eCommerce: No Try Before Buy Good For Shopping
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Guess what the number one item bought on AOL was in 1997? PC. Nope. Modem? Nah. CPU-jammed mega-geek gadget? Not quite. Would you believe clothes? The Internet will never be the same.
This small news item flitted out of AOL's PR machine last month and basically went unnoticed. It reported that "apparel" was the best-selling item on AOL for "all" of 1997. Apparel. One small step for sales, one giant step for Web shopping. Let's backtrack.
AOL said in 1996 that computing was the biggest seller. No surprise. PCs, modems, RAM, drives, storage, software. Business as usual for techies. Food was second place, which does make the eyebrows go up a little. Gifts, candy, flowers. The expected. Apparel is down there with music and toys on the bottom.
Take a look yourself at AOL's top 10 for both years:
AOL.Top.Shopping 1996 vs. 1997
|1. Apparel||1. Computing|
|2. Food||2. Food|
|3. Books||3. Gifts/Gadgets|
|4. Flowers||4. Flowers|
|5. Electronics||5. Apparel|
|6. Music||6. Music|
|7. Toys||7. Toys|
The AOL news alone is meaningless or less than apparently meaningful until we put it into context of other news. Consider this from Dow Jones, reporting on a Forrester Research survey:
- More than 40% of Web users are now women
- Their household income is north of $50,000
- More than 18 million Internet users are women.
Surprisingly, women on the Web don't favor browsing or surfing. They go directly to the sites they want and are very targeted, unlike their male counterparts who seem to enjoy browsing. This is exactly the opposite of how men and women usually go shopping in the "real" world.
Men usually have a specific item to buy in mind and go buy it, according to the research we've seen, while women usually enjoy window shopping and the experience of moving store to store à la the mall. Again, these are what studies show; it's not our opinion, and there's always exceptions to generalizations, so please take our caveat now.
Beyond the gender moves on the Web what we think the AOL data really indicates is that the Internet has taken giant strides from the realm of techies into a genuine mainstream shopping medium. Clothing in particular represents one of the most difficult of purchases since items must usually be tried on, felt, worn a few seconds anyway before somebody feels "comfortable" with actually buying it.
Purchasing something after viewing it on a PC screen under the smallest of on-screen pictures and without any sense of touch requires a leap of faith on the buyer's part.
From an investment perspective we therefore think Web shopping to be the most underhyped phenomenon. If people are buying clothes via the Web then the slew of categories shown in the table, and more, may provide clues to what they'll buy in the future.
So let's run down the list and match which public Internet companies sell items on AOL's shopping list with pure-play Internet companies that do the same.
- Apparel: No pure plays
- Food: No pure plays here either, but AOL and Excite (NASDAQ:XCIT) both signed deals with privately held CyberMeals (order takeout food on the Web delivered to your home) so they benefit. We think Lycos (NASDAQ:LCOS) and Infoseek (NASDAQ:SEEK) may get similar approaches.
- Books: Amazon.com (NASDAQ:AMZN) and Barnes & Noble (NYSE:BKS)
- Flowers: No pure plays
- Electronics, PCs, Computers: ONSALE.com (NASDAQ:ONSL)
- Music: N2K (NASDAQ:NTKI) and CDNow (going public)
- Toys: No pure plays.
The shopping universe is north of $1 trillion. If even a fraction of that goes to the Internet, then watch out.