Virtual Retail

Suppliers of children's products, ranging anywhere from CD-ROMs to videos and toys, are considering more seriously the Internet and on-line services as ways to reduce, and possibly eliminate, their reliance on retailers as distribution outlets. But retailers aren't worried that their...
September 1, 1996

Suppliers of children’s products, ranging anywhere from CD-ROMs to videos and toys, are considering more seriously the Internet and on-line services as ways to reduce, and possibly eliminate, their reliance on retailers as distribution outlets. But retailers aren’t worried that their days are numbered, although they are convinced of the need to reach customers on-line.

J.C. Penney Co. of Plano, Texas, made an early start in establishing an on-line presence. The department-store chain launched areas on Compuserve and Prodigy in 1988, followed by a site on America Online in 1995, and most recently, the start up of its Web site ( in November 1994.

The J.C. Penney Web site acts as an on-line catalogue and will feature up to 1,400 products from its children’s, women’s, men’s and other lines by October. It also houses the retailer’s bridal registry, company information, locations of its head office and stores, and postings of employment opportunities.

‘In no way do we see that [the Web site] is taking away from what we’re doing in the J.C. Penney stores or through our catalogues,’ says public relations coordinator Stephanie Brown. To the contrary, by providing information about merchandise available on store shelves, the Web site complements its retail outlets.

Bentonville, Arizona-based Wal-Mart Stores took its on-line activities a step further than most retailers by kicking off on-line shopping on its Web site in late July. The Web site ( features a brief description, the price, an order number and a photograph for each product listed, including such kids items as the Babe video and the Wal-Mart exclusive Tooth Fairy Barbie. Customers can then order over the Internet with the use of their credit card.

The mass-merchandiser had contemplated offering the service for the last seven or eight months, says Wal-Mart Stores spokesperson Stacey Webb. ‘The Internet is a growing industry,’ she explains, ‘and people are becoming more computer-bound.’

Being where your customers are is the key, emphasizes Mario Fernandez, director of online services with Blockbuster Online Services, a spinoff company of Blockbuster Entertainment headquartered in Deerfield Beach, Florida. Because so many of its customers own computers and modems, Blockbuster is revamping its Web site (, launched in May 1995, to allow customers to search and buy 100,000-plus video and music titles targeted at kids and adults.

For a high-tech company like the electronics retailer Best Buy, having a Web site ‘is important for our brand image,’ says Melinda Gillen, manager of Internet marketing communications for Eden Prairie, Minnesota-based Best Buy. Its Web site ( started running as a trial three months ago. Gillen is confident the project will win corporate approval for expansion this fall. But she cautions that keeping the site fresh and increasing its services is ‘a big capital investment.’

Still, the advantages of a Web site might outweigh the costs. In particular, Gillen anticipates that the Internet will become ‘a big place’ for advertising and offering in-depth product information in the future.

Meanwhile, as retailers begin to take advantage of the new medium, suppliers are testing the Internet and on-line services as ways to distribute products themselves. But most retailers argue that stores will have advantages that will keep customers coming back.

‘[Although] the Internet and on-line shopping are on the top of the list as upcoming [means of distribution], I do not believe that customers will stop shopping in physical stores and do all their shopping electronically,’ says Wal-Mart Stores’ Webb.

‘What we’ve seen from our experience is that our customers enjoy the total shopping experience that is made available by the stores,’ says Jennifer Wolfertz, manager of corporate communications with Barnes & Noble Booksellers of New York, which is still exploring whether to make the move on-line. ‘And by that, we mean they like to come in, and look, and browse, and actually touch the different products that they’re thinking about buying.’

A retail chain like J.C. Penney has large tracking and distribution mechanisms, says Brown, that make it ‘much easier and much more efficient [for suppliers] to go through us. And we’re an established name-we’ve been around since 1902.’

‘Brand loyalty will be very important,’ says Fernandez of Blockbuster Online Services. Customers will visit stores because they know what to expect in terms of the quality of products and the level of customer service. As well, stores can give customers the opportunity to compare different brands, which suppliers of these brands cannot do on their Web sites.

Nonetheless, the possibility that suppliers could withdraw their products from retail outlets in favor of on-line distribution is a concern, says Fernandez.

‘It’s definitely a threat of some sort,’ says Best Buy’s Gillen. And it’s one of the reasons that Best Buy-and probably most retailers-are venturing on-line.

But Gillen predicts that there will continue to be ‘a lot of room for retailers’ alongside online distribution vehicles. Just as e-mail has not eliminated our use of the paper memo, neither will the Internet and on-line services bring an end to retail stores.

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