Etail's Big Comeback.

The hype surrounding e-commerce may have started with Web retailing, but critical mass was still months away when the first etailers opened shop and sluggish sales led pundits to declare B-to-C effectively D.O.A.

But etailing supporters say the industry has simply been experiencing a shakeout, a process of virtual natural selection that's weeding out the flash-in-the-pan dot-com retailers--those with little or no brand recognition, weak financials, and poorly developed marketing strategies. Meanwhile, consumer adoption is surging forward, with 11 million new households expected to buy goods online this year, according to Forrester Research. Critical mass is no longer just a dream.

The challenge now, says Jeff DeCoux, president and CEO of eCustomers.com, is for those retailers with a solid physical world foothold to not only solidify their etailing strategies, but to take online selling to a new level of customization. The Austin-based company plans to roll out a B-to-C e-business infrastructure to help retailers develop highly individualized customer relationships.

Having gathered an advisory board that boasts such retail industry executives as Macys.com CEO Kent Anderson, former American Express CIO Allen Loren (currently CEO of Dun & Bradstreet), Office Depot CIO William Seltzer, and Target president Gerald Storch, DeCoux says in the following interview that his eCustomer exchange aims to make every visit to a retailer's site as cozy and personal as a visit to the neighborhood general store.

Who today is doing a particularly stellar job of serving customers?

Definitely Amazon.com--and obviously there are a whole bunch of weaknesses that people have identified in the model--but they're doing a great job meeting customers' needs. People like going to Amazon because they feel like they're individuals when they log on. And Amazon is only doing 1 percent of where this industry is going a far as personalizing e-business. But that 1 percent has already translated into a really dominant position.

What's the other 99 percent?

Back in the old days you used to be able to walk into a country store and they knew you and it was a trusted relationship and they said, "We have this new blue shirt in for you or we have these products you might be interested in." But think about the Web as it exists today--it's a one site fits all. In Austin everyone wears T-shirt and shorts and sandals from March on, while in New York, you're still wearing some pretty heavy clothing. But if you log on to any retailer on-line, we all see the same thing. They could be showing me snowblowers and shovels and we haven't had snow in Austin in 12 years.

So it's geography?

It's geography, it's gender, a lot of things. I'm a male and I don't want to log onto a retailer and see all these dresses and high-heeled shoes. In fact, one retailer had a 50 percent abandonment rate of males because a lot of them would log on and think it was a feminine site only.

How much do customers have to reveal to get that high level of customization?

You may not want to divulge your identity, but you certainly want them responding to your characteristics. We're establishing what we call trust networks or eCustomer exchanges where a large group of retailers come together and say, we want to respond to you as an individual. We want to give you the respect where your data is only going to be utilized in the individualization of our e-business. We're not going to do any kind of outbound marketing or telemarketing or promotions. We want to give you the capability if you want to, to tell us your specific sizes, styles, the season you're shopping for, the colors you like and those specifics without even divulging your identity. We'd love to respond to those needs.

One of our advisory board members, Allen Loren, former CIO of American Express, equated what we're trying to build as very similar to what a Visa or Amex has done by establishing an infrastructure that you, as the consumer, don't even think about. You walk into a store, give them a piece of plastic and they swipe it, and that transacts your credit to the merchant.

We're establishing an infrastructure to allow you to log on to various sites and transact your data or your preferences to that site so they can personalize the experience.

In addition to convincing customers that their privacy will be respected, what other challenges have you?

One issue we're looking at is that, on average, we've been dealing with 17-inch monitors and even with that, we're having a hard time communicating what products are appropriate for you. Now we're moving quickly to PDA, which is only 4 inches of screen, and to these little pagers which are two inches of screen, and now cell phones are becoming channels for this, and that's a one-inch screen. So how are e-businesses really going to meet your needs as the end customer unless they really understand and appropriately respond to you as an individual.

What qualifies as the right merchant for your "eBusiness exchange"? Is it relative size?

Size is important, but it's also respect by the consumers. We want those that really have great brand recognition and that really want to build intimate relationships with customers online and are going to respect customers by doing so. And 10 out of 10 merchants we meet with are responding to what we're doing. There are only B-to-B exchanges in the industry right now, and this will create the first B-to-C exchange, where the actual end customer is an active participant.

But we want to make sure the technology is in place first. Like what if the bank gave you a credit card and every merchant you visited said, what is this? That's the last thing we want to have happen. So we want to make sure there are merchants ready to respond to you.

That's what happened to some of the smart card pilots.

The reality is that the Web is the best place to implement this. In the case of the physical world, they have to go in to every merchant and give them a new device. They need to replace all the physical devices in every single merchant store. That's a very challenging thing to do. Online, there's one Web site for retailer A, one for retailer B, one for retailer C, and we already have the infrastructure built where we just plug it in and they're live. So it's a lot easier rollout in the e-business world.

What are GEOs of major retail companies grappling with now?

Remember in the last two year, It's been all about acquisition of selection-whoever acquires the customer to their site wins. So everyone's been spending tons of dollars on advertising and banner ads and promotions and those types of things. Everyone we talk to now has realized it's no longer a game of acquisition and selection. If fact, one said we have 3 million unique visitors on out site every single month and less than 2 precent on them are buying. We have to focus all our efforts on extension and retention. How can we get to know the customer and how can we respect their interests and respond. And that's a huge trend that's changing in the market right now.

Online Retailers Face Battle to the Death

Online retailers have miles to go, according to Forrester Research, which surveyed 50 leading dot-com and brick-and-mortar merchants. When asked their top business priority for the year, 86 percent said "growth, growth, and more growth," according to the report. Differentiation was the most daunting challenge, while the prospect of no profits before 2002 was of little concern. But ingenuity and perseverance notwithstanding, Forrester says mounting financial pressures, intensified competition and redirected venture capital will cause significant consolidation in online retail.