ANA examines e-tailing dilemmas

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The brave new world of Internet retailing is redefining brand marketing, as even the country's most established and advertising-savvy marketers search for the right e-tailing tactics.

"Will the winner be clicks and mortar or just clicks?" asked Robert Herbold, chief operating officer of Microsoft Corp. "The truth ends up somewhere in between."

SEEKING ANSWERS

Striking that middle ground is a major focus of the Association of National Advertisers, whose members control $25 billion in advertising and $100 billion in marketing annually. Attendees at the group's 90th annual conference last week sought answers about how to leverage those budgets and their brands in a lightning-paced online marketplace.

Among the issues: how to balance marketer-directed online sales with those of Web-only e-tailers such as Amazon.com, and sites controlled by bricks-and-mortar retailers like Wal-Mart Stores.

ANGRY RETAILERS

"Some bricks-and-mortar retailers are very angry that we are participating with the online companies," said Herbert Baum, president-chief operating officer at toymaker Hasbro.

Mr. Herbold pointed out that some growing e-businesses, such as Proflowers.com, are eclipsing traditional businesses in floral delivery by shipping directly from floral centers rather than local florists.

Some marketers, such as Procter & Gamble Co. and Keebler Foods Co., are looking to the Internet for niche and online-only products that don't pay to squeeze onto expensive supermarket shelves.

P&G has created Reflect.com, a site that will sell custom-created upscale cosmetics starting later this year. It also is marketing Pampers diapers for premature babies, a line extension considered too niche-focused to gain much traditional retail space.

Keebler is taking a similar approach by offering cookies for diabetics via the Web, said David Vermylen, president, Keebler Brands.

Consumers will call the shots, marketers and consultants predicted. Marketers "are going to have to evolve from a vendor-centric brand proposition to a customer-centric proposition," said John Hagel, a principal at McKinsey & Co.

Vivienne Bechtold, director of interactive marketing at P&G, called Reflect.com "a learning proposition."

'SOME CONCERNS' AMONG RIVALS

Although the company experienced "some concerns" among retailers that P&G was competing with them online, the company made a case that retailers wouldn't want to get involved with such a niche business.

The business, P&G told them, will be focused on a complicated process of maintaining 250 different online stockkeeping units aimed at a narrowly targeted consumer base and requiring massive back-end fulfillment resources.

Ford Motor Co., too, has wrestled with how to explore online sales without alienating its all-important dealers, and has come to the conclusion that its role is to be "a customer-driven designer of vehicles," said David Ropes, director, corporate advertising and integrated marketing. So while Ford is now selling used cars direct to consumers online, the buyer designates which dealer he wants to buy from and the dealer still gets a commission.

Ford is spending $20 million to train its dealers in Internet sales, Mr. Ropes said. He noted that if a dealer responds to an Internet lead within 2 hours, a sale likely will be made.

ENTRENCHED INDUSTRIES

Some industries are more entrenched. Hasbro's Mr. Baum said e-commerce accounted for about 1% to 2% of toy industry sales last year and is expected to hit 15% this year. He predicted a shakeout for 2000.

"This Christmas may be bigger than even the next [one] online," he said, adding that some sites in the land grab "will drop by the wayside."

Even so, online sales won't overpower retail stores, Mr. Herbold said.

"Statistics [show] one of the key reasons people shop is to be entertained," he said. "I'm sure that retail outlets will continue to be healthy."

Contributing: Jack Neff.

Copyright October 1999, Crain Communications Inc.

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