Retailers, dot-coms team up Bricks, clicks fix mix and share tricks
February 21, 2000
Some traditional retailers are finding that there are more avenues
into e-commerce than simply building their own Web sites.
Retailers are buying online companies -- even in non-related businesses
-- or forming marketing alliances with online enterprises.
* Nordstrom. Upscale department store operator Nordstrom,
renowned for top-notch customer service as primarily an apparel-and-shoes
retailer, pumped about $ 23 million into online grocer Streamline.com.
The Seattle-based retailer, which has 104 stores nationwide, says
it's an opportunity to reach more customers.
"Down the line there may be an opportunity for Nordstrom to offer
services," spokeswoman Amy Jones says. "There may be products,
like nylons or shirts, needed on a regular basis that don't need
to be tried on."
The co-marketing effort is expected to accelerate the national
rollout of Streamline, a fledgling firm currently doing business
in Boston, Chicago and Washington, D.C. There are 16 Nordstrom
stores in Illinois and the Washington, D.C., area, but none in
* Kinko's. The 24-hour copy center and business-services
provider, based in Ventura, Calif., struck a multimillion-dollar
alliance with Internet portal America Online of Dulles, Va. The
plan calls for in-store Internet Solutions Centers featuring AOL
products, as well as computers to access the Internet. Also, AOL
will make a new Kinko's print driver, called "Print-to-Kinko's,"
available on its software, so customers can print documents at
Kinko's directly from their desktops.
* Federated Department Stores. The Cincinnati-based department-store
operator anted up $ 1.7 billion for Minnetonka, Minn.-based Fingerhut.
Federated wanted Fingerhut's expertise in handling orders through
catalogs and the Internet, plus its abilities in database management
and direct marketing. It has since formed Federated Direct, an
e-commerce umbrella composed of Fingerhut, Macy's by Mail and
Macys.com. It also has an interest in bridal registry WeddingChannel.com.
* Ace Hardware. The dealer-owned cooperative paid $ 5.3
million for a 25% stake in home improvement Web site OurHouse.com
(www.ourhouse.com) so it could quickly join the online-selling
"The development of it, and to stay in the forefront and be a
big player by putting our catalog of products online, would not
be enough," spokeswoman Paula Erickson says.
She noted that Oak Brook, Ill.-based Ace handles all orders and
fulfillment and Evanston, Ill.-based OurHouse.com takes care of
technology, marketing and advertising.
A learning process
Such deals -- though under the guise of studying the expansion
of electronic commerce -- are a tacit admission by both traditional
retailers and online companies that each must learn from the other.
For example, during the recent holiday shopping season, some traditional
retailers found their fledgling Web sites overwhelmed by the unexpectedly
large volume of orders. At the same time, some online start-ups
received low marks for customer service because they were slow
to respond to questions and process returns.
The experience showed traditional retailers that they are more
merchants than technology geeks and vice versa.
"Bricks-and-mortar retailers are looking at any Internet non-store
situation as a way of getting into the Internet business, because
the typical retailer is a merchant, while the typical Internet
operation is headed by a computer engineer who has no retailing
skills," says Ken Gassman, retail analyst at Davenport.
Lack of retail know-how has kept profits at bay for many online
merchants. Without profits venture capitalists and investors retreat,
deflating the highflying businesses like a punctured balloon.
Moreover, stock values of some Internet retailers are already
starting to decline, and some e-tailers have even begun layoffs.
Co-branded Web sites
Retailers aren't the only businesses that have discovered they
do not have to create a Web site to go online.
Zagat Survey, the leading dining guide, linked with online restaurant
reservations firm OpenTable.com. The two companies will develop
a co-branded Web site so consumers can make free online restaurant
reservations. Zagat Survey's 30-point food, décor and service
ratings, plus cost estimates compiled from millions of survey
entries, will be made available on OpenTable.com (www.opentable.com).
In a very broad sense, alliances with non-store businesses have
always been a key expansion strategy for retailers, such as acquiring
catalogs. So when it comes to the Internet, retailers are merely
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