Approaching a New Watershed Point

Michael Crichton called it the ‘watershed point’ - that moment in which mankind’s problems exceeded mankind’s ability to solve them. According to Crichton, the watershed point took place sometime in the 1960s; after that, matters just went into an endless downward spiral. The unpleasant results were things like global warming, vanishing rain forests, and Tom Green movies.

Of course, young Crichton didn’t have the benefit of knowing anything about the Web. Fundamentally, the Web provides consumers with perfect information—one of the essential components of a perfect market. Consumers can now make fully informed judgments about their purchases, considering a much wider variety of suppliers than ever possible.

Maybe it’s an exaggeration to say that the Web has reversed the watershed point, but at the very least we can say that online buying has reached critical mass. The consumer, empowered with this wealth of information, is clearly loving online shopping, is doing it more than ever, and is coming back for more.



Consider these figures, provided by Bizrate:

  • For the first quarter of 2002, online orders are up a huge 34% over 2001 (97 million vs. 72 million).
  • Online sales (in dollars) are up 41% ($12.3 billion vs. $8.7 billion).
  • And the average purchase is up 5% ($127 vs. $121).

The trend is most noticeable in big-ticket items like automobiles. The old ritual of haggling with the dealer has been simplified by having access to each car’s wholesale price.

And the impact on the travel industry has been nothing less than overwhelming, also the result of far better and more available information. Sites like Orbitz, Travelocity, and Expedia have democratized the marketplace, consumers receive email about $250 cross-country specials, and Web-based teleconferencing is a viable alternative to business travel.

Every corner of the shopping world has been affected. Comparison shopping sites have trained consumers to zoom in on great deals, great service, great fulfillment. And retail sites are being held far more accountable for the total experience they present to their consumers.

Consider how loyalty is generated in the offline world: generally by nothing more than distance to the store. The closer the store, the more likely the consumer is to visit. But on the Web distance is immaterial, so consumer loyalty can only be achieved by the pricing and service provided by the vendor.

A number of years ago, during the Web’s ‘bubble years,’ I attended a meeting where AOL was pitching a major retailer on taking a significant position online. After listening diligently to AOL’s impassioned pitch for more than an hour, the retailer’s CEO said, “We believe that, at the end of the day, bricks and mortar will win.” In the short term that CEO was right, as the dot-com devastation proved.

But there was a time limit to his rightness, and that time appears to be up. We could, in fact, be approaching a different kind of watershed point—one in which online retailers’ ability to compete with offline marketers exceeds the offline guys’ ability to respond.

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