Cyberspace - November 1997

Last summer a very ’Net-savvy grandfather we know wanted to buy a canoe. Like many people, he researches large purchases thoroughly, and the Web was where he did a lot of his research. But for this transaction, he decided to really go out on a limb and actually order the item from a Web site he ran across: Vision Canoes in Bigfork, MT, maker of handmade Kevlar canoes.

"Think of it!," our friend said, "ordering a canoe from New England, where all kinds of canoes are made. Here I was going out west to buy a canoe, thanks to the Web. From the pictures on David’s site, it was obvious he was a real craftsman."

He typed his order information into the form but paid the deposit with a check via snail mail. With some delays, phone calls, and e-mail exchanges ("In the e-mailing back and forth, I could determine David obviously knew exactly what he was doing," said our friend, who is an engineer). The canoe arrived on time for a much-anticipated vacation, and it was beautiful. But alas, it was also slightly damaged (in shipping). Grandpapa had to return the canoe and buy one from a store, due to his tight deadline. David refunded him in full. "There was absolutely no hassle," said our friend. "It was a great experience all around. I learned a lot, and David said he learned a lot - about what is required in shipping canoes across the country!"

Not everyone would be willing to go through that kind of learning experience. Take, for example, what two 13-year-old friends told us: Jeremy Fisher said he wouldn't shop online because he doesn't trust it. He wants to try products first. If he were to shop online, he said he would want a computer. And Zachary Eisenstat said he would only buy something if he really knew what it was, "like a CD."

There you have a picture of where Web shopping is right now: trial and error for vendor and consumer; the Web as a product-research tool; paying by check, not sending credit-card information over the ’Net; small businesses’ unprecedented ability to broaden their market; and you can’t "kick the tires."

Well, the holidays approach! Shopping is on everybody’s minds. With this issue, we offer you an update on how the great mall of cyberspace is faring these days, in the three key areas: sales growth, security, and public perceptions. Here’s our table of contents:

• Holiday Wish List (with URLs of course!)
• The state of Web commerce - the numbers
• The consumer side
• The seller side
• Transaction security

* * * *

Go shopping!
Here’s our Holiday Wish List - URLs for some great cyberbuys (window-shopping’s ok, too!). First, a couple of cybermalls for "one-stop shopping." Can’t imagine you’d need more than these two links to find just about anything available for purchase on the Web:

The "Shopping" page in Beatrice’s Web Guide, a service of Women’s Wire and Yahoo!, lists eight cybermalls, with links, of course. The Top 3 are "Advanced Catalogs," "The Catalog Site," and "Internet Plaza." We found Beatrice at the bottom of Yahoo!’s entry page. We e-mailed her Webmaster to find out more about the site’s history and whether Beatrice actually exists. S/he never responded; so the "B Guide" isn’t quite as personable as it sounds, but it’s a great resource. (Women’s Wire has its own shopping page with more local color, with shopping tours in specific cities. There is also a "Shop Talk" area for swapping transaction tales.)

The other super resource was also found on Yahoo!: Visa Shopping Guide. There are 26 product/service categories, from Books to Gardening to Tickets & Special Events. If that’s not detailed enough, Yahoo! itself is.

Here’s a sample Holiday Wish List (we accept gifts! :-] ), taking a queue from Find/SVP’s findings on e-commerce’s Top 6 product categories for 1997....

Software - Software.net is one of the older Web-based commercial software stores (a big two years old!), selling more than 21,000 titles (at least 2,000 of them downloadable). Then there’s the aggressive master-of-convenience, CNet, and its several software sites in this category. Its BuyDirect site allows you to download directly from the manufacturer. For shareware and freeware there are three great sites, two by CNet, of course - Download.com and Shareware.com - and you can’t beat Jumbo! (exclamation theirs), with more than 200,000 downloadable titles. Versions, a company based in Patagonia, Ariz. (they’ve devoted a whole Q&A in their company FAQ on their location), tracks your favorite software and e-mails you whenever there’s an upgrade. And there’s WinCorp’s Virtual Software Store, where you can buy and sell software.

