Smoking Out Online Buyers

By SmallBusinessComputing Staff | Posted August 27, 2002
By Rebecca Lieb

Billionaire New York City Mayor Michael Bloomberg built one of the first online empires. He's continued to pledge the city will play a vital role in the e-economy.

New York provided a shot in the arm to e-tailers outside city limits last month. A new tax makes New York the most expensive place to buy a pack of smokes in the country. In July, the first month the tax was in effect, cigarette sales were halved.

Don't think for a second half of all New York smokers up and quit in four weeks' time. They're buying elsewhere. Given we don't drive (78 percent of Manhattan households don't own cars), it's reasonable to assume a healthy chunk of the 15 million packs of cigarettes not sold locally last month were purchased online. In only four weeks, over $100 million was redirected from the cash registers of delis and newsstands to Indian reservations and other out-of-state vendors.

A fundamental law of marketing is to create a need. Online marketers create need for online markets - and that's exactly what the mayor did. Smokers can't drive to the next town, but they want to appease nicotine addiction for less than $7.50 a pack. Online tobacco revenues are skyrocketing. New Yorkers are smoking for as little as $2.00 a pack.

Tobacco is hardly the only flourishing online retail sector. Online consumer sales (excluding auctions) were $6 billion last month, a 26 percent increase over July 2001, according to comScore Media Metrix. As this is one of the only U.S. economic sectors experiencing double-digit growth this year, it raises the question, "Why?"

It's because buying online increasingly fits consumer needs. Online retailers (and retail sectors) enjoying the most robust growth in traffic, revenues, and profits meet needs in a manner very specific to the medium. Look at what's growing: travel, computer hardware, and, most of all, financial services and information. All offer solid incentives to buy online.

Marketers who understand these incentives can translate them to their own businesses. It's not always enough to explain the benefits of the product. Explain (or create) benefits related to the point of purchase. Five motivators apply to most online considerations: cost, necessity, specificity, research/comparison, and timeliness. Few of these apply to products that tanked big time in Cyberspace, such as dog food.

Online travel's renaissance is a no-brainer. Sales were largely jumpstarted by necessity. As airlines phase out paper tickets in favor of e-tickets, they practically compel travelers to book online. Buyers are already on the Web doing research and comparison, anyway.

Revenues are up 30 percent over last year in online computer sales, a sector driven by research and comparison. Consumer technology is a high-consideration purchase. Purveyors of comparable high-ticket, feature-rich products would do well to emulate the wealth of information buyers take for granted on Apple's and Dell's sites. Automotive is certainly taking notice, as are the appliance and electronics industries. Use the Internet's strengths - offering questionnaires to help buyers determine which model suits their needs or providing interactive search functions for specific product features. These capabilities give online buying an edge over traditional retail.

The two fastest-growing retail sectors on the Web are financial services/information and real estate, according to the study cited above. Both are perfect for the online medium. The lowest mortgage rates in memory sparked a flurry of financial activity requiring searchable, timely research and comparison. The housing market is strong. Consumers save time (and shoe leather) previewing properties on brokerage sites before taking off across town (or the country) to assess a potential home's closet space.

Other smart retailers lure online buyers with offerings tailored (often literally) to specific needs. These items sometimes aren't available in brick-and-mortar stores, creating a necessity for online shopping. In clothing, think Land's End custom jeans or Nike ID shoes. Gap and Banana Republic recently moved some sizes, such as trousers in "long," out of stores and onto the Web. I walk by half a dozen of their retail outlets every day. I wouldn't pay shipping and sales tax at a store. But I'm six feet tall. In this case, need is hardly cost based.

Mix and match the motivators to come up with a formula that helps your customers and you understand why they should buy online as opposed to anywhere else. Then, communicate those benefits.

Specificity and timeliness could apply to someone who wants a specific book, game, brand, or toy. She might bypass the mall in favor of a quick online buy. Timeliness and necessity? The Web's a good bet for delivering a gift for a special occasion on time. Well-constructed cost-based motivators (as with the NY tobacco example) can pay off for consumer and retailer alike (but not the $20-free-for-just-trying-us tactic of bygone boom years).

"In two or three months, you won't see me here. I should never have gotten into this business," a disconsolate news and cigarette vendor told The New York Times a few weeks after the new tobacco tax was enacted. As someone else's bubble bursts, online purchases will increase at a compound annual growth rate from 15 to 20 percent over the next five years, according to the Yankee Group.

Take a lesson from Mayor Bloomberg. Induce and incentivize customers with the benefits of online buying, and make certain they apply to your product or service.

Rebecca Lieb is executive editor of internet.com's eCommerce/marketing channel. She has held executive marketing and communications positions at strategic e-services consultancies, including Siegelgale. She worked in the same capacity for global entertainment and media companies including Universal Television & Networks Group (formerly USA Networks International) and Bertelsmann's German network, RTL Television. As a journalist, Rebecca has written on media for numerous publications, including The New York Times and The Wall Street Journal, and spent five years as Variety's German/Eastern European bureau chief.

Reprinted from ClickZ.com.

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