April 13, 1998 5:50 PM PDT

ICat to host Net storefronts

Hoping to lure small businesses online, e-commerce software vendor iCat on Wednesday will launch a new service hosting Web storefronts for merchants.

The new service, iCat Commerce Online, will be free to merchants with ten or fewer items in their storefront.

As reported earlier, the free services are come-ons designed to get merchants started, then turn them into paying customers by charging monthly fees for stores with more items.

Today, iCat launched an online resource center, called iCat Commerce Source, for merchants interested in getting into Internet commerce. The iCat Commerce Source also includes partners such as CyberCash for payment processing, Taxware for sales tax information, and a variety of marketing services for merchants to publicize their storefronts.

But the new service, previously code-named Lemonade Stand, also could pit iCat against ISPs, telephone companies, and hosting services that already market iCat's full-featured catalog software. However, iCat says it is negotiating with such partners to open similar Web malls for small stores.

Still, iCat's "free for life" storefronts with up to ten items could create costs for iCat with no corresponding revenue. Charges will range from $49 per month for 11 to 50 items up to $349 per month for 3,000 products.

"This is great, good old-fashioned experimental Internet marketing coming out of iCat," said Chris Stevens, e-commerce analyst at Aberdeen Group. "In hindsight, iCat will either look visionary or foolish."

ICat will outsource the hosting service to Exodus. Chief executive Craig Danuloff said he is negotiating with other Web hosting services to make similar offerings for small businesses, but none have been announced.

Stevens thinks iCat's pricing could shake up the Web hosting industry, where the lowest prices for storefronts start around $30 per month.

"If it works for iCat, we'll see some dramatically reduced prices in the very immediate term, and it might have implications for the Web hosting market at large," Stevens said, noting that the service also will affect rival catalog vendors, which include Intershop, Vision Factory, and Viaweb.

Viaweb, in fact, is primarily a hosting service--the line of business iCat is entering. And Stevens thinks iCat will, like Viaweb, be considered by ISPs and commerce hosting services as a competitor, not a partner.

Most Web hosting services base their rates on network utilization and storage, two factors that reflect their costs. iCat, however, is basing charges on a merchant-oriented measure: the number of items. "That probably will not adequately match their cost structure," Stevens said.

ICat's Danuloff said the new initiative aims to address three barriers that dissuade small businesses from pursuing Internet commerce: cost, confusion, and complexity.

Other potential competitors include GeoShops, small merchant sites being offered inside GeoCities, one of the most visited Web communities. GeoShop merchants will benefit from GeoCities' heavy traffic, something iCat cannot offer. Marketing initially will be the job of individual merchants, although iCat might spend money to draw traffic to its mall at a later time.

Nor are those the only potential competitors to iCat's new effort, noted analyst Nicole Vanderbilt of Jupiter Communications. The smallest merchants can sell online using auction sites such as eBay or Onsale, forgoing a Web storefront altogether.

 

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