Software giant to spur e-shopping explosion - Microsoft Corp.'s plans for electronic commerce through its Microsoft Network; includes related article on alleged antitrust violations and online services

LONG BEACH, CALIF. -- Electronic commerce is now only a $200 million market. But within the next five years, on-line transactions are expected to dramatically grow. And retailing will likely pave the way for that growth.

"It's a fairly small market today, but it's growing rapidly. There is going to be a fundamental shift in how people shop," said Rich Barth, group product manager of Microsoft's new Microsoft Network (MSN).

Microsoft plans to bundle MSN with Windows 95, the long-awaited operating system that will hit stores Aug. 24. Windows 95 is expected to sell about 30 million copies by the end of the year.

Realizing the tremendous potential of the overall on-line service, Microsoft hopes to create a compelling shopping environment for MSN subscribers.

Yet, there are several challenges involved in the future success of MSN as an on-line shopping vehicle, Barth said, speaking at the Microsoft Interactive Media Conference here last month.

The main challenges are gaining consumer acceptance and technology, which must provide security for billing and credit authentication. Microsoft's strategy, Barth said, is to work with key partners, focus on the company's current expertise and to create a marketplace.

Microsoft will provide its shoppers with secure transaction technology (STT), a set of services that ties into the existing bankcard system. The consumer, in turn, doesn't need to understand the specifics of the transaction. All he needs to do is shop and pay.

"With STT, the computer sends an encrypted order to the bank and then to the merchant. In some ways, it's more secure than the existing system," Barth said, adding that only the merchant can read the credit card order.

When the bank authorizes the transaction, the merchant generates a bill and sends it to the consumer, he added.

Instantaneous billing in "real" time is only one of the many benefits of retailing on MSN or the Internet.

Electronic retailing also creates direct marketing opportunities and allows merchants to augment their existing marketing mixes, said Ken Schneider, group manager of Electronic Commerce.

MSN merchants will establish two-way dialogue with each customer, Schneider said.

Retailers will be able to enhance their brand equity and offer 24-hour customer support.

"It's a medium unlike any other. It will give consumers 24-hour access to your brand and it is also a place where you can showcase your brand identity," he said.

Retailing on the MSN is also an invaluable way for merchants to gain insight into consumer purchasing patterns. "To be able to access purchasing information in real time is critical to your study of customers in the real world," Schneider said.

Schneider explained that MSN can be used to gather information like consumer profiles, interests and demographics. In addition to attracting loyal customers to on-line stores, merchants will be able to attract new customers by offering limited promotional prices and developing add-on and cross-selling opportunities.

The implication of electronic retailing will be dramatic, said Microsoft chairman Bill Gates in his keynote speech.

"It will reshape retailing," Gates said.

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