Despite forecasts that the dotcom bubble is about to burst, mainstream retailers are often belatedly moving on to the web. But they might prove to be the ultimate winners, by Penelope Ody

With 60-70 per cent of the venture capital poured into dotcom start-ups spent on marketing, these high profile names are often the first ones that new e-shoppers discover. But the sleek web site often conceals an inadequate business infrastructure when it comes to processing orders and despatching goods, leading to disappointment and frustration among would-be shoppers.

"These companies have spent a lot of money on the front-end but they have totally underestimated the fulfilment needs," says Greg Girard, service director for retail applications at AMR Research in Massachusetts. "It is primarily an IT problem with a basic lack of such things as merchandising replenishment planning. They've underestimated their success: high-volume environments need well-defined material and system flows and that is lacking."

The result has been a spate of publicity detailing the dotcoms' poor service levels while many shoppers have been deterred by less than easy-to-use web sites. "Boo.com launched with much hype and considerable financial backing," says Alistair Charatan, e-retailing specialist with PA Consulting, "and yet it already shows signs of failing - the sophisticated web site has been simplified, staff laid off, products have been discounted to clear and returns are high. Even more successful online retailers such as Amazon.com are showing signs of slowing sales growth increasing losses."

Inevitably, many of the start-ups lack volume business for sourcing products, so costs are high. Given the web's apparent preoccupation with discounts and price-cutting, margins are clearly low and - as Amazon demonstrates - as a result, profits are hard to come by.

In contrast, the "bricks and mortar" retailers have long since learnt that having the right products at the right time is paramount. Close co-operation with suppliers on product development and quality, as well as sophisticated merchandise management systems, are vital - if hidden - aspects of retail success.

"The real-world skill of building good supplier relationships becomes even more crucial as internet sales volumes rise and an increasing number of premium and branded products are sold online," says Nick Jones, analyst with researchers Jupiter Communications' European research team. "As online shopping becomes mainstream, bricks- and-mortar, players have the opportunity to build on their off-line experience."

Jupiter currently calculates that 51 per cent of the online retail spend goes to the pure-play dotcoms, but it expects dominance to shift dramatically to the "clicks and mortar" retailers in coming months. Its studies suggest that online commerce revenues in Europe are set to increase eightfold, rising from E8bn in 2000 to E64bn by 2005. At the same time, the number of online buyers will more than quadruple, reaching 85m by 2005 (up from 20m in 2000) with the most aggressive growth expected during the next 24 months.

While part of this growth is due to growing volumes and diversity of consumers' purchases, Jupiter's research also indicates that online shoppers are now looking for products and services that are higher in price and which require some thought before purchase, such as packaged holidays and expensive clothing. Shoppers may happily buy merchandise offering little, if any, product variation - such as books or CDs - from a dotcom start-up operating from a suburban back bedroom, but when it comes to expensive lines then a reputable brand and proven reliability are essential.

An intranet survey of about 1,300 of its staff by IT consultant Cap Gemini showed that the biggest deterrents to buying online were first (cited by 70 per cent of the sample), an inability to actually "see and feel" goods, second (49 per cent) problems with home delivery, and third (45 per cent) a "lack of trust" - which included concerns over secure payments.

The trust factor can also include concerns over delivery: in the UK, researchers Book Track reported a sharp downturn in online book sales after December 11 1999 as shoppers opted for high street purchases rather than risk non-delivery of their gift orders.

James Bidwell, marketing director at eToys UK says: "A birthday present which arrives late doesn't make for happy customers."

The Cap Gemini survey also suggests that shoppers are very likely to use the internet to search for goods - by product functionality or price - and then use that information to guide a real-world sale. "There is a strong link between information gathering and shopping," says Rebecca Thomas, retail marketing manager. "And a known brand - even if it is solely an internet brand - is more likely to attract people looking for information. But information gathering does not in the majority of cases result in an online purchase."

One problem is the cumbersome nature of online buying, with shoppers soon becoming bored with the need to key in details of delivery addresses or wait for slow order-entry screens to appear. Mrs Thomas suggests that more intelligent sites, capable of completing transactions efficiently, may help, but for many shoppers - those 70 per cent who actually want to "see and feel" - the solution is likely to be a visit to the web site operator's nearest real-world store. This is likely to be a more common option in Europe, given the higher population densities and closer proximity of prime shopping centres.

Ragnar Nilsson, chief information officer at German retailer Karstadt, says: "Europeans live so close together that it's often more convenient to go and see the item, rather than buy it via the internet."

Given the shift to higher value product lines, the "see-and-feel" requirement, and the inevitable problem of waiting at home for the home delivery to arrive, the clicks-and-mortar option looks attractive.

Information and basics can be bought online with a real-world experience for more expensive (and therefore more profitable) lines. The result could be the pure play dotcom marginalised to cut-price commodities - and that will do little to help profits or keep the dotcom bubble inflated for very much longer.

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