Mass market goes on line; Service Merchandise, OfficeMax tap cybersales - retailing on computer networks

Discount Store News, April 3, 1995 by Richard Halverson

NATIONWIDE DSN REPORT - Mass merchants are venturing more and More into on-line retailing through the various computer networks such as Prodigy, CompuServe, America Online (AOL) and a brand new service, internetMCI, even though they expect little in the way of sales for the immediate future.

But by the end of the decade, when a projected 200 million potential customers are using the Internet - almost a ten-fold increase from an estimated 25 million today - on-line sales could represent a major growth opportunity.

Early last month, Service Merchandise went on line with Compuserve, featuring just 100 skus out of the thousands of items in its showroom catalog, but offering shoppers an opportunity to obtain its catalog and order anything they wish for home or office delivery.

The newest cybermerchant is Office Max, which went on line late last month with a new service, internetMCI. By the end of April it is scheduled to go on line with CompuServe an Prodigy. It will follow in a couple of months with AOL.

Initially, OfficeMax will offer only a limited number of skus, perhaps about 500, or about 10% of the 5,000 skus in its catalog. But OfficeMax has the potential to eventually offer almost all of its catalog through on-line service according to spokesman Juris Pagrabs.

"On-line service is our answer to the information highway," Pagrabs said.

For the next 12 to 18 months, on-line sales will have little impact on the bottom line, either positively or negatively, he said. By the end of the decade, however, on-line sales "should become a major growth opportunity," he said.

By the year 2000, the number of potential Internet shoppers is expected to shoot to 200 million from 25 million in '95, Pagrabs said.

InternetMCI claims to be the first secure electronic shopping service over the Internet, Pagrabs added. A spokeswoman for internetMCI declined to comment on plans to launch the now service since it was still negotiating with several retailers at press time.

One of the major problems with retailing on the Internet - initially a loose collection of computer networks linking universities and government agencies and open to everyone - has been the security of credit card numbers, as well as the difficulty for novices to find their way around. The MCI service has developed a way to encode credit card data, a spokeswoman said, but refused to provide any details.

CompuServe, Prodigy and AOL are private computer networks open only to their subscribers, so they claim that the security of credit card numbers is no problem.

InternetMCI will be found on a new, easy-to-navigate part of the Internet called the World Wide Web, and many businesses are looking to the Web as a new way to advertise their goods and services and generate incremental sales.

Prodigy already provides access to the Web for its subscribers, and CompuServe and AOL will follow shortly.

At Service Merchandise, online retailing is just "a sidelight to what we're doing," said Fred Zimmerman, director of premium investment. It represents a "minuscule investment" on our part, he added.

With just a few weeks worth of experience retailing on line with CompuServe, "it's too new" to tell how it's doing, Zimmerman said. "Our emphasis is on getting procedures straight, getting inquiries answered and making sure it works procedurally."

The limited offering encompasses only handfuls of skus from each major category: jewelry, 15 skus; consumer electronics, 16; housewares/personal care, 12; home office, 11; tabletop/clocks/gifts, 10; sporting goods, nine; luggage, nine; and baby store, eight.

The Service Merchandise program provides only a written description of each product, including its price and a reference price, but no pictures of the items.

An extensive menu of topics includes the location by each of the 17 states in its market territory of the 400 catalog showrooms.

Customers can also put themselves on the Service Merchandise mailing list and order gift certificates.

The program devotes much of its space to describing its customer service policy, extended warranty program, returns policy and even a description of how to measure fingers to determine ring sizes.

Last December, Kmart became the first full-line discounter to begin on-line retailing, but its venture was just a single market test in Phoenix. Through Shoppers Express, an AOL service that allows customers to shop on line for groceries and drugstore items, Kmart shoppers in Phoenix can order 8,000 skus of general merchandise and pharmacy items and, for a fee, get delivery.

The previous month, Marshalls had begun selling some 150 skus on Prodigy, and the Shopping Club Outlet Store of HSN had begun offerings on Prodigy closeout quantities of goods that have been introduced on HSN.

Other on-line retailers include JCPenney, Lands End and Spiegel.

AOL retailers include Pennywise Office Products, Shopper's Advantage and Comp-U-Store (CUC) on line, which claims to offer 250,000 items at discounts ranging from 10% to 50% off suggested list prices.