E-tailers fortify service

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Consumer electronics and technology purveyors are hitting the Net with a frenzy and gearing up for a green Christmas in cyberspace, looking to reel in sales and score points among consumers.

While apparel, book, flower, food and software e-tailing have taken off in the past couple of years, the consumer electronics category has been slower to realize the opportunity of the Net. That's partly due to product purchases tending to be more complicated and requiring more research, qualification and explanation.

Ever buy a 61-inch projection TV or a DVD player from a Web site? Even a cordless phone purchase, perhaps one of the most simple buys a consumer can make, is not yet de rigeur.

AVOIDING PARTNER ALIENATION

For marketers harboring e-tailing aspirations--brands such as Sony, Panasonic and Philips--there are thorny and endemic channel issues: How to mount an online store without alienating longtime retail partners?

Players range from giants such as Amazon.com (with an estimated $40 million to $50 million ad account handled by FCB Worldwide, San Francisco), which recently began selling consumer electronics products; and megastores 800.com and Buy.com; to niche sites CoolAudio.com and Netmarket. Two bricks-and-mortar big guns, Best Buy and Circuit City, sell a limited number of products online.

Jupiter Communications forecasts online consumer electronics spending will escalate to more than $1 billion by 2003. The Internet research organization doesn't include computer hardware and software in its consumer electronics segment forecast. Forrester Research is even more bullish, forecasting online consumer electronics sales will spiral to a whopping $11.6 billion by 2004.

Still, online sales of electronics wares is a comparatively small part of the $79.2 billion consumer electronics market.

LESS PATIENCE FOR BAD SERVICE

As e-tailers rev up for what they hope will be a fourth-quarter sales bonanza, they'll have to earn their stripes with consumers--proving they can go the extra mile in service, support, returns, reliability and price.

"As the Internet becomes more of a mainstream channel, consumers have less patience for broken servers, images and bad customer service," said Mike May, digital commerce analyst for Jupiter. "These sites are spending millions of dollars on advertising for exponential spikes in transactions and sales, and they need to be prepared to deal with those big spikes."

Jupiter projects online merchants will see up to four times as many transactions and visitors as they're used to this quarter. "A lot of them haven't been tested previously," Mr. May added.

Look for huge marketing blitzes this quarter. Bigger sites such as 800.com and Buy.com will spend handsomely to seed their brands and lure customers to deep product assortments at low prices. Buy.com is expected to spend about $25 million via Lowe & Partners/SMS, San Francisco, in the quarter.

MANUFACTURERS WEIGH IN

The big manufacturers also are getting into the act. Thomson Consumer Electronics' venerable RCA brand recently unveiled RCA.com. The e-commerce destination will sell 100 product models initially--everything from camcorders to big-screen TVs--and use the site to showcase new digital product offerings.

"RCA.com is clearly intended to be a complement to our distribution strategy, not competitive. We want to use [it] to expose consumers to our new digital technology products," said Mike O'Hara, senior VP, Thomson. "This clearly is a franchise enhancement for the brand."

Executives said RCA.com won't undercut traditional retailers on price and consumers probably will use the site to conduct research. That conclusion is based on a spring survey by the Consumer Electronics Manufacturers Association, which RCA executives said concluded that more than 75% of consumers who bought electronics online also used the Net for research.

SONY TO EXPAND OFFERINGS

Archrival Sony Electronics is getting ready to unveil its own e-commerce initiative by next month. Sony is expected to greatly expand the products it sells online.

As the online consumer electronics field gets more crowded, consolidation is inevitable, Mr. May said.

"The best players in this category are going to be those who go deep about product selection," said Mr. May, adding that sites that can educate consumers on product features and leverage comparison shopping information will be most likely to drive traffic and capture revenue.

For example, Buy.com is positioned as an Internet superstore with low prices, a sort of megaportal across multiple categories that include consumer electronics. It boasts 1 million product models.

"We do believe we're headed into a period of consolidation and that the opportunity for single-category e-tailers is going to be challenging," said Greg Hawkins, chairman-CEO of Buy.com.

Buy.com is in the midst of an agency search for an estimated $50 million account. Black Rocket, San Francisco, had handled print, but the majority of recent advertising has been done in-house.

Competitor 800.com offers only one-quarter as many products as Buy.com. But the fast-growing 800.com is quickly eclipsing cataloger and online rival Crutchfield and offline powers Best Buy and Circuit City. Customer service is what 800.com touts, plus the fact that more than half of its customers in September were repeat shoppers. It also offers free shipping. Lowe & Partners/SMS, New York, has 800.com's $25 million account.

IN THE COZONE

Computer retailer CompUSA recently launched Cozone.com. It tapped Donald Trump, Dr. Joyce Brothers and NBA star David Robinson, who each appear in a humorous $15 million fourth-quarter campaign for the site created by Mullen Advertising, Wenham, Mass., as people who are experts in their respective fields, but who need assistance in doing new things.

"We wanted to say, 'It's OK that you don't know everything about technology,' " said Stephen Polley, Cozone.com's Chairman-CEO. The tag, "Cozone.com. We can help."

RESEARCH SPRINGBOARDS

Whether positioned as trusted guide or low-price provider, consumer electronics sites may find consumers using the venues as springboards for research, then ultimately buying at brick-and-mortar stores.

Value-added services such as free shipping, in-home setup, hassle-free returns, order tracking and superior customer service could make or break consumer electronics cyberland.

Copyright October 1999, Crain Communications Inc.

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