The Future of Internet Retailing: Is Barry Diller a Nonbeliever?

Barry Diller, CEO of IAC/Interactive Corp., says buying online is “unnatural” and will account for no more than 10 percent of the retail marketplace.

The online and multichannel retail executives who gathered at the Shop.org annual summit were mostly young, intelligent, and passionate about the industry they invented. Throughout the two-day conference in Las Vegas, participants spoke proudly about the phenomenal growth of online retailing during the past 10 years and expressed optimism that the good times will continue. They largely spoke with one voice, sharing similar research, and drawing like-minded conclusions.

It took one older, slightly cranky, and immensely successful capitalist to throw a splash of cold water on the two-day festival of back patting.

Barry Diller, chairman and chief executive officer of IAC/Interactive Corp., which owns several e-commerce Web site companies, didn’t share the largely optimistic mood of the participants, saying that Internet retailing is still in its infancy and even when it matures will capture about 10 percent of the retail marketplace, but that’s about it. “Retail is a tough nut to crack,” he said.

Diller, who previously served in leadership positions with Vivendi Universal Entertainment, Paramount Pictures Corp., and QVC Inc. (his company now owns Home Shopping Network, QVC’s chief rival), called purchasing product online “unnatural” because it fails to re-create the shopping experience that a store or catalog provide.

“The issue is what kind of experience do you want and how do you create it for the consumer,” he said. “You can’t re-create the storefront and you can’t re-create the form factor of turning pages in a catalog and leaving it open. … This medium, obviously, it’s flat because there’s a screen. … I don’t think it’s value added.”

In the end, he said, the people who are successful at retailing on the Internet are going to be very smart and employ sound merchandising practices. “The Internet is going to be a merchant proposition,” he predicted. “Just like stores. Just like catalogs.”

Diller’s keynote address was conducted in an interview format. Carrie Johnson, vice president and research director at Forrester Research, was faced with the task of asking Diller questions. At one point Johnson said to Diller: “The entire industry thinks differently.” Diller quickly responded, “Good.”

Diller said his company—which owns a diverse group of Web sites, such as AskJeeves.com, CitySearch, LendingTree, and Match.com—said his company looks for good ideas and sound merchandising propositions. “Our feeling about retailing is give either a good product line or a good idea; we’ll fund it,” he said.

His view on the influx of online product reviews written by product users? “Product reviews have a place but I don’t think it’s a big deal.” He said you have to ask the following questions: What is it? Is it of value? Do you trust word of mouth? Would you pay for it?

Asked whether blogs (personal Web logs) would create a new kind of consumer or even a new social order online, he said: “Blogs are not changing the social order.” When told there are estimates that 75,000 new blogs are being created each day, he replied: “Who wants to hear it?”

He added, “The truth is that there’s less talent than the mass of people who have blogs. … Self-publishing is great if you have a great talent, but we’ve seen very little of it.”

Diller’s idea of a great Internet retail company: “EBay is the definition of a pure play. It’s a great business, and it’s still growing. Everybody understands what they do. That’s the definition of a great company.”