Store-based retailers, alerted by analysts’ predictions that on-line retail sales could account for as much as 10 percent of total US retail sales by 2003, are joining the rush to the Internet. As yet, these store-connected World Wide Web sites generate only trivial revenue. Many have suggested that the game has emphatically gone to pure Internet plays such as Amazon.com and eToys.com.

In fact, however, store-based retailers have a number of advantages over their Internet-only competitors, which can offer personalized search tools and links to related products and services but not the ability to see, touch, and try merchandise and to walk out with it. More generally, store-based retailers can leverage their multichannel advantage to give customers what they want, how and when they want it. So if store-based retailers make their sites as innovative and adaptable as those of their pure-play Internet rivals and at the same time realize synergies with their brick-and-mortar facilities, they may yet come in first after all.

Choose a winning business model

Building a thriving retail site on the Internet is every bit as hard as creating an exciting store environment. Like real-world retailers, on-line ones (pure play or not) must understand customer...