Christmas cracker for web retail

Bacon could be big on the internet

By BBC News Online internet reporter Mark Ward

Christmas is coming but few web retailers will be getting fat this holiday season say experts and analysts.

This year more people than ever are expected to use the internet to do some of their Christmas shopping, but industry watchers believe the increased demand will only expose the weaknesses of many e-tail firms.

The problem with many dot.coms is that they do not have the faintest idea of how to run a business

Kevin Grumball, Actinic

And so this festive season is set to expose firms without the funds to survive, to show up those that neglect customer service or fail to deliver, and reveal just what people are happy to buy on the web.

Traditional high-street retailers who also sell over the web are expected to be the winners over the next few weeks, and many expect this Christmas to set the tone for the development of e-commerce in the UK over the next few years.

No bail-outs

E-tail sales are growing fast but they grow fastest of all at Christmas. A survey by the Boston Consulting Group found that e-commerce revenue quadrupled during the festive shopping season in 1999.

But the stampede of shoppers to the web is expected to cause problems for many e-tailers.

"This Christmas some investors will not be dipping into their pockets to bail out the companies they have already funded," said Mark Simon, founder of start-up services company The Chemistry.

Mr Simon believes many investors are preparing to cut loose loss-making e-commerce companies, as the realities of e-tailing become clear.

Fighting over the 1% cake

Web shopping is growing fast but it still accounts for less than 1% of all European retail sales. Competition for the small number of customers is therefore very intense, said Mr Simon.

E-tailers are forced to spend far more than they planned on advertising, marketing, security and customer service. As a result, they are burning through their start-up funds quickly.

Rare cheeses can be bought by mouse

This situation is favouring the traditional companies who can call on cash generated by already profitable businesses to subsidise their shopping sites.

When running websites they have other advantages too.

"The problem with many dot.coms is that they do not have the faintest idea of how to run a business," said Kevin Grumball, founder of web shop software company Actinic.

Many dot.coms, like fashion site Boo.com, get the technology right at the expense of every other part of their business said Mr Grumball.

"The bricks and mortar companies know how to do the difficult bits such as shipping what customers ask for on time," he said. "And they know what to do when what's bought does not fit and they know a cost effective method of getting goods back to the company."

Marketing muscle

The traditional retailers also know all the marketing and selling tricks that can boost online sales and help them to know more about their customers.

This knowledge of shopping habits and how to make people spend more could be crucial, because people tend to act differently when shopping online.

"Most internet purchases are pre-planned," said Miles Bentley, managing director of web shop software maker Ubik. "Most people come in and know they want to buy something."

Mr Bentley said many web retailers do a good job of making their sites easy to buy single items from, but few are able to exploit the information they are gathering about customers to drive sales.

"The average person trading on the internet has difficulty relating this type of data to what it tells them about what's happening on their site," he said.

By contrast many traditional retailers have years of experience in analysing buying trends as well as remaking shops and shelves to boost sales.

They know the tricks, such as cross-selling and up-selling, to make people buy more.

Best of breed

According to Mr Bentley, many websites are now being re-worked, so that they can easily be tuned and changed to bolster marketing drives and advertise special offers.

Sites are now build so that they can be relaunched quickly with new features that ensure shoppers stay longer and buy more.

But while pure dot.coms may lose out to the traditional retailers that move online, the web could prove to be the saviour for many very small businesses.

"The net is going to be very good for the specialists," said Mr Grumball from Actinic, "anything that is hard to find or rare is a natural for the net because now people can find it and order it."

Jim Hadwin who runs the Mansergh Hall Farm that sells organic lamb and pork, including Gloucester old spot bacon, said his company has been on the net for a few months but is already seeing the result.

"A lot of people are finding us on the web and then coming to see us in the farm shop," he said.

Mansergh Hall Farm still does most of its business by supplying hotels and restaurants, such as Aubergine in London, and by mail order.

The company can't afford to advertise itself heavily, but is relying on word of mouth and the reach of the net to bring in new customers.

"Using the net is like opening a shop in every city and town in the country," said Mr Hadwin.