January 14, 2000

Localization of the Internet

by Joe Loehr

The holiday shopping season is finally over, and the clear winner is on-line shopping. In spite of some out-of-stock and back-end delivery problems, it is clear that shopping on the Internet is here to stay and will only become a bigger factor in next year's holiday season. But how can the local retail merchant take advantage of this trend?

The motivation behind the current rush to get on-line has been the increase in the globalization of marketing and distribution. However, the typical local merchant is not interested in delivering products into a global market, and probably could not deliver to that market even if they so wanted. Instead, the local merchant is focused on the delivery of goods and services to a defined geographical community. One that is now being invaded by an onslaught of -on-line merchants. The local merchant is at risk of losing a share of their traditional customer base to on-line shopping if they do not find a way to compete in this arena.

Merchants that have attempted to position themselves on the Internet, thus far, have typically spent large advertising dollars with web development companies only to find that their websites generate little or nor traffic. This is generally the result of the lack of an effective way to advertise the site to the people who are most likely to buy their product. The advertisement in the local newspaper or magazine that includes a "Come visit us at www.-whatever.com" does little to generate new interest. The prospective customer has already seen the ad and formed an opinion based upon the content of the ad, not the website. The website has become nothing more than a redundant advertising expense.

One possible solution to this problem could be the emergence of the community oriented, or localized website that provides advertising of local merchants within the context of a local news service or other resource information that has community interest. The local advertising could even take the form of a product oriented business directory, similar to localized telephone directories provided by private organizations. In addition, the website would display the typical advertising banners to which we have all become accustomed. This will reduce the overall cost of advertising by drawing visitors to a single site with the promise of access to useful local information along with lots of "free stuff," such as on-line discount coupons, and links to other information or community sites. The result would be an increase in traffic to local business websites from a source other than their own advertisements in the printed media.

However, without local business support can a community oriented, resource website be profitable? Strangely enough, the answer to that may lie back in the global aspects of the Internet. Although the local merchant may not be willing to fork over additional money to support a resource website, many of the companies that compete in the global arena are willing to do just that. The name of the game in the global market is "traffic," and many global merchants have established affiliate advertising programs that will pay websites on a "per click" or sales commission basis to bring traffic to their websites. This traffic to global sites could potentially generate the revenue stream required to support the community oriented site.

But doesn't the introduction of global advertising defeat the purpose of creating a locally oriented site? The answer to that depends on whether or not the intention is to create a venue solely for the use of the local merchant, or instead to create an arena where the local merchant and the global merchant can compete for on-line shopping on an equal basis. The economics of running a resource website will probably dictate the latter. The clear benefit is to the customer who will have a single point of access to both local and global merchants, while also benefiting from the free services and information provided by the resource website.

Joe Loehr is the founder of Woodstock Systems, Inc., a pioneer in the concept of community resource websites, and has an MS in Computer Science from Southern Polytechnic University. Woodstock Systems operates the "access Woodstock.com" resource website serving Woodstock, Georgia and surrounding communities.

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