IBM man shows cautious faith in Net’s future

Tom Vassos is an e-commerce evangelist. But in some respects he remains a Doubting Thomas. The Canadian-based Internet strategies manager for IBM travels the world, spreading the good news of how Web-focused marketing strategies can transform corporate fortunes.

But despite his proselytising role, Vassos admits he is a non-believer when it comes to the wilder predictions of just how much retailing will be done on the Web, rather than on the high street, in the next century.

High streets will look different and, in certain product categories, a large chunk of business-to-business and consumer retail spending may migrate to the Web, he predicts. But futuristic Mad Max-style scenarios of crumbling, abandoned shop fronts are wide of the mark.

“I’ve been on the Internet for eight or nine years now, but if I want to buy clothes, I go to the shopping mall,” he says.

“We’ve seen figures estimating consumer spending on the Internet as being $436m (267m) last year, rising to $1.2bn (736m) this year. Then we have estimates of spending growing to between $100bn (61bn) and $275bn (169bn) by the year 2000,” says Vassos. “But even then, we have barely scratched the surface of global consumer spending.”

By early in the next century, Web-based sales may account for “one, two, or three per cent” of global retail sales, rising possibly to high single figures as the century continues, says Vassos.

But that does not mean the Net can be ignored. Firstly, Vassos expects the value of business-to-business e-commerce to run three times ahead of the market value of consumer Net-based transactions.

Secondly, for consumer retail spending, the Net may well become a major channel for sales in some product categories, where the convenience of ordering and payment – or keener prices – outweighs the costs of transportation and delivery. These goods are likely to include financial services, travel, publishing, and a range of well-established “hard good” brands such as motors and electricals, where some consumers may be happy to buy “sight unseen”.

Thirdly, he argues, looking for a sales hike as the key benefit from a Website may be a red herring.

Instead, a Website may earn its keep by helping advertisers win a competitive advantage by raising brand awareness, providing product and pricing information, or providing after-sales customer services.

“There are some things which are going to become runaway hits for selling on the Internet and some which will be duds,” he says. “But even without online sales, a Website can provide more information about a retail product and its availab ility than many shop assistants can.”

The key issue for Web advertisers to consider is how a site can help to introduce customers to the initial sales cycle, says Vassos, and then encourage repeat purchasing. He points to Federal Express’ satellite-aided tracking system, which allows customers to trace the progress of a package to its destination.

“It’s a great example of hooking up a Website to a back-end database, which you can use to improve customer service,” he says. “Simply doing this first, ahead of rivals, gets your homepage bookmarked and gives you a competitive edge.”

And, despite his IBM background, Vassos warns against technology-driven Web strategies, which ignore the human element in consumer behaviour.

“Building e-commerce is not really to do with technology. We have to convince thousands of retailers to build Websites, and consumers to change conservative shopping habits and perceptions,” he says.

“The majority are concerned about the security of passing on credit card details on the Web, even though we argue we have technically solved that security problem.”