March 31, 2000 12:20 PM PST

Scanners point way to e-commerce shopping future

Scanning the milk carton before dumping it out could be the next big thing in e-commerce.

Pens, Palm pilots and general digital devices could revolutionize the way we shop and get information--not because they'll connect us to the Web, but because they'll connect our everyday world to the Web. Such devices, built with scanning technology, will read bar codes or UPC numbers on almost every consumer product, just like scanners at grocery checkout stands.

Armed with bar code readers, people can shop everywhere they go, scanning products at home or in the office--or at other people's homes and offices. Back at the computer, they can upload the information to the Net and make a speedy purchase online that avoids sifting through scores of sites and bulky Web files.

PlanetRx became the first known e-commerce company to sell that kind of handheld scanner for use at its site. The ScanCart program uses an egg-shaped device, made by New York-based Symbol Technologies, that costs $159, memorizes up to 350 items, and comes with a port that attaches to a computer.

Analysts say other e-commerce companies will follow suit.

"We'll start to see more and more devices that do this kind of thing over the next year," said Malcom Maclachlan, an e-commerce analyst for International Data Corp.

Online grocers are seen as a natural fit for this technology. Webvan is "aggressively" looking at the market, according to business development manager Dan Mosher.

"This is a great way to create a shopping list--just open the cupboard and scan all your food," Mosher said, adding that the company is in talks with several technology companies to develop the service.

But there is doubt whether consumers will buy such a device if they can't use it more broadly. Shoppers may want to compare prices across a number of sites, get more information before checking out, or buy in different product categories such as electronics and home furnishings, analysts say.

"Devices catch on when they can do lots of different things well," Maclachlan said. He cited e-books as the perfect example of a technology that will work only when consumers can use one device for all their needs, such as reading, email, scheduling, Net access and so on.

Industry observers say that giving away bar-code readers would be a great way to bolster sales and turn one-time shoppers into long-term customers.

"It's the same principle of free Internet usage that if you give these products away you can recoup the cost of making (them)," said Mark Kaufmann, co-founder of Xenote Technologies, which develops a content scanning device, iTag, and is in talks to develop a product scanner. Kaufmann said that the device costs less than $5 to produce.

This may be the case in the future.

"If Symbol was selling it on its own and it was applicable to every storefront on the Web, people still wouldn't pay for it," said Seema Williams, e-commerce analyst at Forrester Research. "It really should be a freebie."

Webvan's Mosher said that the company's goal would be to give it away.

"If the device was to go for $50, I could see us eating that cost just so we could gain a customer," he said.

A similar product is being test-marketed in some grocery stores, including Safeway, in Britain. It lets shoppers scan products through a Palm handheld device. Symbol is developing souped-up versions of the Palm III and Palm VII, which cost between $535 and $1,000, as well as an enhanced Cross pen, which costs less than $100.

Palm, the leading electronic organizer maker, currently offers an ad-on for consumers to scan products, but most e-commerce companies don't yet offer services that would allow the user to buy the products online.

For its part, PlanetRx plans eventually to lower the price for the scanner. James Chong, chief technology officer, said that he could see manufacturers subsidizing the technology because it increases the chances of shoppers buying the same product over and over.

"The e-commerce shopping experience is still very cold; this is one way to reach out to establish a connection with the customer," Chong said, adding that its next generation device will let shoppers scan in prescriptions and will fit on the key chain.

PlanetRx has applied for a patent with the U.S. Patent Office on the business model, which involves the process of scanning products, uploading them to a Web site and then making a purchase. If the patent is approved, the company plans to license the technology to other e-commerce companies.

But Symbol is already in talks with "every major e-commerce company" about offering such services, according to Ron Goldman, senior vice president and general manager of Symbol of the company.

"I don't believe that anyone will be able to obtain a patent that will preclude Symbol from selling this technology to other companies," Goldman said.

 

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