By Leslie Walker
Washington Post Staff Writer
Thursday, January 20, 2000; Page E01
NEW YORK – The good cheer was surprising.
Here was PriceWaterhouseCoopers predicting that half of all retailers will file for bankruptcy within five years – nearly twice the failure rate of the past decade.
And here was an Ernst & Young analyst predicting the Internet will claim 5 percent to 10 percent of U.S. retail sales within five years, and Goldman Sachs saying 25 percent in 10 years.
Still, despite the raging debate over how much business Web sales will siphon from traditional stores, most old-line merchants seemed upbeat here this week at the National Retail Federation's annual convention.
For the first time, the Internet dominated both the formal and informal agendas of the meeting. After grudgingly acknowledging that they must find ways to marry, e-tailers and retailers are rapidly turning "clicks" and "bricks" into terms of endearment as they tackle the prickly challenges of doing business under one virtual roof.
Traditional retailers spoke confidently about how retailing will refashion itself to accommodate the Internet. Rather than the Internet hurting their bottom lines in the long run, many said they now believe it will wind up boosting the value of real-world stores because it will allow them to expand more cheaply.
Merchants spoke of integrating their behind-the-scenes databases so consumers can communicate with a company's Web site and simultaneously have their wishes recorded in the company's stores and call centers.
They spoke of deeper changes, too: How the Internet is encouraging customers to "pull" what they want from retail stores, rather than waiting for stores to "push" products at them. Analysts touted the trend toward bundling related services, products and editorial content at one-stop Web shops as something harried Americans increasingly crave.
The availability of instant information about prices and products is supposed to empower customers, making them kings on the Internet. But merchants are still searching for data about what Internet customers really want so they can adapt online merchandising schemes to respond. New players came here offering to help the old-liners get digitally hip.
Shoppinglist.com was recruiting partners for its Web service, which lets people type in their Zip codes and see what's on sale at stores in their neighborhood – an important new trend in clicks-to-bricks. A dozen companies showed off software tools to give retailers greater push-button control over their online product displays, including filters that let them easily change which products pop up on Web pages a customer sees, based on that customer's purchasing history.
Another venture, Market4Retail.com, was signing up retailers for its new Internet trading center, designed to help merchants plan product mixes with online analytical tools. The site also lets retailers conduct market surveys online, presumably offering faster, fresher data about the almighty King Customer.
Spirits were high in part because retailers are still flush from their 1999 success. Retail sales totaled $3 trillion in the United States last year, up about 8 percent – the best growth in 15 years. Internet sales in 1999 are estimated at around $15 billion, more than double the year before.
The lowest prediction about the impact of the Internet didn't come from an analyst, but a retailer, whose talk typified the angst that still lurks as the industry confronts well-heeled Internet-only competitors.
Home Depot Vice President Paul Hoedeman said he expects no more than 5 percent of retail sales to be made online by 2010. He took jabs at the still-unprofitable Amazon.com – which recently added a new product line to compete directly with Home Depot – by noting that, unlike Amazon, Home Depot actually "makes money." Hoedeman's defensive comments called to mind the disdain Merrill Lynch executives expressed for Internet commerce late in 1998, shortly before the world's largest stockbroker made a digital U-turn and embraced online trading.
Hoedeman's attitude, like Merrill Lynch's, was that the Internet poses little threat to his company. "The Internet is going to be a success, but the primary result is going to be to drive more traffic into Home Depot stores," he insisted.
Home Depot has no separate Internet strategy because its stores are the focal point of everything it does online, he said. Even e-mail and online chat rooms will be linked back to the stores. Noting that all Home Depot stores have warehouses and delivery fleets – an advantage Internet-only competitors lack – Hoedeman predicted that Wall Street's willingness to fund money-losing ventures won't last.
"The music is going to be stopping soon," he said, "and when it does, there are not going to be any special chairs for e-tailers."
His swagger drew laughter and applause, but was out of sync with the attitude of many traditional retailers.
More typical was the talk from Office Depot, whose chief executive described his vision for turning the company's Web site into a one-stop shop for business services. The plan is to buy chunks of Internet start-ups and promote their online services with links at OfficeDepot.com.
Since most Office Depot customers are small-business people, Office Depot wants to expand its mission by helping its customers move online. It will offer such services as digital distribution of news releases, online recruitment of employees, and Internet deals on insurance.
"We expect to increase the types of transactions that can be conducted on OfficeDepot.com," chief executive David Fuente said. "We will begin to look more and more like a small-business portal."
That's the kind of catering to customers – trying to anticipate where they will want to branch out online, and getting there ahead of them – that is likely to help traditional retailers win a favored bookmark from King Customer in the new world of electronic commerce.
Send e-mail to Leslie Walker at email@example.com.
© 2000 The Washington Post Company