isn’t about to go away. ’If retailers begin to

lose share, no matter how small, it has massive implications for their

margins,’ he says. ’It costs a lot to build and run superstores.’

Margolis thinks that big retailers will need to begin adapting rapidly

but doesn’t believe that they will ever be sidelined. Many analysts


Retailers are in too dominant a position. And they provide a one-stop

shop. Individual manufacturers don’t.

David Symonds, the development director of Andersen Consulting’s retail

arm, Smart Store Europe, argues that it’s not quite so straightforward:

’A small loss of share would have massive implications for the economics

of retail. Retailers know it’s coming and manufacturers have begun

working on the one-stop shop problem. A group of fmcg companies is

looking at how they could team up to create a joint proposition. They

are already researching consumer reaction to this.’

Perhaps retailers have become dangerously complacent. ’It’s all a long

way off - and whoever is offering the service, they have to recognise

that for most people, the prospect of having the weekly groceries

delivered to their door is an unusual proposition,’ Symonds says.

’But if retailers want to lead rather than follow, they have to wade in

there and start learning.’

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