eCommerce: No Try Before Buy Good For Shopping

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

1997 1996
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
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
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

  • 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: (NASDAQ:AMZN) and Barnes & Noble (NYSE:BKS)
  • Flowers: No pure plays
  • Electronics, PCs, Computers: (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.

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