This article appeared in the December 1984 Online Today, CompuServe's magazine for CIS subscribers.
Sound like an impossible demand? Not at the Electronic Mall™. Available exclusively to CompuServe subscribers, the Electronic Mall is the result of extensive research and development by CompuServe Incorporated and L.M. Berry and Co., one of the nation’s largest Yellow Pages directory publishing companies.
Not only does the Mall provide shop-at-home convenience, it also affords easy ordering of a multitude of brand-name products and services as well as helpful information on everything from life insurance to travel. Many of the products and services are offered at considerable discounts. And spot advertising and a New and Noteworthy board keep shoppers informed.
In some respects, the Electronic Mall is similar to a conventional shopping mall. The consumer can go directly to the shop of choice or spend a leisurely afternoon “window-shopping” via videotex. A Mall manager is on duty to field inquiries. Email feedback and phone numbers make it possible for customers to communicate directly with merchants.
There are several product categories representing over 60 merchants, including specialty stores like New York’s 47th St. Photo. Recognizable names include Waldenbooks, Metropolitan Life Insurance Co., E.F. Hutton, Bank of America, Commodore Business Machines, Heath, Microsoft, Kodak, American Airlines, Bloomingdale’s, Sears, Roebuck and American Express.
“Product categories were chosen by three criteria,” according to Stephen A. Swanson, L.M. Berry’s vice president of strategic planning. “They’re already marketed through direct-response techniques. They don’t require color graphic descriptions, and they match the interests of CompuServe subscribers as determined by market research.”
The concept of the Mall originated nearly two years ago when CompuServe and L.M. Berry began working together to determine how to place advertising on the Consumer Information Service. “The overall objective of the Mall is to test the effectiveness of the electronic media as it pertains to direct marketing and advertising,” says James H. Arnold, director of operations at L.M. Berry. The success of the Mall in achieving that objective will be determined by research conducted by A.C. Nielsen during a four-month period.
Objectives of the Nielsen test include not only the tabulation of sales receipts, but also an evaluation of how valuable information may be to the consumer. “We’re also testing the technical aspects and support structures of the Mall,” says Mary Vaughn, CompuServe’s product marketing manager.
Initial response to the Mall has been favorable. Swanson notes that CompuServe subscribers have sent many positive comments to the Mall Manager.
Who is the typical customer, and what factors lead him to shop electronically? “The demographics of CompuServe subscribers are that they are professional males in their 30s, are married and earn high incomes,” says CompuServe product marketing specialist, Mary F. Zacks, who adds that the wide array of products in the Mall may motivate the entire family to shop electronically.
According to Dr. Wayne Talarzyk, chairman of the marketing department at Ohio State University, the online shopper and the mail-order customer have similar demographics and consumer needs. “The common denominator is time constraints,” he says. “If the consumer is faced with demands on his time, it makes life easier to be able to do the shopping and gather information at home.” These consumers like the potential for shopping 24 hours a day, 365 days a year. Ronald Ramseyer, Sears’ national catalog advertising manager, sees this as a clear alternative. “It is possible for the customer to shop at home when our telephone operators aren’t working or the stores aren’t open.”
Access to a wide range of products, often at considerable savings, is another distinct advantage for the consumer. Special book collections and 1930s radio programs are among the rare items that a typical shopper might have difficulty locating. “Because the electronic merchants do not have to maintain a physical inventory, they are able to offer a wider variety of merchandise,” says Swanson.
Time and money, the same factors motivating some customers to park the car in the garage and shop from the den, motivate others to hire a babysitter, fight Saturday afternoon traffic and spend three hours searching for the perfect gift. Some people argue that electronic shopping is a rich man’s sport. But, if you consider the costs of gasoline, parking, wear and tear on the car, babysitting and the value of your time, traditional shopping can be an expensive hobby.
“It’s like anything else,” says Thomas Rauh, national services director for retail consulting at Touche Ross. “Some people like to shop using a catalog and some people don’t. I don’t think anyone fully understands why it appeals to some people and not to others.”
“You can’t browse very well on online systems,” says Martin Lane, director of videotex planning at LINK Resources, a New York research and consulting firm. “Online systems are really geared to people who know more or less what they want ahead of time.”
One problem with electronic shopping is that you can’t squeeze the Charmin. “Two of the biggest consumer needs are the ability to talk to someone and to touch the merchandise,” says Robert Barlett, director for retail consulting for Touche Ross and Co., a management consulting firm specializing in retail, banking and high-technology industries. “You need to be able to pick up the packets of meat in the supermarket. And you need to feel the cloth of a dress and look at it under the light.” “It’s very logical,” says Lane. “The things people will buy online are the kinds of goods you don’t need to see and touch, such as books, records and tickets for airlines.”
But with certain types of products there’s an advantage to seeing them. Kirk Shelton, senior vice president of Comp-U-Card, a shop-at-home service offering more than 60,000 products, says, “I don’t think anyone cares that much about a 13-inch television set. But when you start talking about a 25-inch TV that you put in your living room, people care whether it’s contemporary or traditional.” Similarly, a shopper might be more apt to order a blue oxford shirt via the micro than a daughter’s prom dress. “Anything with a brand name or identifiable model number or features works well,” Shelton says.
“One drawback with videotex is that we won’t have graphics,” says Herb Price, president of Fifth Avenue Shopper, a CompuServe specialty store since 1982. “Brand names give people a graphic image in their heads. In a sense, it prepromotes the product and gives immediate identification.”
Research by OSU’s Talarzyk indicates specialty items, like Godiva chocolates, that the consumer can’t purchase at the corner drugstore will do well, as will items about which the consumer doesn’t require much information. Talarzyk predicts groceries and health aids will sell better than many other items.
