Offline ' And Happy To Be There

Today, it seems that every business has a Web site.

And why not?

For many people, going online is the first step in buying anything.

Yet, some firms refuse to sell online. Sound odd ' behind the times? On its face, perhaps, but sound business reasons explain such “backward” behavior ' and they're the same reasons why many brick-and-mortar businesses choose not to accept phone or mail orders.

Executives of some firms may feel that their company cannot maintain a reputation for exceptional, customized service electronically ' even though the 24/7 availability of e-mail, instant messaging and other personalized communication may be more attentive to the customer than a traditional shop clerk. Those firms instead prefer to build a reputation with face-to-face, “hands on” customer contact.

Who Might Be Web Shy, And Why

Consider sellers of custom-fit designer apparel, or specially designed home furnishings, who want to satisfy customers with the first shipment. Online sales may just lead to returns, whenever the unseen customer feels something is not “just right.”

Human intervention is also necessary if the seller must screen customers, either for regulatory reasons, or simply to ensure that the customer gets the right selection from a product line.

Other firms avoid e-commerce because their vendor won't let them sell online. Manufacturers that have invested in an upscale brand image may legally prohibit price advertising, in any medium, to avoid tarnishing that image with discounting. The ubiquitous e-mail us for prices reinforces the perception of the Net as a Middle Eastern bazaar ' where all is for sale, all the time.

Still others avoid online sales to protect their dealers' investments in gaining product knowledge and building markets. To get the best of both worlds, all online sales inquiries are directed to offline dealers, often with exclusive territories.

As a result, retailers who must spend heavily to maintain product showrooms and inventory, and keep staff trained, don't have to serve so-called free riders. Customers who shop in person for selection and skilled advice cannot then bypass dealers by buying online to save a few dollars.

This strategy allows a manufacturer to maintain the online presence that customers naturally expect. But the manufacturer also protects its distribution network and, at the same time, controls how its products are marketed online.

This combination of online and offline channels avoids the risk of “commercial suicide,” the verdict that the Economist magazine recently rendered concerning a policy of avoiding Internet sales totally. “A Web site is increasingly becoming the gateway to a company's brand, products and services ' even if the firm does not sell online. A useless Web site suggests a useless company, and a rival is only a mouse click away,” the magazine wrote in its May e-commerce report.

When Brand Owners And Other Sellers Disagree

But what if other sellers don't share the manufacturer's preference to stay offline? Business resellers may be more interested in the immediate profit from an online sale than in maintaining a brand or distribution system. Individuals who simply want to turn a branded item into quick cash find online auctions more convenient than “for sale” ads or a yard sale, without concern for their effect on the brand.

Fortunately, the law protects brands online. Manufacturers can legally restrict online use of their intellectual property, such as trademarks or custom images.

For example, a reseller may advertise a watch for sale online, but (without the manufacturer's permission) may not use its “John Exclusive Name” trademark on a Web site (including in metatags), or in search-engine listings. Similarly, the online reseller can post its own images and copy about the product, but can't illustrate its ads with the same professionally produced images or slogans found in an “official” ad.

Even more aggressive protection exists if the manufacturer can locate the reseller's Web-site host. A vendor can put the Web site hosting the allegedly infringing material on notice that it may be harboring infringing material. This so-called take-down notice demands immediate removal of the vendor's intellectual property (such as its product names or images) from the host site. A host that still allows it online, after a warning, could itself be liable for contributing to the harm.

The vendor also has an absolute right not to sell to anyone who doesn't follow its rules. The distributor who wants to ensure continued access to a product should consider that it could lose such access with the first online sale below list.

Although these remedies exist in theory, however, manufacturers determined to protect their brands online may find these remedies difficult ' and expensive ' in practice. Most importantly, no one prefers to sue a customer, even one that doesn't follow advertising rules. Similarly, no firm wants the bad press that inevitably will follow actions that could be portrayed as bullying, whether directed to individual consumers who use brand names in their online auctions, or small businesses that thrive on auction sites.

Moreover, expensive legal efforts may be necessary just to find online infringers. Some Web-site registrations simply list a post office box. Even worse is that today, some domain registrars advertise that they will mask true WHOIS data, so that a subpoena is required to locate the seller.

Getting Out Of Town

The Web also makes it very easy for an online seller shut down by a compliance program to just re-emerge at a different Web site, perhaps even in a different country. The manufacturer must then start over to shut the new site down. For example, Philip Morris' brand-integrity program recently won a hard-fought victory against an online seller of untaxed gray-market goods. When the seller simply continued sales through different Web sites, the court ordered those Web sites transferred to Philip Morris.

But that win just began the battle. On its Web site, the seller mocked Philip Morris for what it called an unenforceable “virtual victory,” and quickly transferred its Web site outside the court's jurisdiction, to Switzerland. Philip Morris vowed to continue its fight, but its general counsel conceded that brand protection “truly is a global effort.”

Ultimately, each vendor must weigh the costs and benefits of allowing its products to be sold online, whether it sells the goods and services itself or allows others to sell them. The perceived harm from online sales, in dollars and bad publicity ' if it can even be measured ' must exceed the cost of trying to cut the sales off.

