Retail Presence on the Web

Professor John M. McCann
Fuqua School of Business
Duke University

March 20, 1995

One of the obvious uses of the Internet is the selling of products and services. It is common for Internet providers to make wild claims about the Internet's potential, such as the following statement by MCI chairman Bert Robert: "Think about it. You can have access to millions of customers. Products and services can be sold 24 hours a day. And since transactions are handled electronically, sales and distribution can be done much more cost-effectively." (Atlanta Journal-Constitution 2/3/95 E3)

One of the early retailing endeavors on the Internet was the Branch Mall. The idea is that a mall-like environment can exist on a WWW server to which the consumer can connect to buy items. There are flower shops, record stores, lawyers, insurance agents, cosmetic shops, information providers, and dozens of other "shops." Conceptually, it is a mall; actually it is software.

I ordered flowers from Grant's Florist, and the transaction was successful. It was reassuring to read the material on Grant's Florist Home Page and learn that I was dealing with an actual florist shop that had been in business since 1947. In this instance, the Branch Mall was providing an additional outlet for an physical business.

But such an arrangement is not guaranteed. It would be easy to set up shop on the Internet without having an actual, physical store. You could take orders for products and then route those orders to the lowest bidder. Thus the Internet allows middlemen to appear as retailers.

Research indicates that consumers use tangential information about a firm in their judgment of the overall quality of the firm. For instance, it has been shown that the size of a yellow page ad is used by consumers in deciding whether to select the advertiser. In a similar way, consumers may use the size and characteristics of a retail store as a signal of its quality. That is, the physical "presence" of the store provides information to the consumer about the store that is above and beyond the overt information provided by the retailer. It is logical to assume that consumers view a large and/or plush store as having a lot of permanence and thus will likely be around to stand behind the items purchased in the store. Thus, investment capital is important in establishing a successful retail store.

A retailer's presence on the Internet's Web is through its pages, and very little capital is needed to develop and deploy an impressive Web site. The "little guy" can have as much Web presence as the big retail chain. All it takes is a few thousand dollars investment and a little creativity to generate a virtual store front that looks as permanent, large, and plush as the biggest retailer.

Web malls are virtual in nature; they do not actually exist. Whereas a real, physical mall has a geographical location and thus can only serve the consumers within driving distance of its location, a virtual mall can serve anyone connected to the Web. This feature allows the development of niche malls that serve a population that may be too small to be adequately served by a physical mall. The Disability Mal is an example of such a virtual niche mall. Its mission is to provide consumers with disabilities easy access to high quality products and service.

Another way to use the Web for a retail presence is for the manufacturer of products to use the Web to establish a direct consumer channel as an alternative or adjunct to the traditional retail channel. For instance, Mammouth Records, a small music label in Chapel Hill, North Carolina, has Web page that consumers can use to access information about the label and its artists, and even download songs from its CDs.

Rainy Day Records is also a record site, but this one involves a distributor of local artists, which illustrates the notion that the Web provides the little guy with a large presence.