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None of this, you can imagine, made bookstore chains very happy. But they held back on the Net. For years the buzz in the book industry was all about building new megastores, where shoppers could sip mochaccinos and chew over big ideas while they sat on comfortable couches. And in the two years that Barnes & Noble and Borders were focusing on what kinds of vanilla-sugar cubes to put in their coffee bars, Bezos was building an empire. B&N has tried to catch up, forging close ties with the gigantic online service America Online and suing Amazon.com over its use of the tag line "Earth's Biggest Bookstore."
Barnes & Noble has been an object lesson to the rest of the retail world, where everyone seems to have a Net commerce story these days. "In many ways this is what we've been doing for nearly 100 years," says Randy Heiple, vice president of advertising production for catalog giant Spiegel Inc., which ventured online in 1995 and has been ravenously growing ever since. Today the Net accounts for less than 5% of the Spiegel catalog's overall sales, but that share has grown fivefold or more in each of the past three years; sales and circulation of Spiegel's catalogs, meanwhile, have plunged.
But even as Spiegel has jumped into the electronic world, other giant retailers have not. Sears, for instance, is taking a more cautious approach. Though it put a catalog of Craftsman tools online last fall, it isn't rushing to build a webstore. "We think it has to be a profitable channel for plans to add any new merchandise for sale," says Paula Davis, a spokesperson for the retailer. But is Sears missing an opportunity? It has already missed Lisa Fontes, a 36-year-old Massachusetts psychologist who went to sears.com last month hoping to buy a freezer. The Sears site, however, didn't have what she needed. "I assumed I couldn't find it because I was stupid or computer illiterate," she explains. But the real illiteracy may have belonged to Sears. It doesn't yet sell freezers online.
Sears may feel the chill soon. Most businesses are finding that the Net is actually pretty lucrative. According to ActivMedia, which surveyed 2,000 commerce-related websites, 46% are profitable and an additional 30% expect to cross that line in the next couple of years. For some firms, the Net has become an essential competitive advantage. Dell, which sells $5 million worth of computers a day on its website, claims that the efficiencies of Web-based sales give it a 6% profit advantage over its competitors. Discount-mortgage broker American Finance and Investment, which conducts 60% of its business online, was profitable 90 days after plugging into the Net. And Eddie Bauer, the outdoor-clothing retailer, has an online operation that has been profitable since 1997 and is growing at 300% to 500% a year. The Net, says Judy Neuman, the firm's vice president of interactive media, "makes you think very differently about your customers."