June 11, 1996 2:30 PM PDT

IBM, Microsoft do some power shopping

Two computer industry titans, Microsoft and IBM, today made a grab for pieces of the online shopping pie. But in spite of the weight both companies can throw behind the new market, many analysts are skeptical that cash registers will start ringing in great numbers on the Net anytime soon.

Microsoft itself went shopping, acquiring eShop, a provider of Internet shopping software and proprietor of a Web-based mall called eShop Plaza. At the same time, IBM announced plans to host an online shopping mall called World Avenue that will make it cheaper and easier for merchants to sell their goods on the Net than if they opened their own stores.

"If you build it, will they come? I think that still remains a question," said Vic Wheatman, director of electronic commerce at Gartner Group. "Longer term, we'll certainly see people acquiring goods and services through the Internet. But I'm very conservative about seeing full-scale movement from the physical world to the cyberworld."

But analysts do think that market has great potential for growth in the next five years. Market research firm Forrester Research estimates that online retailing brought in $518 million to merchants this year. By the year 2000, that figure could jump as high as $6.6 billion. Both IBM and Microsoft are preparing today to make sure that they are well-established in that market.

In the short term, the Microsoft Network will get a boost from the acquisition with merchants from eShop Plaza, including Tower Records, 1-800-FLOWERS, and The Good Guys, moving to an area called MSN Mall.

Further out, Microsoft plans to integrate eShop's merchandising and shopping software into Microsoft Merchant, its electronic commerce server, and will aim the combined product at companies that want to set up individual shops or malls online. Merchant will also be sold bundled with Normandy, a comprehensive set of server software allowing Internet service providers to set up Web-based online services complete with chat, bulletin board, and shopping capabilities.

Before it becomes part of Merchant, however, the eShop software will need to be ported from Unix to Windows NT, said Paul Maritz, group vice president of the platforms group at Microsoft. The company expects to go into beta testing with the Windows NT version in August, with a final version due in the fourth quarter. The company did not announce pricing for the product.

Microsoft hopes that the eShop software combined with Merchant server will allow online merchants to provide services more compelling than shopping through a mail-order catalog--for example, promotional offers that are personalized for a customers specific tastes.

"You need specialized tools that allow merchants to do online electronically more than they'd been able to do in passive media like catalogs, to target offers more narrowly and constructively [to customers] and to do this without having to becoming programming wizards," Maritz said.

But at least one analyst was disappointed by the lack of details on what eShop would add to Microsoft's Merchant server, including connections between back-end systems and Web servers.

"We're not seeing much about what [eShop] offers merchants to integrate their [Web store fronts] with their back end," Wheatman said. "I may offer customers a front end, but how do I integrate this?with my traditional transaction order entries."

Meanwhile, IBM said today that its World Avenue mall will provide merchants with back-end processing, data-mining tools for tracking customer buying habits, and marketing assistance so they don't have to do the work themselves.

But joining the mall, which will open its doors online in the fall with at least 20 retailers, will cost merchants a piece of their sales. A typical merchant marketing 300 items will pay IBM $30,000 to sign up for World Avenue, plus a monthly fee of $2,500 and a 5 percent cut from their sales, IBM said.

Related stories:
IBM jumps in, from content to commerce
Internet shoppers surf till they drop
Netscape tackles Web commerce
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