Rapid growth in e-tailing puts it hot on the heels of conventional stores

The latest buzzword to hit the retail world is e-tailing. The concept of e-commerce, which was regarded as a niche-driven technology issue, now has mass-market appeal in Ireland.

Mirroring the rate of adoption of Internet-based commerce, the relatively new e-tailing market is growing at a rapid pace. A recent report prepared by Merrill Lynch indicated that UK retail sales on the Net have grown by 34 per cent to 75 per cent per annum for the last three years. It is estimated that 40 per cent of these sales came at the expense of mail order sales, with the remaining 60 per cent at the expense of conventional store-based retailers.

The competition for bricks and mortar retail has arrived, but to what extent? In the US, it is believed that e-tail sales could account for some $100 billion by 2003 from a base of $25 billion today.

According to research by forecasting company Amarach, there are now 400,000 Irish people using the Net, the equivalent of 14 per cent of the adult population. This is forecast to rise to 20 per cent, or well over 500,000, by the end of the year and to 850,000 users by 2002. Few Irish shopping centres can offer such a catchment.

However, what this will mean for the retail market and, more particularly, the Irish retail market, which has seen enormous growth recently, is debatable. E-tailing has its advantages, including savings in property costs, easier access to markets for international retailers with the benefit of few real trade barriers. However, to believe that e-tailing could take over completely from conventional retailing would be to ignore some of the reasons why people like to shop. Retail is a leisure industry. People enjoy the social interaction that shopping provides. They also need the ability to touch and feel the product they are going to purchase. Sales on the Net of items that require inspection, such as jewellery and fashion, will always be difficult. CDs and books trade well, as people can listen to the music or read a book review prior to purchasing. They are easy and inexpensive to deliver for the e-tailer.

One of the major concerns surrounding e-commerce is security. Many people are reluctant to send their credit card or other financial information over the Net, although many of us trust strangers with our credit cards at other times. Retailers will need to give comfort to shoppers if they are to expand their e-tail market. Secured transactions will need to be sold as a concept to shoppers before they will embrace e-tailing.

What should retailers do? It is simply not an option for the progressive retailer to ignore the Internet. No matter what some people think, there will be a market for e-tailing. Deciding what you want to achieve and making sure you know some of the retail rules for the Internet will help avoid some of the pitfalls. Some goods are more suitable for the Internet market than others. Sites should be interactive and give advice, as a shop assistant would do. The Web page needs to be easily accessed and comfortable to use, and the information needs to be updated and current.

It is necessary to invest in a Web page design. Up-front planning will lead to longer-term rewards. Loyalty and bonus points can be awarded. Give customers a reason to return. Customers will expect cheaper prices and fast responses. Respond to emails within 24 hours. The issue of after-sales care also needs to be examined. Let people know you have a Web site by marketing it on stationery, bags, advertisements etc.

A number of Irish retailers already have sites on the Web, but many of these are information sites - few are interactive despite the Government commitment to make Ireland a hub for e-commerce. Many travel companies and estate agents have quickly caught on to the ability to market their product internationally. Properties are actively marketed on the Net and some larger schemes are setting up Web sites, such as Lakepoint in Mullingar (www.lakepointpark.com. There are also some shopping centres listed on the Net with link pages to the various shop units. St Stephen's Green shopping centre in Dublin is one example (www.stephensgreen.com/). Catalogue retailers stand to benefit significantly from e-tail as the extra costs of home delivery could be offset by the savings in property costs. The real costs lie in the fulfilment systems and the Web site design costs. Since the design costs can be done remotely (i.e. by a design company in another country) and the fulfilment delivery systems can be located in out-of-town locations, the cost savings can be huge.

Ireland is well positioned to benefit from e-tailing being a predominantly English-speaking country, being computer literate and members of the Euro.

Branding will become even more important as e-tailing levels increase. E-tailing, by its concept, requires the shopper to be confident in the product they wish to purchase. Well-known brands will trade better over the Net, particularly for the green or first-time purchasers on the Net. In the UK, some leading brand names have not only entered the market, but also have become Internet Service Providers (ISP) and offer free Internet access. Dixons reported a huge leap in share price when it announced it was to float its "freeserve" concept.

As e-tailing becomes more popular, operators will have less demand for retail space, leading to an even greater focus on warehouses with good distribution links. Many transport courier companies will form strong alliances with e-tailers over time. For this revolution to be effective, goods must be delivered quickly. Delays in delivery and damage in transit will simply not be acceptable.

The difficulties with delivering goods cheaply and quickly, combined with difficulties in pricing for different markets, has so far restricted fast international growth but these problems are rapidly being resolved. They will almost certainly disappear with the advent of the Euro.

In the UK, Tesco has announced that 20 per cent of its total recruitment will be for its home shopping network. In theory, Tesco could centralise its call centre for grocery shopping, which will lead to further opportunities in shared service and call centres.

Again in the UK, auctions have been held with bids being accepted over the Net as well as over the phone. There is an even stronger need for trust. For example, how can the traditional auction items, such as antiques, be authenticated? A large UK auctioneer has recently linked up with the Internet book retailer, Amazon (www.amazon.com), for a Web auction service. Already, they claim they have signed up 2,800 dealers from around the world to use the service.

Will e-tailing and e-commerce destroy retail as we know it? Very unlikely. Undoubtedly some categories of retail will focus on the Net and move away from the high street. However, with every threat there is an opportunity and these opportunities will be closely monitored by the retail and property world alike. The challenge is there for the property professional and retailer to realise the enormous advantage the Internet can offer.

Cormac Kennedy recently joined Gunne Commercial's development team from Tesco Ireland where he worked as a property manager. He was previously attached to the retail division of Jones Lang LaSalle.