Aberdeen angles on beefing up Net sales

Analyst suggests that slow access, not security, is the culprit in the slow take-up of e-commerce.

It is a widely held view that the most common drawback to commerce one slow take-up of e-commerce. the internet is its lack of security, even though people use far less secure methods to carry out transactions all the time in other walks of life. They trust shops and cinemas with their credit card details but not the internet.

But a report entitled Internet Sales: Virtual Corporations, Real Profit, by US research company Aberdeen Group, is attempting to blow away the security myth by showing that a more stable online system will bypass the whole problem.

Speaking at Electronic Commerce 97, Chris Stevens, senior analyst at Aberdeen Group and principal author of the report, took issue with the theory that security measures will be the turning point. 'New internet access devices and broadband communications, rather than security protocols, will be the ultimate cause of mainstream internet consumerism,' he said.

Aberdeen Group takes issue with the theory that the security risk is responsible for the slow adoption of commerce on the internet. Consumers are quite willing to take the perceived risk for a trusted brand name or a high-quality service, it argues.

According to Stevens, businesses which are slow to adopt electronic commerce over the internet have failed to match the demographics of their business with the user profile of the internet. The leaders in the internet pack have been those offering products or services that have gained value by being sold online. Online bookstore Amazon.com has had a million customers in less than two years, principally because it sells a commodity product, delivered via third parties with an international infrastructure, and it has a selection far greater than any terrestrial store. As a result, more than 40 per cent of trade is from repeat customers.

US broker Charles Schwab runs half its business on the Web and has more than $50 billion in online assets and more than 700,000 online accounts.

By offering greater access and better value, Schwab was able to put security concerns aside.

In contrast, some businesses that seemed to offer a viable internet sales route have done less well than expected. UK catalogue companies such as Argos and Great Universal Stores, for instance, have not had much of an impact - their customer base is not a group that uses the internet regularly.

For their regulars, there is little value to be gained by seeing the goods online rather than in a printed catalogue, and there is not much room for discounting goods which are already considered to be low price.

For other companies, the reluctant takeup is driven by fear that online success might jeopardise their existing business. K-Mart, the US cut-price high street retailer, set up an internet sales operation, but prices were initially higher than in its outlets because it could not afford to damage its vast investment in property or risk reducing the revenue gained from impulse shopping.

Number one supermarket Tesco has hit the headlines in the UK with its high-profile internet shopping venture, but only a small number of stores are so far offering customers the facility and the company refuses to say when the operation will be profitable.

Many other retailers in the UK are considering and trialing internet shopping without investing heavily. John Sacher, IT director of Marks and Spencer, summed up the general feeling among UK retailers when he said the future was in electronic trading but that it was too soon to do anything yet or see any dramatic upturn in electronic business.

Stevens had advice for retailers. 'Aberdeen Group recommends that all companies start selling on the internet soon because it will take time to learn how to interact with internet consumers, alter existing systems and organisational structures, and develop and protect brands prior to the second flood of consumers. Noah comes to mind - build an Ark.'

Roger Till, CEO of the Electronic Commerce Association, said it is important not to misjudge the hype about security issues. 'Stop worrying about internet security - by that I mean that companies should be aware there is reasonable security available for the internet already.'

The key for dealers, therefore, is to ensure that they provide the best service and to carve themselves a niche before the whole industry jumps on the bandwagon. After all, if there is money to be made from these business opportunities, there is no better time to get involved than at the beginning.