Books - Book price wars are raging on the Web these days, since Amazon ("Earth’s biggest bookstore," as marketed) went public and Barnes & Noble jumped into the e-commerce fray. We decided we should never buy a book in a real store, given that Web prices are about 30% off store prices these days. We went to Amazon Books and searched for The Living, a favorite novel by Annie Dillard. The hardback version and cassettes were both listed as "hard to find," but the paperback editions "usually ship in 24 hours."

Computer stuff - Beatrices’s Web Guide has a great page on how to buy a computer online, with links of course to vendors! They’re also featuring Web auctions right now - another way to e-shop, but they don’t mention one of the pioneers in this area: Onsale.com, offering computers, consumer electronics, and sports equipment (and there was special bidding on cigars when we visited).

Gifts/Flowers - For flowers, there’s the grand dame of Web flower-ordering, maybe even of e-commerce as a whole (they first went interactive in 1992!): 1-800-FLOWERS, which guarantees a week of freshness. Eight of their competitors can also be found on Visa Shopping Guide’s Flowers page. You can buy cheese, chocolate and many other gourmet foods and equipment from Dean & Deluca of New York (we can’t go to Soho without stopping there); a Swiss Army knife, a watch, or cool shades from Abnet; or just about anything Uncle Frank and Auntie Meg relish on the Gifts page of the Visa Shopping Guide. And everybody near a mall or sporting a mailbox in their front yard knows what can be found at The Disney Store, Warner Bros., and The Sharper Image. Gift-shopping destinations are a lot more numerous than our wallets are fat!

CDs - Music is one of the oldest and biggest categories on the Web. And for good reason! Here, you can “taste-test” what you’re thinking of buying. For shopping, there’s CDnow, which calls itself "the world’s largest music store" (it’s set up a lot like Amazon Books), and Tunes, "the world’s largest listening station" (its strength is variety - bluegrass, children’s, gospel, jazz, world, urban, roots, and rock - and lots of listening opportunity). Tower Records, with its 150,000 titles, offers incentives: Top 1,000 always on sale; Buy 5, get 1 free; etc. There are a lot more music-merchant sites than there are book-merchant ones, so we could go on and on; your individual prejudices need to take over. But don’t miss some of the wonderful non-selling sites (they’re ’zines more than shops), especially Addicted to Noise. For a fulsome list of record-label sites, go to Record Labels on the Web for more than 2,600 links!

Travel - This is another huge, "old-timer" category of e-commerce. There sites where you can make reservations, plan a trip, get travel tips. In the first group, Flifo offers real-time reservations for flights, hotels, and rental cars; there is also a Travel Zone with world weather, currency conversion, pet travel, B&Bs, airport and airline directories, and more. Microsoft Expedia offers all the same things, plus "Mungo Park," an "online adventure magazine." Travelocity excels in convenience, in terms of page layout and service: There’s a "Today’s Lowest Fares" box right at the top of the home page and all the other be-your-own-travel-agent amenities. For pure leisure (and supreme holiday surprises!), there are nearly 30 cruise-line sites listed on Yahoo!’s cruise page. We clicked on "Cunard Line," then "Royal Viking Sun," then dreamed about the Chilean fjords (we’ll take a suite on the Sky Deck with floor-to-ceiling views from both rooms, private deck, and marble bath). Downloading’s slow at cunardline.com but, there, somehow it seems appropriate!

That all-important final category
We’re adding one more category of our own - Toys! - for those who make the holidays magical:

At Etoys, you can pick from more than 1,000 toys, books, and software pieces and throw ’em in the "Shopping Cart," then proceed on to "Checkout." Toys.com says it’s "the Internet’s largest online toystore" but doesn’t give the size of its inventory. It does say it sells rare toys. Then there’s FAO Schwarz, "the ultimate online toy store," which says that a third of its catalog and Web offerings can only be found at FAO. Holt Educational Outlet may reign supreme in sheer inventory size, saying it has more than 20,000 items, at 20-50% off (as of this writing, the site’s still under construction).

