Team Boston - The Sun March, 2001 Volume 4, Issue 2 Page 3

Page 3

The Sun

Volume 4, Issue 2

E-shopping with E-Cash Is Evolving

Today, no credit card no problem as start-ups
and established firms rush to fill the gap with all sorts
of electronic currency and credit equivalents.
The Electronic Exchange Gap

According to Cyber Dialogue, e-tailers will rake in
$53 billion in 2000, and 88% fo e-shoppers will pay
with a credit card. But there are millions more eager to
shop online that can't or won't use plastic. Some 17
million teens and young adults shop online but usually
must pay by phone, in person, by check or not at all.
Then there are the millions more who fear that
hackers will break into e-tailers sites and steal their
credit-card number, so they comparison shop for the
best price online, but then go to a "real" store to make
a purchase.

Virtual Cash, Virtual Wallets
Flooz .corn and Internet Cash Corp. are two
companies that offer virtual currency backed by real
money, delivered via snail mail or the telephone.
With virtual cash, consumers and retailers down-
load software that enables electronic transfers to be
made. Consumers buy cyber-currency just as they
would buy a phone card or gift certificate.
This limits liability because even if the currency is
stolen it can only be used for a fixed amount. A big
hurdle here is getting enough e-tailers and consumers

to set up transaction systems for the issuing
companies to make a go of it.

Difficulty persuading retailers to participate
is the problem with virtual wallets, too, which
work the same as digital dollars except that the
e-tailer receives a real credit-card number, not
cyber-currency. The wallet also stores shipping
and billing addresses and any other information
consumers want to share.
Advantage: Consumers don't have to set up
new accounts with every Web merchant they
patronize. Downside: The wallet is tied to a
specific computer and may not work on another
system.

Other Payment Systems Evolving
Escrow accounts for big purchases are
gaining popularity, which are managed by a
third party who ensures that the buyer gets his
merchandise and the seller receives payment.
For smaller purchases, person-to-person
payment systems work well.

Predictors of dot-corn doom aside,
e-commerce will only get bigger, and various
modes of payment will be devised, tested, tossed
and tweaked to ensure that every willing buyer
can confidently pay for online purchases.

aninews.gif (12470 bytes) Remodeling the E-tail/Retail Business Model

The fundamentals of finding, servicing
and keeping customers matter both for
online and offline suppliers.

New Thinking: Hybrid
Selling the outcome is what retailers
always have done, only they called it cus-
tomer service. Today, that means giving
customers what they want, when they
want it and doing so more efficiently and
less expensively than the competitor. That
means abandoning the either/or mentality
(either online or offline) and embracing a
hybrid model.
That's what most name-brand retailers
have done, using their name recognition
and steady revenue stream to outsell and

outlast the start-ups. Furthermore, having
established relationships with customers
in the real world makes it much easier to
attract attention online. According to the
Boston Consulting Group, it costs Inter-
net-only retailers $82 to acquire a new
customer, but only $31 to get customers
of bricks-and-mortar stores to shop at the
virtual version. Catalog-based retailers
spend just $11 to convert mail customers
to online customers.

Both have a pretty big advantage over
"Internet only's," which is why the stock
of so many e-tail start-ups is now well
below the IPO price, and why others have
been shuttered.