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Thursday, 12 October, 2000, 16:35 GMT 17:35 UK
A dot of trouble

Ordering goods online may be more convenient than going to the shops yourself, but what if your purchases never turn up? It seems the "new economy" faces the same distribution problems as the old one.

Internet retailers, the so-called e-tailers, promised to allow surfers to buy almost any product with just a click of a mouse.

A computer user
"A table and a chair, and make it snappy."
Sadly, more than a third of customers receive their goods late and 17% see nothing at all for their virtual trouble, according to a new UK-wide survey.

For all their snazzy graphics and snappy names, "b2c" (business to consumer) dotcoms are nothing more than modern mail order operations.

And in the mail order (or e-mail order) world, you've only done your job once the goods reach the customer's door, says Kevin Grumball - whose company, Actinic, produces web shopping software.

All front?

"Many dotcoms are so in love with the front, that they have forgotten the back end."

The buzz surrounding e-commerce encouraged many would-be internet millionaires to rush into the sector without understanding the problems of retail, says Mr Grumball.

Amazon set to
Getting the goods out is the real test
It is notoriously difficult for new e-tailers to gauge ordering capacity, especially if they are offering, as many dotcoms do, a dazzling array of products.

Telephone booking lines, and real world shops, can become clogged by eager customers, but there is no physical barrier to prevent e-tailers receiving far more orders than they can possibly handle.

Though mail order companies face similar problems, they usually warn customers to expect a 28-day delivery lag. E-tailers, however, are trading on the speed of digital technology.

Against the clock

"Who'd accept a 28-day wait on the internet? If you order electronically you want it now. You almost want it squirted back down the line to you," says Mr Grumball.

Posting a letter
Allow 28 days for delivery
Even if an e-tailer's website operates 24-hours a day, their distribution network may not. Impatient customers expect the cogs to whirr into action as soon as they send their e-mail. In fact the order may not be picked up for 12 hours.

While the damning Institute of Trading Standards survey shows e-tailers need to raise their game, it may also be worth trying to lower customers' expectations.

Book e-tailer Amazon, one of the sector's giants, already gives customers a "shipping" deadline for the book to leave the warehouse, rather than a blanket promise about when you can expect to start reading.

Supply and demand

Although a smudged address sticker or sleepy postman can foil an e-mail order on the home straight, it may be getting the right goods to post in the first place which frustrates many e-tailers.

A warehouse
"I'll take that one on the top left."
Tracking down a rare CD or an outsize pair of trainers at a moment's notice can be difficult for a new dotcom lacking an established relationship with a supplier or the financial muscle to bully one into submission.

E-tailers once ridiculed traditional traders for the sluggishness with which they set up internet sites. However, these "clicks and mortar" operations now look best placed to make e-commerce more reliable.

They already boast stocked warehouses and supply infrastructure to keep their real world shops in business. These supply chains can be harnessed to serve internet shoppers.

Logging out

However, some current "clicks and mortar" e-tail models are not proving a boon for their operators.

Delivering groceries direct to internet customers is an expensive proposition, especially in a business with relatively low profit margins.

Lastminute.com's Martha Lane Fox and Brent Hobberman
Are e-tailers all front and no "back end"?
British supermarket chains Budgens and Somerfield have both backed away from their internet operations.

Dr Bill Robinson, head UK business economist with Pricewaterhouse Coopers, has advised that the large traders who remain in the sector will have to supplement grocery deliveries with selling more profitable products.

"Picking and delivery costs which wipe out the profit margin on a modest basket of food might be acceptable on a more valuable mixed basket of goods and services."

Basket case

Tesco, a supermarket which receives more than 60,000 electronic orders each week, has begun to offer surfers a wide range of electrical products direct to their door.

Tesco delivers to an internet customer
"A hi-fi, a video and two dozen eggs, madam."
As dotcoms become accustomed to the problems of real world business, and traditional traders adjust to the new opportunities offered by the internet, electronic customers may enjoy a more reliable e-tail experience.

Indeed, there are signs of a greater interchange between the new and old economies.

Lastminute.com, the internet travel site whose recent problems seemed to signal the bursting of the UK dotcom bubble, has appointed the former boss of supermarket chain Asda as its chairman.

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See also:

12 Oct 00 | Business
Net shopping 'pitfalls' warning
20 Sep 00 | Business
Food retailers go offline
11 Oct 00 | Business
Lastminute move for Asda's Leighton
17 Mar 00 | UK
Can Lastminute deliver?
18 May 00 | Business
My bout with Boo.com
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