A few weeks ago we e-mailed our subscribers about some timely new toy-related sites, not all of which allowed ordering online. Toys R Us just helps you find the store nearest you (as if parents didn’t already know!), but it has a "Learn the Internet" area useful to families online. Creative Wonders, a joint-venture of Electronic Arts and ABC, Inc., is a good "shop" for interactive toys. And the cutest site, of course, is The Jim Henson Company’s Muppets.com, where they are "busy building...the first Virtual Reality, 5D, secured-socket, fully encrypted, dynamically interactive, bearly browserable, community-based, Java-enabled, highly compliant, platform-independent, frog-functional...sequentially tagged, third-generation, CGI-reciprocal, porcine-promoted, plug-and-play, state-of-the-art Web site. Unfortunately, last night Animal ate our hard drive."

* * * * The numbers
Whether or not the Web will ever compete with all those slick catalogs in our mailboxes, online shopping is growing. We looked at the research of several organizations to give you a good range of viewpoints. Jupiter Communications projects Web sales to $2.6 billion by year’s end, more than a 350% increase over 1996. Find/SVP gave us a lot more data, but also a much more conservative projection for ’97 Web transactions: "a conservative $1.1 billion," as Find’s Stuart Gibbel put it. "There were 7.5 million purchases this year,” with a median value per purchase of $150. Stuart added that 75% of the people who bought items on the ’Net made multiple purchases. As mentioned in our Wish List, Find found that this year’s Top 6 product categories are computer software, books, computer hardware, gifts & flowers, CDs, and travel.

CommerceNet/Nielsen did a Web-user survey last spring. Though a bit old, it yielded a few interesting facts: Of the 220 million people in the US and Canada, 23% were using the Internet last spring, probably more now, and a whopping 73% of those users are searching for information about products and services, and 39% searched for product information online before making a purchase.

Even if we take Find/SVP’s conservative figure of $1.1 billion in sales this year, we’re looking at at least a 150% increase over ’96. Does that mean the Web will soon be a threat to malls and catalogs? No, if you follow Georgia Tech’s annual Web user survey: "The slow trend toward increased acceptance of the Web as a purchasing medium continues," the Georgia Tech researchers say.

Key to the Web’s success
Tom Steinert-Threlkeld, editor-in-chief of Interactive Week told us he thought the situation at least was improving, but discovered at a panel discussion he attended recently that there’s still a lot of fear out there among consumers. Internet industry leaders CNet, Earthlink, and Excite said the biggest problem they encounter is people’s fears of sharing credit card numbers over the ’Net, Tom said in a phone interview. Ironically, he added, the consumer is not the party at risk in these transactions. "There’s more risk if he goes into a corner grocery store, drops his card on the ground and loses it," Tom says. "The risk on the Web is to the vendor."

We asked Tom if he thought healthy commerce was key to the online medium’s success. "I think transactions have to be there or there won’t be much to the ’Net. I don’t think any site is going to subsist on advertising alone, and I don’t see any big rush to subscribe on the ’Net [subscriptions being another possible source of revenue]... which leaves transactions. I think people will get over their fear. It’ll take a few more years.... But given compelling reasons to buy on the Web, people will. Merchants haven’t leveraged the medium yet. Discounting should be one of the biggest selling points, because the Web has cut out the middleman." We agree, noting the rush on the part of many "middlemen" - real estate brokers, car dealers, travel packagers - to understand and exploit the medium; look for discounts in these categories!

A pretty picture for consumers, not sellers
That brings us to the seller’s side of e-commerce, which will have increasing impact on all of us consumers. In September, Interactive Week published survey results on corporations and e-commerce. The news is encouraging for those who want to see ’Net commerce take off: "More than 50% of today’s corporations conduct some form of Web-based e-commerce," Interactive Week reported, and their technology managers "expect the amount of business their companies transact over the Web to increase 20% or more in the next 12 months."

