Make no mistake. The World Wide Web will revolutionize retail. Everything will change in the way we buy things. But maybe the time is not quite yet, as thousands of red eyed dot com investors will tell you.

The fact is, there’s just too many advantages offered by the online retail model for it not to be adopted. And, for the consumer, the single biggest advantage is that it’s a much more efficient business model. Someday, when corporate masterminds finally figure out that cheaper prices appeal to consumers, this efficient business model will translate into significantly lower prices for the end user. And when that happens, watch e-tailing numbers spiral into the stratosphere. We’ll be buying online, big time, and our society will finally step over the threshold into a digital and sociological revolution that will be unlike anything we’ve ever experienced.

Creatures of Habit

As we said in a previous NetProfit, it wasn’t the Internet itself that was flawed and caused the demise of the dot-gones. The beating that the online retail sector received was primarily due to two factors. First, the business models of many of these online businesses were just not based on sound profit based principles. Secondly, humans do not progress as quickly as technology. It takes us a while to move our lumbering psyches in the direction of the newest technofad.

We didn’t start using banking machines overnight. It’s been about 20 years since they were first introduced. The ubiquitous fax machine made its first appearance about the same time. Today, both are considered absolute necessities. We couldn’t do without them. But we had to get used to them in our own good time. Don’t expect anything different with the Internet.

Look at the adoption of e-mail. This was probably the first introduction most of us had to the Internet. I received my first e-mail address about 8 or 9 years ago with CompuServe. I didn’t even use it for the first 2 years, largely because I didn’t have anyone to e-mail too. About 4 years ago, I started using e-mail occasionally, and was usually surprised when someone e-mailed me back. Today, it’s my primary source of communication, and once I filter out the junk in my in-box, I’m left with about 30 to 50 e-mails a day that are all important to me.

This duration of the technology adoption lag varies depending on the individual, the amount of change required, and the nature of the change. The more profound the change, the more it affects other aspects of our lives, the longer it will take us to adopt the change. I’d venture to say that no other change in our lives will be as profound or far reaching as the wholesale adoption of the internet as a communication channel and tool in our personal and professional lives. For that reason, don’t expect significant change overnight.

Why the Web will Prevail

With all of this said, however, there are just too many reasons why the Web is the perfect place to do business for it not to be adopted en mass by profit and efficiency driven business people.

Making The Dollar Stretch Further

First of all, the web is tremendously cost effective. It allows businesses to access global markets yet centralize their resources in one area. Web infrastructures can be streamlined for a relatively small investment to allow integrated ordering, accounting, inventory, customer service, shipping and tracking. A retail outlet doing significant sales can reduce their overhead to a fraction of what would be required by a bricks and mortar location doing the same. Maximum utilization of both human and physical resources can be utilized.

No Shelves, No Lights, no Motor Cars..not a Single Luxury

It costs money to keep a retail location open. Rent, fixtures, utilities, floor staff, it all adds up to significant costs. The more exclusive the merchandise, the more glitz required to create the proper “ambience”. On the web, the ambience is restricted to the available real estate of your monitor. The business owner doesn’t have to worry about solid brass clothing racks, terrazzo floors or leopard skin wall paper. It’s much cheaper to design a professional looking website (with leopard skin background images, if you really insist) and there’s no monthly rent.

Freedom from Geographic Restraints

On the web, your head office can be literally anywhere. You can have access to the entire world from Minot, North Dakota, Thirsk, U.K. or Kwangju, South Korea. It doesn’t matter. You can choose to locate your business based on where lease rates are cheap and qualified people plentiful, because your market is just one click away, no matter where you are. Run your online empire from a Barbados beach or a Banff ski lodge if you want.

Direct to Consumer

Another advantage of the web is one that bucks an intricate retail system that’s been decades in the making. The days of the retail distribution chain are numbered, but that’s not stopping the current stakeholders from fighting tooth and nail to save it from demise. Currently, there exists a multi-level distribution chain that makes sure the product gets from the manufacturer to you, the consumer. Along the way, the distributors, wholesalers and retailers all take their cut of the action, inflating the end price as it goes along. By the time it gets to you, the actual hard cost of that item may only be a small fraction of the amount you’re pulling out of your wallet.

With the Net, the manufacturer has the ability to go directly to the consumer, cutting out not one but several middlemen. Theoretically, this should allow you to save big by buying direct. But, as we said before, just because technology makes it possible doesn’t mean it will change overnight. In this case, there are millions of people who rely on this current retail distribution chain for their livelihood. It can’t just disappear. Our society couldn’t absorb the shock.

The Taxation Grey Zone

If society takes time to catch up with technology, governments can take eons. Currently, world governments don’t know what to do with e-commerce. Borders have no meaning in a global digital economy. The whole idea of nations was brought about to entrench an economic infrastructure that evolved 300 to 400 years ago. In the space of one short decade, we’ve introduced a new economic and communication tool that could make the idea of a nation obsolete. Talk about your earth shaking revolutions.

In the short term, the government’s main concern is how not to miss out on their share of taxation revenue from the predicted billions that will be spent online. There’s a loophole, make that a black hole, in current regulations which haven’t evolved to take into account e-commerce. When the seller and buyer can be on opposite sides of the globe, who pays the tax, who collects the tax and who gets the tax? Right now, in many cases, the answer is no one

Superior Customer Tracking

In the last NetProfit, we talked about why websites are made to order for Customer Relationship Management. We won’t repeat ourselves here except to say that a website allows you to keep track of your customers more efficiently and effectively than you could possibly do in a traditional retail situation.

Access to the World, 24-7

Finally, it was the idea of a storefront that was accessible to the entire globe, all day, every day that first set retailers hearts and share prices soaring. In hindsight, it would have been prudent to remember that it doesn’t matter if everyone can shop in your store if they’re just not ready to buy. Be that as it may, the fact remains that global, full time access is still the single biggest opportunity that doing business on the Web can offer.

So, Now What?

With all these advantages, why is the NASDAQ hitting record lows for the year? Why are dot-gones dropping by the bushel load? Why does the entire Internet sector seem to be trembling on the brink of collapse? It just grew too big, too fast and now the human beings on both sides of the equation have to catch up. We’ve already talked about the consumers on the buying side. Now let’s talk about the people running the sites.

What do people want from shopping online? Forget convenience, forget the high tech sex appeal, forget selection. We are an inherently cheap society. The vast majority of shoppers just want to save money. We want the best deal. And we want that whether we’re shopping in Wal-Mart or online.

For all the reasons stated, an online shopping model should be able to deliver the lowest prices. And that’s all consumers want. When those two paradigms reach common ground, I’m betting e-commerce will win big. But right now, for several reasons, you won’t find the best prices online. It may be because the site owner still hasn’t grasped this simple concept. It may be because a manufacturer has pledged to protect an existing retail distribution chain. Or it may be that the site owner is still maintaining a physical retail location and can’t drop prices below that found on his shelves.

I believe e-commerce can’t truly take off until the inherent advantages are used to their full potential. Next week, we’ll explore some ways existing online merchants have used the Net to their advantage and suggest some strategies to take advantage of the efficiencies of this selling channel.