Old Brands, New Futures

Sydney Morning Herald

Tuesday October 24, 2000

there needs to be a major offline experience in an online purchase," he says. ``And if I was David Jones I'd be focusing on the offline experience and the convenience of online. Because convenience and price are still the two killers."

Another problem facing bricks and mortars is a less obvious one namely, that the type of people who buy online are less likely to be attracted to traditional brands in the first place.

``There is a group of consumers that is most likely to consume on the Internet, a group we call the super-consumers, who are 22 per cent of the population but have half the discretionary spending power of the country," Honeywill says. ``Now 82 per cent of this group are online already, so they're really comfortable in the e-world, and it's a universe they populate because it allows them to define their own identity, to be who they want to be.

``When they shop in the bricks and mortar world, however, they have to be who the retailer wants them to be. What typically happens when a bricks and mortar company goes online is they replicate that transactional approach and that does not suit this very influential group of people, who are the most likely to be the Internetshoppers of the future."

The result, he says, is that many companies can't rely on their brand to attract online customers. ``Brands are a shortcut to certainty and certainty is not as important online, particularly for the super-consumers who are prepared for a little edginess," he says. ``So it is possible for brands to have a successful transition, but not in their bricks and mortar form. They actually have to come up with a new, experimental personalised model that isexclusively for the e-world."

The problem is that hardly any Australian companies are providing a truly personalised service, with Honeywill saying that the closest thing to it is ANZ with its myanz site.

While banks may not be the most exciting bricks and mortar industry, they are targeting online users more aggressively than most other industries probably because they know they'll have a better success rate.

``Banks already have a customer base that's prepared to use Internet services," Galloway says. ``Customers have already moved through the transition of using a teller, then an ATM, and so they've become used to using technology."

According to Stephen Coulter, generalmanager of e-commerce strategy at theCommonwealth Bank, between 5 and 7 per cent of the bank's consumer customers and more than 15 per cent of its small to medium enterprise customers use its online services. These are high figures when you compare them to the retail bricks and mortars, who are lucky to get beyond the 2 per cent mark.

Dymocks, for example, has had a site for years and is often the most trafficked Australian book site on the Net. Yet its marketing manager, Peter Knocks, says the site accounts for only about 1 per cent of the store's total turnover. While Knocks believes the online store will become profitable in time, he believes the site's main benefit is currently to provide customers with pre-sales information.

It's a similar story with Sanity Music's site. Despite being one of the most popular and recognisable music sites in Australia, Sanity's chairman, Brett Blundy, says it accounts for only a few per cent of Sanity's total sales and that it won't become profitable in its own right for another couple of years.

In fact, it seems the only clicks and mortar retailers who are making real money are those selling PCs, as the success of Dell and Harris Technology shows. Harris Technology, which was acquired by Coles Myer last year, even claims to make a profit from its site with Ron Harris, the company's managing director, saying the siteaccounts for approximately 15 per cent of overall sales. But Harris says that the bricks and mortar side of the business is still crucial to the company's success.

``I don't have any doubts about the Internet as a medium for doing business and improving customer relationships but it's not a panacea," he says. ``It doesn't stand alone, it stands together with the rest of our business. If we were just running a Web site and we didn't have our stores we wouldn't be giving customers the ability to talk with us anytime over the phone or come into the shop seven days a week. The Internet's an extension of the business, it's not a replacement for it."

Media companies are the other clicks and mortar success story a curious turn of events considering they were once seen as the most threatened by the Net. But the runaway success of Channel 7's Olympic Games Web site, not to mention the Popstars site before it, shows that media companies can obtain online success if they have the right content. Or, as ninemsn has shown, the right partnerships with companies such as Microsoft and eBay.

``The Web is an obvious place for media companies to extend their businesses," says Steve Vamos, chief executive of ninemsn. ``I think that all strong offline media companies will have, over time, successful online extensions. They'd be crazy not to."

dkaufman@ozemail.com.au