That’s good for us consumers, says another pundit - J. William Gurley, a general partner of Hummer Winblad Venture Partners - in a column he wrote for CNet's "Perspectives" page. Why? Because, e-commerce is changing all the rules and empowering consumers. It makes product information easier to find and more abundant; it makes ordering more convenient; and it cuts out the middleman, which brings down costs - savings that eventually will be passed along to the consumer.

This revolution in which technology doesn’t just automate but completely changes the selling process, Gurley says, will not be a pretty picture for vendors: "For 30 years we’ve been using technology to benefit merchants.... The second wave [of e-commerce] is now just coming into sight, but when it crests, merchants aren’t going to like what they see. Over the next few years the breakthrough success stories in e-commerce will be those that seek to lower transaction costs and effort for the buyer, not the seller."

* * * * The real security problem
As Tom, Georgia Tech’s researchers, and many other ’Net insiders and observers indicate, transaction security is not so much a technology issue as a perception one. But we thought you, like us, would want to get a better fix on the security part. Bill Parodi’s business is transaction security. He’s president of Automated Transaction Services, a company that provides check and credit-card clearance services for sales on the Internet. ATS, he says, has seen a 300% increase in sales this year over last, and has more than 1,500 clients on its books.

Here’s what he told us:

Sage: Have transactions on the Web gotten more secure in the past couple of years (i.e., has the technology improved), or have perceptions only changed?

Bill: I think security has been basically the same for the last two years, due to the government's laws in not allowing browsers to go beyond the 40 bit encryption methodology we currently have in place. Our Netscape server (which is RSA encrypted - SSL) is capable of 128 bit encryption and is far more secure than the browsers that the public have to buy allow them to be. This is a government thing, not an industry thing!

Sage: Why doesn’t the government allow more than 40 bit encryption?

Bill: Because it doesn't want to have code out in the public's hands that it is unable to crack and be able to at random see what is being transmitted over the Internet!

Sage: If the technology has improved, is it about as good as it gets now - as secure as, say, giving a credit card number over a regular phone?

Bill: No, the non-cell phone is more secure! This is, incidentally, the method with which all credit card transactions are done in the USA currently. When you swipe a credit card through one of those machines in the grocery store, restaurant, or department store, it is simply using a non-cell telephone line to send the data to the credit card processor. That is about as safe as one can get. The next safest method, I would guess, would be an encrypted Internet connection (128 bit or more - obviously the more encryption the safer it is), and then, finally, a cell-phone connection, which can be picked up on scanners relatively easy. I don't think anyone uses the cell phone technology for that very reason!

Sage: How would you describe where the Web is right now, in terms of transaction security?

Bill: I would say it is as safe as the government is allowing it to be for the moment and could be 50 times safer.... However, as a practical matter, the criminals out there are too good businessmen to spend a lot of time and money breaking encrypted Internet transmissions to find credit card numbers to use in a credit card scheme. It is so much easier today to do what they are doing - gleaning credit card numbers from other sources [e.g., contacts at restaurants, department stores, hotels] - that it doesn't make any logical sense to get them from the Internet directly. Mastercard and Visa do not give us this type of information, but basically we do not see too much fraud on the Internet yet, since most items on the Web are lower in price, and using them on the Internet doesn't give them enough return for the data potentially stolen.

If someone is stealing credit card numbers off of the Internet and using them in another medium somewhere we are completely in the dark about this. We do not know of this happening anywhere and do not at the moment suspect this to be the case.... If the Internet were a source of problems for the credit card companies, I am sure they would be making a lot of noise about it trying to dissuade people from being involved. So far, that is not the case at all; rather, more and more companies are coming online with secured transaction methods.

* * * *

Have you ever shopped on the Web? We’d love to hear what you bought and how the process worked out. We’d also like to know if and why you have problems with the whole concept (you’re not alone)! All other thoughts are welcome as well - please e-mail us. Thanks!

Next month: Keeping our eyes on the road, with a few glances in the rear-view mirror ... how the Web changed in ’97 and where it’s headed for families online.