AOL wants you to spend even more online

The online leader revamps its e-commerce strategy in an attempt to make its users spend even more than the $1.8 billion they forked over in the first three months of 1999.

3 min read
America Online is revamping its e-commerce strategy in an attempt to make its users spend even more than the whopping $1.8 billion they forked over in the first three months of 1999.

For its online retail partners, the biggest boost of the new strategy is AOL's decision to drop its proprietary Rainman format for shopping and replace it with HTML, the language of the Web and most online shopping sites.

AOL's e-commerce moves are closely watched by both financial and e-commerce analysts because AOL users account for a huge share of merchandise sold online, both on its own shopping channel and as an Internet on-ramp for other sites. In financial terms, AOL is banking on e-commerce and advertising sales to boost its revenue as quickly as Wall Street expects.

The $1.8 billion in sales to AOL retailers eclipses the $1.2 billion figure for the fourth quarter, which included the best-ever holiday shopping season online.

"We've topped the holiday numbers in March and April and we are tracking at $500 million-a-month in member spending," said Patrick Gates, a veteran merchandiser brought in to lead AOL's new initiative, dubbed Shop@AOL. He has worked at Web storefronts Internet Shopping Network and FirstAuction, plus Home Shopping Network and traditional retailers Neiman Marcus and Barneys New York.

"We are trying to see how we could make the member experience better, as opposed to being this big pass-through for members [on their way to Internet storefronts]," said Gates, who joined AOL eight weeks ago as its vice president of e-commerce.

"Also, we want to help these merchant partners sell more products," he said. "HTML allows us to do more on shopping than we can with Rainman."

Fashion e-tailers like Gap, J Crew, and Neiman Marcus, he noted, will be able to do much more with an HTML-based system than on AOL's system. Discounters will be located in a separate area from mainstream retailers.

Shop@AOL will give merchants new, more flexible tools to hawk their wares with short-term promotions, a shopping search engine, a shopping toolbar on the AOL user's screen, and quick checkout for shoppers. But the switch to HTML from AOL's proprietary format will remove a costly annoyance for merchants who needed one storefront to sell on AOL and another on the Net.

The new shopping features will debut starting July 1, with the goal of launching all by October 1, in time for a hoped-for Christmas rush.

AOL's move to HTML eventually will let e-tailers use the same storefront on all major AOL properties--the proprietary service, AOL.com, CompuServe, and Netcenter.

"The move to allow retailers to write once, sell anywhere, is an indicator that AOL is moving quickly to rationalize the use of its diverse properties now that the dust has settled on its acquisitions," said Scott Smith, e-commerce analyst at Tera Group. He thinks AOL also will focus each of its properties on different target markets.

So does Peter Krasilovsky, e-commerce analyst with Kelsey Group, noting that the Netcenter emphasis signals that AOL is beginning to deliver on its intentions to use its Netscape acquisition as a channel to reach Internet users that don't use AOL.

But Krasilovsky calls AOL's e-commerce record spotty so far. "It has landed a number of really big deals on the basis of its 16 million members, and sales have certainly been increasing. But those deals are generally still more ad-oriented than sales-oriented."

Nicole Vanderbilt, e-commerce analyst at Jupiter Communications, likewise cautioned against attributing too much influence to AOL, despite an audience she called "immense and enviable."

"AOL provides access to these consumers, and they are free to make the buying decision on their own. They have more influence than most ISPs, but you can't give them credit for all of these transactions just because these consumers use AOL," said Vanderbilt.

A better measure of AOL's impact is how much they produce for its merchant partners, she added.

On that score, AOL's Gates has set his own benchmark--an intense sales effort is underway now to boost the number of merchants on AOL from 150 today to 250 by this year's fall shopping season, the most critical time on the retail calendar.

"If merchant partners are signing up, they believe in the strategy," Gates said.