Rauh foresees financial services evolving more rapidly than most product categories. “The information content you want to convey when you’re selling life insurance is best presented as text and graphics,” he explains. “You don’t need a photograph of a nice-looking young family to sell life insurance, mutual funds or any financial product.” Mark Hirmes, director of media technology at Metropolitan Life Insurance Co., which offers Mall customers life insurance, individual retirement accounts and, in some states, automobile and homeowners’ insurance, agrees. “We think videotex has an excellent potential for marketing to individuals.”
If brand-name products promise to be a shopper’s first choice, does it follow that homemakers will order Campbell’s soup, but not a head of lettuce or a steak from the electronic supermarket? Not necessarily. “We sell perishables within specialty areas,” says Shelton. “Lettuce may do well if the retailer is able to demonstrate that he can provide personal service and quality,” Barlett notes. “But initially people will not go into a service to buy lettuce. They’ll buy cases of Michelob™ and, we hope, the lettuce will be a pleasant surprise.”
Will a consumer be more apt to order custom-made roller skates from a merchant he’s familiar with than one in a town he’s never heard of? “It depends on the price,” says Rauh. “If it’s a brand item and there are no qualitative factors like service and follow-up, I think the consumer would make his decision based on price.” CompuServe’s Mary Vaughn thinks Mall customers will shop at entrepreneur-owned stores because of their trust in CompuServe, but “if you have national merchants such as American Express, the consumer might initially shop there because he knows there’s a real, physical store called The American Express Store.”
“The retailers’ policies are also important,” says Rauh. “Most of the retailers in both the mail-order business and electronic commerce have a strong guarantee policy.” According to Vaughn, all CompuServe merchants have return policies.
Many of those peddling their wares electronically do so because they think videotex will be an important part of the marketing mix of tomorrow. They want to get in on the ground floor. Most of these merchants did not view online services as a way to make quick, easy money. “I think most of the companies in the Mall are taking a long-term view” says Arnold.
“Sears is interested because we’re looking at alternative ways of communicating with potential Sears customers,” says Ramseyer. “We strongly believe that videotex services are going to be a major way of marketing,” says Mary Beams, director of videotex at McCann Erickson, New York, a worldwide advertising agency representing a variety of CompuServe merchants. “We want to know as much about it as possible and want to be one of the leaders in making it happen. We think it’s going to be a medium that will have a significant impact on the American public.”
Wyn Walshe, director of creative services/electronic media at J. Walter Thompson advertising agency, says his clients, which include Kodak, Kraft and Timex, are going online because they know that at some point videotex will be an influence in advertising. “They are learning what’s best, how to create advertising, what to say in it, whom to address and how interactive it should be.”
For the entrepreneur, videotex can be a good place to hang out a shingle without having to mortgage the house. “From the retailers’ point of view, the technology can be used to reduce operating expenses, reduce the number of salespeople required on the selling floor and reduce the amount of inventory held at each store location,” says Rauh. “This medium makes it easier for a merchant who doesn’t have much market position or much of an infrastructure to compete directly with companies that have stores on every main street in America,” agrees Martin Lane.
Since almost all merchants are novices at videotex marketing, the entrepreneur stands a chance against the company with an in-house marketing staff of 20. “When you move into a new market, everybody is a beginner.” Says Mall merchant Frank Fiore, general manager of Software Advisor, a store offering popular software for popular computers at discount prices, “No matter who you are, you have to figure out how to deal with that market.”
Fiore is a classic example of an online entrepreneur: He previously operated Lobby Letters of America, a service providing its clients with letters to their congressmen or local newspapers, which was also available on CompuServe. Fiore feels strongly that videotex is a good market for entrepreneurs.
Don Ochs, owner of Primetime Radio Classics, is another online entrepreneur. “I’ve been online for three years,” says Ochs, a former real-estate agent whose current sales line features a collection of 25,000 vintage radio programs from the 1930s, ’40s and ’50s.
Although the focused audience of computer buffs makes videotex a great marketplace for peddlers of computers and peripherals, many merchants — even entrepreneurs — feel that the medium offers a relatively small audience compared to advertising in a national magazine or generating a mail-order catalog. “Relatively speaking, videotex has a small consumer base,” says Price, whose Fifth Avenue Shopper offers hard to find gifts, including the finest perfumes and out-of-print books. “Your sales base can be significantly smaller and much more divided than a mail-order operation, which can have 2-, 3- or 5-million mailings.” Although Fiore is satistied with the sales receipts from Mall purchases, he says his advertisements in national magazines get more response.
Will the bride of 1990 register her china pattern at the online department store? Although many merchants have high hopes for videotex shopping, they don’t expect to change people’s shopping habits overnight. “In psychological terms, it takes about 15 years to change any population’s habits,” says Lane. “One of the mistakes made in the videotex/online business is to think that things will change quickly. I think it will be more than 10 years before we see a really distinct pattern, such as people doing a majority of their routine shopping this way.”
Rauh says, “It’s our feeling that electronic shopping will not be a significant factor in the mass marketplace until the mid-1990s.” Rouh defines a significant factor as 10 percent or more. This figure encompasses both at-home shopping and use of public-access videotex terminals in shopping malls. Other industry experts don’t feel that electronic commerce will ever account for more than 10 percent of retail sales. Of course, growth of the home computer market will be a major determining factor.
“Up to this point, there has been a lot of technology chasing after consumers,” says Barlett. “Ultimately, the deciding factor will be consumers’ needs.”
— Francine Sevel