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A hidden value of the 'Net

By: Scott Bradner

According to a June 16th article in the New York Times the bloom may be off the rose of Internet sales. The article quotes statistics from some market research companies along with reported results from eBay and Expedia that show a dramatic fall off on the rate of growth of business done over the Internet. But I wonder if the Times article and the research firms are missing a key factor in how the 'Net contributes to Internet commerce.

The numbers seem a bit scary: book sales will grow at a rate of 11% this year, down from a growth of 40% last year, apparel sales will grow 21%, down from 61%, pet supplies (the sock puppet lives?) at 30% down from 81%, eBay has a growth rate of only 1% this year over last and spending at Expedia is basically unchanged from last year.

The absolute numbers in the article are far from bad -- 5% of total US retail sales will be via the Internet this year for a total of $116 billion. But the evaluation of success in US business is always on growth so the decline in the growth rate from unsupportable to merely impressive is seen as failure,

What the article misses totally is the use of the Internet to support non-Internet sales. For example, as many as 8 in 10 car buyers use the Internet to do research on what car they decide to buy. (http://www.imediaconnection.com/content/13881.asp) I'm one of those -- I decided what vehicle to buy and what dealer to go to based on the manufacture's and dealers web sites when I bought a new minivan two weeks ago.

I've not found much in the way of statistics (I only looked on-line of course) but, based on my own experience and the experience of people I talk to, I think that the Internet has significantly changed how many people shop -- and not just for cars. Other than groceries and restaurant meals, I use the 'Net to research almost everything else I buy - even things I buy in real-world stores. For example, two weeks before buying the new car I used the Internet to find where I should buy a new air conditioner -- I used the web to search for a dealer that carried the unit that Consumer Reports listed as the quietest.

The Times article hinted at this phenomenon when it discussed the growth of systems that enable web customers to reserve a purchase for pickup from a physical store. This ability augments the power of the Internet with instant gratification.

A casual reader of the Times article might decide to cut back on investment in their web presence in response to the reduced growth rate but that would be a mistake. A good web presence drives business to a store - some of that business will be on-line and some will be at the physical store but without a web site a business will be hard pressed to grow.

disclaimer: Harvard has a big web presence but I doubt that this is a case where it helps sales -- in any case the above observation is mine not the university's.