As traditional publishers add commerce to their Web sites, they are beginning to delve into the foreign world of retailing. The challenge is providing a successful transition from the off-line soft selling of subscriptions to much more concrete online pitches for specific products.
That means they need to develop new expertise in critical retail areas, such as creating point-of-purchase displays or moving loss leader products on their sites.
`HOW DO I SELL MORE?'
Over the past year, publishing sites have been testing different models, including options for going it alone, cutting deals directly with manufacturers or striking alliances with third-party aggregators.
Hearst HomeArts began with an in-house online sales model in 1996, selling household goods and other products from direct sellers in its print publications. In 1997, it moved to varied partnerships with iQVC, PC Flowers and other online retailers. HomeArts is now looking to hire someone to take charge of its online retail efforts.
"I need someone thinking, `How do I sell more? What do I need to do to make it move? I've got 2 million people coming through here every month. Can I get 1% of them to spend $50?' " said Katherine Creech, general manager of HomeArts.
THINKING LIKE MERCHANDISERS
Brian Sroub, HomeArts VP marketing, said, "Our traditional business really is advertising. ... The next step is that publishers have to think like merchandisers."
David Cohen, director of new media for Meredith Corp.'s Better Homes & Gardens, Ladies' Home Journal and Family Money, said online revenue for the three is now split about 90% ad sales and 10% commerce overall. But by the end of his three-year advertising-based strategic plan for the sites, he sees "a major increase in commerce." He declined to be specific.
SHOPPING A NATURAL FIT
"The easiest thing, and quite frankly the most profitable, is to cut deals," Mr. Cohen said. His publications haven't hired any retail specialists, but, he added, "We are using the experience of companies we're working with. Align yourself with good people who know what they're doing. That's the theory."
Shopping seems a natural fit for publishers. If a user comes to a publishing site to read a book review, look up a recipe or search for an article about running, the next logical step would appear to be hitting the buy button for books, cookware or fitness gear.
ONLINE PUBLISHERS UNDER FIRE
However, some publishers have been criticized for blurring the line between editorial and advertising. Last fall, for example, online publishers including The New York Times Electronic Media Co., USA Today Online and others came under fire for their participation in a BarnesandNoble.com program that paid them a commission on book sales generated through links from their sites.
At the time, publishers, including The New York Times Electronic Media Co. President Martin Nisenholtz, said these commerce efforts in no way compromise a publication's editorial integrity and that new revenue streams are necessary in order to make money online.
Analysts and the new merchandisers agree the concept looks promising. But no one knows exactly how much revenue publishers can expect to generate through online commerce.
Bill Bass, analyst with Forrester Research, said, "The Internet is an experience medium. When you have site content, advertising, transactions and interactivity all built in, the experience will be better than a site with just content."
OTHERS RELY ON RETAIL PARTNERS
However, he said, the advertising model is still the best way for publishers to make money. Transactional models not only give publishers more risk to share, but also usually involve a much lower cost-per-thousand impression rate as part of the deal, he added.
"Even if I wasn't going to make any money, it would still be something I'd want to do to make [for] a better customer experience," Mr. Bass said.
Ms. Creech said that for HomeArts, the transaction model won't be a significant revenue contributor for at least two or three years.
Other publishers are relying more heavily on partners to bring retail skills online.
Wired Digital, for example, sells its own Wired Ware directly online, but uses strategic partners in its other shopping efforts on HotBot.
"It just doesn't make sense from a financial point of view to do it on our own right now," said Andrew DeVries, director of marketing communications.
Wired Digital sells products from retailers including Gap, BarnesandNoble.com, Cyberian Outpost and other online merchants on its HotBot shopping site, and it plans to continue adding commerce capabilities, said Mr. DeVries.
"Commerce promises to be a very strong incremental revenue stream for us. You'll see a lot more from us on that in the near future."
Copyright February 1998, Crain Communications Inc.