By Leslie Walker
Washington Post Staff Writer
Thursday, December 31, 1998; Page E1
You might think of 1998 as the proof-of-concept year for electronic commerce, with cyber-Pied Pipers proving they could lure millions of shoppers online. But what sounded like music to consumers was a call to arms for businesses, making it likely 1999 will see commerce wars erupt on the World Wide Web.
As the global computer network matures into a more stable medium for buying and selling, big real-world companies are getting worried about it. In the coming year we're sure to see some of them ditch long-standing business partners and ally with new ones in a bid to protect their bottom lines.
It's become plain as day that the Internet is upending rules that companies have played by for most of this century. By lowering communication costs, the Net shrinks distances and fundamentally alters the way information and ultimately goods and services can be distributed. These changes are roiling players at every level of the distribution chain, from manufacturers and distributors to retailers and consumers.
The Net creates cheaper channels for companies to reach retailers and consumers. It lets manufacturers bypass entrenched middlemen such as distributors, resellers or real estate agents; they can even bypass retailers if they are willing to sell online themselves.
Even as it threatens to kill off the old intermediaries, the Net is creating a new breed of cyber-middlemen who are inventing creative ways to link buyers and sellers.
Lately, most of the attention is going to traditional manufacturers and retailers struggling to find their place on the Net.
Barnes & Noble fired a new broadside against rival Amazon.com this month when it announced it would buy the nation's largest book distributor, Ingram Book Group, which is Amazon's key supplier.
Estee Lauder shook up retailers everywhere by opening a direct Web outlet for its Clinique cosmetics last month. And Levi Strauss began selling custom-fit jeans on its Web site and forbade retailers to offer the same jeans on theirs.
Other manufacturers are hanging back, afraid of alienating distributors or retailers to tap a sales channel that barely claims 1 percent of retail transactions. But you can count on many of them losing that reluctance as Internet start-ups begin stealing customers.
So who are the newcomers that have traditional companies worried?
In the ever-expanding cast of Amazon.com clones, there are many clever retailers. One is Sparks.com, which launched under the radar of American Greetings and Hallmark this month to sell personalized greeting cards. Another is Bluefly.com, which aims to be a kind of Filenes Basement of cyberspace by collecting discount designer fashions.
Even more intriguing are Web middlemen who collect information and services, rather than goods. Here's a sampling of ones worth watching in 1999:
Internet-only companies likely will continue leading the way in electronic commerce, becoming takeover targets for bigger traditional companies. Expect a gradual blurring of the distinction between online and off-line players as the Net goes mainstream.
As an example of hybrids to come, look for Internet access terminals to pop up in regular stores, helping shoppers find exactly what they want at the traditional point of sale.
Leslie Walker's e-mail address is email@example.com.
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