Problems with delivery delay on-line shopping

IN THE past few weeks, there has been a stampede by large retailers to offer their products on-line, bringing electronic home shopping into British sitting rooms much earlier than anyone was predicting even a year ago. Observers say, however, that the rush has so far been defensive: long-term strategies are still hard to discern.

In April, J Sainsbury, the supermarket group, announced it was offering wine on the Internet, the global network of linked computer databases. Anyone with a computer, a modem and a subscription to an Internet service could choose wine on-line, though they had to confirm the order and pay for it by telephone.

A week later, CompuServe, the US-owned on-line information system, announced its UK Shopping Centre. Subscribers, who pay about pounds 7 a month, could buy books from WH Smith, CDs from Virgin and cameras from Dixons, among other things. Because Compu- Serve is considered more secure than the Internet, the retailers ask customers to enter credit card numbers directly into their computers.

Then last week, Barclays Merchant Services announced it was establishing a "virtual shopping mall" on the Internet. Initial stallholders in BarclaySquare are Argos, Toys 'R' Us, Eurostar, Blackwell the bookseller, Campus Travel (an agency aimed at the youth market), Innovations, The Car Shop (which provides information on new and used cars) and Sainsbury. This means that the supermarket chain is now selling its wine through two separate Internet sites: the difference is that BarclaySquare uses a secure system that means customers should be able to enter their credit card number safely. In a matter of weeks, the security problem seems to have been overcome.

The results of these schemes have been positive. WH Smith says it so pleased with the response that it will offer many more books from next month. Sainsbury's has sold 1,200 bottles so far and, a spokeswoman says, "we are looking to expand the opportunities as soon as physically possible". Tesco also says its service "is going very well".

David Symonds is managing director of Smart Store Europe, a demonstration "mall of the future" run by Andersen Consulting in Windsor. He talks to manufacturers and retailers as they visit his site and says, attitudes towards on-line selling have shifted. "A year ago, directors were saying they were not sure if it was an issue, and if it was, it was five years away," he says. "Now they are saying it is a definitely a live issue."

He says that the big chains started to move out of fear that their rivals would cut the ground from under their feet. "They could see that if on- line shopping removed 10 per cent of turnover, that would have a massive effect." As a result, he says, "a number of them are trying to make a splash - getting the maximum public relations for the minimum effort". He points out that Sainsbury already had a telephone-based wine delivery service: adding a page on the Internet involved no great effort but did give it front-page newspaper coverage.

John Williams, marketing director of Infobank International, which is just launching a largely hi-tech retail service on the Internet, agrees that the moves have been largely defensive. "Why would anyone need a superstore if manufacturers started selling their products on-line?" he asks. "People like Tesco could see on-line shopping presenting a threat as well as an opportunity."

Why did the stores suddenly change their mind and develop simultaneous paranoia this year? Because, Mr Symonds says, of the media coverage of the Internet: if retailers could not open a paper without reading about it, they reasoned, nor could their rivals. When researching the Net, they would also have found out about CompuServe and may have decided that was a better bet. CompuServe's UK subscription base is growing fast and offers the advantage of providing a structured organisation with which to work (CompuServe is privately run, while no-one owns the Net).

Having given themselves breathing space with an on-line presence, the chains are now trying to work out their long-term strategies. Usually the US offers a useful precedent in all things electronic, but not here. Many American companies offer products by mail order (books, CDs and novelties are typical), and a handful offer an electronic "shopping service" - you give them a list by computer, and they go shopping for you. But no retail chain offers a full on-line service.

Mr Symonds believes the big food chains will offer such a service in the UK, but only for products that customers are happy to buy remotely. His market research suggests that they would love to have standard products such as washing powder and tinned food delivered, but that they would still want to visit the shop to buy bread, vegetables and dairy products. This should give shops an opportunity to use the freed-up space more imaginatively, he suggests.

Logistical problems will also have to be overcome. These will not be on the hi-tech ordering side: the problems of security for customer and retailer have been largely overcome through sophisticated encryption systems, and devices such as an "intelligent agent" that will search out the best value on the Internet have also been developed. Ordering will soon be possible via a number of media - the Internet, private on-line services, interactive television and even special in-home devices.

But the mundane business of delivering goods could prove a stumbling block. "Big retailers are used to shifting pallets of products by lorry," Mr Symonds says. "Packing and delivering single items quickly is much more difficult."

This may lead the retailers to make alliances with parcel companies, the Post Office, or even dairies.

What happens if the delivery arrives when you are out? In Germany, a housing estate dotted with secure cool boxes has already been built. This could be the way forward here: the outside fridge with a combination lock could yet be the big seller in Currys.