Today, it seems that every business has a Web site.

And why not?

For many people, going online is the first step in buying anything.

Yet, some firms refuse to sell online. Sound odd ' behind the times? On its face, perhaps, but sound business reasons explain such “backward” behavior ' and they're the same reasons why many brick-and-mortar businesses choose not to accept phone or mail orders.

Executives of some firms may feel that their company cannot maintain a reputation for exceptional, customized service electronically ' even though the 24/7 availability of e-mail, instant messaging and other personalized communication may be more attentive to the customer than a traditional shop clerk. Those firms instead prefer to build a reputation with face-to-face, “hands on” customer contact.

Who Might Be Web Shy, And Why

Consider sellers of custom-fit designer apparel, or specially designed home furnishings, who want to satisfy customers with the first shipment. Online sales may just lead to returns, whenever the unseen customer feels something is not “just right.”

Human intervention is also necessary if the seller must screen customers, either for regulatory reasons, or simply to ensure that the customer gets the right selection from a product line.

Other firms avoid e-commerce because their vendor won't let them sell online. Manufacturers that have invested in an upscale brand image may legally prohibit price advertising, in any medium, to avoid tarnishing that image with discounting. The ubiquitous e-mail us for prices reinforces the perception of the Net as a Middle Eastern bazaar ' where all is for sale, all the time.

Still others avoid online sales to protect their dealers' investments in gaining product knowledge and building markets. To get the best of both worlds, all online sales inquiries are directed to offline dealers, often with exclusive territories.

As a result, retailers who must spend heavily to maintain product showrooms and inventory, and keep staff trained, don't have to serve so-called free riders. Customers who shop in person for selection and skilled advice cannot then bypass dealers by buying online to save a few dollars.

This strategy allows a manufacturer to maintain the online presence that customers naturally expect. But the manufacturer also protects its distribution network and, at the same time, controls how its products are marketed online.

This combination of online and offline channels avoids the risk of “commercial suicide,” the verdict that the Economist magazine recently rendered concerning a policy of avoiding Internet sales totally. “A Web site is increasingly becoming the gateway to a company's brand, products and services ' even if the firm does not sell online. A useless Web site suggests a useless company, and a rival is only a mouse click away,” the magazine wrote in its May e-commerce report.

When Brand Owners And Other Sellers Disagree

But what if other sellers don't share the manufacturer's preference to stay offline? Business resellers may be more interested in the immediate profit from an online sale than in maintaining a brand or distribution system. Individuals who simply want to turn a branded item into quick cash find online auctions more convenient than “for sale” ads or a yard sale, without concern for their effect on the brand.

Fortunately, the law protects brands online. Manufacturers can legally restrict online use of their intellectual property, such as trademarks or custom images.

For example, a reseller may advertise a watch for sale online, but (without the manufacturer's permission) may not use its “John Exclusive Name” trademark on a Web site (including in metatags), or in search-engine listings. Similarly, the online reseller can post its own images and copy about the product, but can't illustrate its ads with the same professionally produced images or slogans found in an “official” ad.

Even more aggressive protection exists if the manufacturer can locate the reseller's Web-site host. A vendor can put the Web site hosting the allegedly infringing material on notice that it may be harboring infringing material. This so-called take-down notice demands immediate removal of the vendor's intellectual property (such as its product names or images) from the host site. A host that still allows it online, after a warning, could itself be liable for contributing to the harm.

The vendor also has an absolute right not to sell to anyone who doesn't follow its rules. The distributor who wants to ensure continued access to a product should consider that it could lose such access with the first online sale below list.

Although these remedies exist in theory, however, manufacturers determined to protect their brands online may find these remedies difficult ' and expensive ' in practice. Most importantly, no one prefers to sue a customer, even one that doesn't follow advertising rules. Similarly, no firm wants the bad press that inevitably will follow actions that could be portrayed as bullying, whether directed to individual consumers who use brand names in their online auctions, or small businesses that thrive on auction sites.

Moreover, expensive legal efforts may be necessary just to find online infringers. Some Web-site registrations simply list a post office box. Even worse is that today, some domain registrars advertise that they will mask true WHOIS data, so that a subpoena is required to locate the seller.

Getting Out Of Town

The Web also makes it very easy for an online seller shut down by a compliance program to just re-emerge at a different Web site, perhaps even in a different country. The manufacturer must then start over to shut the new site down. For example, Philip Morris' brand-integrity program recently won a hard-fought victory against an online seller of untaxed gray-market goods. When the seller simply continued sales through different Web sites, the court ordered those Web sites transferred to Philip Morris.

But that win just began the battle. On its Web site, the seller mocked Philip Morris for what it called an unenforceable “virtual victory,” and quickly transferred its Web site outside the court's jurisdiction, to Switzerland. Philip Morris vowed to continue its fight, but its general counsel conceded that brand protection “truly is a global effort.”

Ultimately, each vendor must weigh the costs and benefits of allowing its products to be sold online, whether it sells the goods and services itself or allows others to sell them. The perceived harm from online sales, in dollars and bad publicity ' if it can even be measured ' must exceed the cost of trying to cut the sales off.