The Promises of the Internet

We launched www.VillageHatShop.com in 1997.  Over the years, I have written about what I considered to be the promises of the Internet – major advancements in the areas of information, communication, and shopping. The potential synergy (an overused word but it fits here) of all this provided impetus for us to get an early start as online merchants as we believed that this new sales channel was a good fit for our abilities.  Although there is much to argue about in the areas of information and communication (e.g. Google’s efforts at digitizing the world of books, controlling junk email, the integrity and value of new media/blogs, etc.), I believe that, basically, the promise has been met.  Namely, email is the reason that I’m back in touch with many old friends and I can find the answer to virtually any question that comes to mind.   

However, the promise of online retail – what I do and think about every day – to improve shopping has had mixed results and the future is unclear.  E-commerce was to include a great selection of goods, the convenience of not having to bother with malls (some of us, I for one, don’t particularly like going to malls), and, at least in part, the possibility that the customer and the merchant would once again have a meaningful relationship (primarily because email would allow for exceptional communication in support of shopping and fulfillment).  The customer could visit the merchant’s site, see and read information about the products, get a good sense of the business, email questions to the merchant with the expectation of a timely reply, purchase conveniently, and have the product show up at his/her door.  (Wow – what was there not to like?). 

Isn’t this working?  Some things are: They include price competition as it’s easy to compare prices from one site to another, delivery is getting faster because fulfillment speed matters, the promise of a bigger selection has certainly been met, along with the ever-growing ability to garner more information online about one’s prospective purchase. 

So what’s the problem?  A meaningful connection between customers and merchants in real stores is in danger of being lost (later: why we should care).   This merchant/customer relationship started out well in the early days of e-commerce (at least with the better merchants), but is eroding.  An increasing number of online customers have no idea who they have purchased from!  In the first half of 2009, fully twenty-four percent* thought that they had bought from either a search engine (Google, Yahoo, MSN, etc.) or a comparison shopping engine (Shopzilla, Shopping.com, NexTag, PriceGrabber, etc.).  In the early days of e-commerce, a smaller merchant actually could compete rather well against big faceless corporations. The current trend however is clear: businesses with the deepest pockets will dominate the top positions at the search and comparison engines.  The giants, with their online marketing partners, will overwhelm Main Street in this new channel just like they are doing in the old world.  Good communication between the customer and a real merchant about product features, delivery, etc. – forget about it.  Phone calls to a real store – nope. 

Here’s an example of one e-commerce business model that is growing rapidly:  The online seller has no store (never has had one) and no inventory (never has had any).  All the products sold are delivered to the end-user from a drop-shipper.  If you call the site and ask a question about a product, the customer service people are trained to search the Internet for the answer.  We tested one such company (this one has 200 people answering phones!) with a call and this simple question: I’m considering one of your hats.  How do I determine my hat size?  The answer was read, verbatim, from our site.  No stores, no inventory, no direct experience with the merchandise that they sell – a virtual business.  The CEO proudly claims that they add 2-3 drop-shippers a day – every day.  They aggressively compete in all online marketing channels, and virtually every decision is driven by the extraordinary data that’s available to the nth degree: each customer’s shopping habits, the conversion rate of the site’s content and navigation stream identifiable to the smallest bit, the drop-ship vendor’s report card, and much much more.  This model worships the data that inexorably grows the top line revenues and allows for the continual narrowing of profit margins to the point where smaller merchants (with three-dimensional merchandise to stock and stores to run) will not be able to compete.  There is nothing nefarious about this.  Simply put, smart and savvy businesspeople are exploiting and leveraging the manifold elements of this new channel for financial gain.  Unfortunately, this was inevitable.  In order to compete, smaller online merchants hailing from the late years of the last century - along with their experimental spirit and pioneering enthusiasm – will either considerably grow and change their businesses so that they adapt to new methods of commerce (throwing in the towel on a Small is Beautiful**/ClueTrain*** people-centered and product-focused approach) or will be trampled. 

Cultural historians often identify the “Golden Years” of television, the movies, rock and roll, impressionist art, etc. as the nascent times when these heady mediums were most dynamic while early adapters felt their way forward, before the interests of big money saw the potential and entered the fray.  Add online retailing to the list. 

With online shopping, we need to ask the same questions that we are (hopefully) asking in the bricks-and-mortar world.   If (when?) it becomes all about price and nothing more, what will we lose?  What about quality or harmony or convenience or neighborhood vitality or meaningful relationships?  Although an inexact parallel, a restaurant’s quality where the proprietor is present is almost always better than one where he/she is not. 

Despite where this will go, I feel that The Village Hat Shop and www.VillageHatShop.com is duty bound to achieve something beyond making money.  Any self-respecting merchant understands that he/she is an actor within the confines of society.  To truly succeed (beyond financial success) one must contribute to the community by creating a place that improves upon the larger world that the customer leaves when entering the store (or web site).  This mission can be complicated and I would be disingenuous if I did not make clear that we operate four stores in three different California cities (I am not the restaurateur greeting you at the door).  Some might argue that I am no longer a merchant, but have crossed the line to retail businessman.  They may be correct, but I do still struggle with the scale of our operation and its relationship to doing the right thing.   Businesses with these values have already begun to move out of our neighborhoods.   

That’s the problem, and why we should care.  We’ll all be voting with our pocketbooks as to what kind of world we want (assuming that our searches – on or off line - continue to return real choices).

Fred Belinsky
www.VillageHatShop.com
 

*ChannelAdvisor White Paper: “How Consumers Shop Online: A bi-annual study of consumer buying behavior”

**Small is Beautiful: Economics as if People Mattered by E. F. Schumacher

*** The Cluetrain Manifesto - http://www.cluetrain.com

Comments

[Fashion Minute]

Online retails, for better or for worse?

[Narconon]

I Love blogging. I love blogs about anything and everything. When I got hooked on drugs I went to Narconon to straighten my life out and it helped a lot. You don't gotta take drugs to get high. You can get high on life. Make yourself feel good is what I mean.

[D Bostrom]

Don't feel discouraged by the "Internet" giants out there. I frequent your website, But to be honest I've never purchased from it I Frequent Long Beach's Pike and Rainbow Harbor area with my Girlfriend, Since your shoreline Village shop is just across the harbor we usually walk over to and shop, I've bought quite a few hats that I have seen on your website in your shop.

[alex]

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