E-commerce model will feel its share of growing pains before hype meets reality

After Chapters Online laid off 17 per cent of its work force last month, there was no shortage of observers who used the occasion to question the viability of e-commerce ventures.

On the surface, the move by the on-line arm of Canadian book retailer Chapters Inc. appears to be a negative one. And, make no mistake, negative it certainly is. If Chapters’ foray into selling books over the Web was generating as much business as the company had originally planned, we’d probably be hearing about how its work force was being expanded by 17 per cent. And anyone sceptical of the e-commerce sales model has every reason to postulate that cutbacks of such a large proportion could lead to more choppings in the future.

A closer look at the Chapters situation, however, reveals a somewhat different picture, one that offers a good illustration of where the evolution of e-commerce presently stands.

The layoffs affected those employees who were involved in writing book reviews and producing other site features “that were not widely used by online shoppers,” according to the company.

While the user experience might be a little less robust with the elimination of such features, the slashing of book reviews and author bios does not significantly change the core business model on which Chapters Online is staking its survival. Customers will still be able to browse the site for a book they may want, add it to their shopping cart, click on an ‘Order’ button, wait for the book to arrive, and eventually pay off their credit card. If the company had announced that it was reducing its inventory or ceasing its traditional on-line discount incentive, the venture would clearly be heading for the slag heap.

The actual changes indicate, however, that Chapters Online is still discovering how best to sell books to customers over the Web. It must be remembered that this way of doing business is so infantile that these types of growing pains are going to be felt, probably for a number of years to come. Historically, any method of selling wares to consumers, be it newspaper advertising or the concept of shopping malls, had to be refined after it first appeared. It’s no different with e-commerce.

If these natural growing pains don’t form enough of an obstacle for e-commerce to establish itself as a viable sales medium, it also must face a somewhat self-inflicted one. Because companies like Chapters have spent so much time and energy trumpeting the benefits of e-commerce, awareness levels amongst the general populace are quite high – as are expectations. So when e-commerce companies can’t hide even their most minor growing pains, everyone hears about it, and everyone begins to question the hype they’ve heard beforehand. Because the method is such a new one and has not taken firm root in the minds of consumers, the skepticism about e-commerce has no trouble growing.

Through this haze of hype, confusion and skepticism, however, emerges one clear reality: e-commerce isn’t going away. In all likelihood, the business model will continue to morph into something that becomes as second nature and commonplace as a grocery flyer in your mailbox. E-commerce will find its place with industries that, first of all, sell to an audience that looks favourably upon Web-based transactions, and secondly, that adopt the right technology and approach at the right time.

When shopping malls began appearing in Canada in the ’60s, many businesses no doubt set up shop within them, only to find out that their enterprise was better suited back on Main St. The same scenario is being played out in the e-commerce arena: some businesses will find it to their liking, others will not. The discovery process will be a sometimes painful one for both those that succeed and those that fail. It Should be an interesting one to follow in the years ahead.