Although sales to businesses far outstrip consumer buying on the Net in terms of dollar volume, online shopping caught the attention of old media during the holiday gift-buying season. The result: A surge in online shopping. Here's a look at the 10 top e-commerce stories of 1998:
1. Consumers tried Net shopping
A year-end rush into Internet storefronts signaled that consumers had put aside fears about security, privacy, and cyber-crooks to shop online. Web merchants and e-commerce analysts reported threefold or fourfold increases in holiday shopping over last year. The move onto the Net of familiar, real-world brands and widespread media coverage of online commerce helped boost consumer confidence and enticed everyday computer users to try the convenience of clicking to buy.
2. Online trading took off
Online stock brokerages proliferated amid price wars that drove prices below $10 a trade. Traditional discounter Charles Schwab made the smoothest move onto the Net and was rewarded in the year's last week with a stock market value higher than staid traditionalist Merrill Lynch. E*Trade was the most popular online-only brokerage and like Schwab tried to turn its Web site into a financial hub for financial information and trading. But scores of online brokerages, some owned by mainstream Wall Street firms, made competition cutthroat.
3. Offline retailers jumped onto the Web
Visa's belated embrace of online shopping was cited as a key factor in consumer comfort buying on the Internet, but it was hardly alone. Macy's put 250,000 items on its Web store, and Victoria's Secret opened with skimpy offerings. Among other real-world brands joining 1998's Net retail rush: Gap, Wal-Mart, and Best Buy.
4. Travel sites boomed
Travelers turned to online agents and airlines alike, both booking their own flights and checking on their options before calling their travel agent. American Airlines put up a site for frequent fliers that was so popular it choked right after opening. Preview Travel looked over its shoulder as Expedia, a Microsoft site, gained.
5. Amazon.com became the icon of Net commerce
Traditional advertising and lavish coverage helped cement Amazon's reputation as the emblem of e-commerce. Executives everywhere worried about getting "Amazoned" by a brand-new online competitor, just as Amazon blindsided traditional booksellers. Amazon Chief Executive Jeff Bezos began to morph his operation into an online superstore, offering music, software, and soon videos. Wal-Mart showed its uneasiness about Amazon by suing. Meanwhile, rival Barnes & Noble bought Amazon's biggest book distributor, Ingram Books, and sold a 50 percent share in its online store to German publishing giant Bertelsmann AG.
6. Auction sites drew customers--and investors
eBay wasn't the first online auction to go public, but being profitable stirred investors' excitement. eBay, where individuals auction off merchandise while eBay takes a cut, ran into some technical glitches in December, but its stock soared from its offering price of 18 to top 311. Onsale fared well on Wall Street too but sold its personal auction site to Yahoo. Internet Shopping Network sold its computer store to Cyberian Outpost to concentrate on its auction business, First Auction. Computer store Creative Computers spun off its auction, uBid, in another hot IPO. Excite backed into the auction game too when it bought Classifieds 2000 and got an auction to boot.
7. Internet retail stocks soared
Internet stocks were hot, and those of Net retailers were among the hottest. Visions of cybershoppers danced through the heads of investors, driving almost every retail name upward on the slightest positive news. IPOs like eBay, Ticketmaster/City Search, and techie bookstore Computer Literacy soared. Preview Travel and others returned to the Wall Street trough to raise more cash in secondary offerings. But many up days were followed by big declines, as small-time day traders drove the pricing of many issues. Meanwhile, traditional investors debated whether Internet retailers were real investments or merely something to trade.
8. Consumer portals shifted toward e-commerce
Doubtful that ad banners alone could generate the revenue growth Wall Street demanded, portals Yahoo, Excite, Netcenter, Lycos, and Infoseek turned first to big-bucks deals with major online retailers. Then they started buying up e-commerce sites and technologies. Yahoo bought Viaweb, an e-commerce software and hosting service, and turned it into Yahoo Stores. Other portals snapped up "shopping agent" technologies, hoping to assure themselves a cut of the e-commerce action even when visitors buy elsewhere.
9. Priceline pushed a Net-only e-commerce model
Priceline let buyers name their price for airline tickets, then let the major airlines accept those offers with answers in an hour. Boasting a new way of commerce, the start-up patented the idea, then expanded it to autos, mortgages, and hotels. The venture capitalists, including Paul Allen, staked Priceline $55 million in early December. Twelve days later the company filed for a $115 million IPO.
10. Online customer service lagged
Online customer service lagged, driving consumers to the phones for help--or out of their minds. An army of vendors stood ready to help Web storefronts get their customer service operations in order. Online chat firm iChat transformed itself into Acuity. E-commerce analysts lectured that consumers won't stand for crummy service indefinitely.
Other stories helped set the stage for 1999 in e-commerce. Privacy concerns won't go away, but that remains largely the turf of diplomats and legislative insiders. E-cash, badly battered in 1998, could make a comeback in the form of scrip for specific stores. Smart cards, touted as the next big thing for a decade, may continue their slow progress in the United States, where many see them as a nice bridge between online and real-world retailing. The accoutrements of real-world retail--coupons, frequent-buyer programs, and mergers among competitors too small to play alone--are likely to continue in the new year.