E-Businesses Hope To Learn That Edu-Commerce PaysE-Businesses Hope To Learn That Edu-Commerce Pays

Imagine browsing in a bookshop and discovering best-selling author John Grisham in the back room, teaching a free class about his latest novel. Or walking into a branch office of your brokerage house to investigate investment opportunities and finding a free class on Investing 101, scheduled to start whenever you choose to take a seat.

That's convenience, you think. Great personalized service. You buy the Grisham novel on the spot and increase your investment portfolio at the brokerage. Perhaps you'll be more inclined to return for future purchases or more investing.

At least that's what several E-commerce players hope. They're investing in the virtual equivalent of book seminars, branch workshops, and other adult-education courses in a growing trend dubbed edu-commerce, edu-tailing, or learning through commerce. Retailers, financial-services firms, and other business-to-consumer companies are taking advantage of the collaborative opportunities of the Internet, by providing free courses that tie in with their products and services. They're seeking to improve sales, lower customer-acquisition costs, and boost customer satisfaction.

"Retailers are displaying a service that creates brand loyalty, whether it be buying books or giving investment advice," says Peter Stokes, executive VP at analyst firm Eduventures.com. "Customers like freebies and appreciate things that could help them better use the service or product they're buying."

Education as a revenue driver isn't a new concept; traditional retailers have long offered free classes or workshops that spotlight their offerings. Home Depot Inc., for one, holds in-store home-improvement classes. But Internet shoppers are infamous for their brand disloyalty, so "stickiness" is an ongoing concern for businesses online. For every 100 E-commerce sites the average shopper visits, he or she makes purchases on only 2.5 of them, says Rob Leathern, Jupiter Media Metrix's E-commerce analyst. The future looks more promising, though. The Internet population is growing--142 million in the United States alone--and more of those people are increasingly comfortable with online shopping, Leathern says. In fact, 46% of Internet users made purchases online last year, compared with 31% in 1999, Jupiter Media Metrix says.

Personalization, E-mail advertising, and other attempts to strengthen brand loyalty online have had limited success. On the theory that consumers are more disposed to purchasing products and services when they're educated about the offerings, online businesses increasingly are turning to edu-commerce to improve sales. They can take free education one step further by combining the functionalities of online learning with those of online merchandising and customer-relationship management technologies. Through the capture of student information, preferences, and buying patterns, "this outward education turns into a CRM tool," Stokes says.

Yet Stokes and other analysts are hesitant to declare edu-commerce a successful marketing medium just yet. They cite the sizable investment and the difficulty of tying free courses to certain kinds of products or services. Blue jeans, for instance, don't lend themselves to edu-commerce as easily as goods such as books or computers. "Edu-commerce is going to be a real market, but businesses haven't exactly found the right way to tap it," Giga Information Group analyst Claire Schooley says.

One exception, she says, is Barnes & Noble.com LLC. The online subsidiary of the New York book-retailer created Barnes & Noble University, a program that features free online courses on subjects ranging from guitar playing to Shakespeare. The bookseller offers more than 50 four-week courses, each tied to a book in its inventory, and three or four new courses each month. Students buy the required reading material (from Barnes & Noble.com, the company hopes), register on the site, and communicate with classmates on a message board. The instructor, often the author of the text, posts new reading assignments and course quizzes twice a week.

Classes are popular: Barnes & Noble University had to set enrollment caps of 2,000 students per class for technical courses and 5,000 students per class for the other courses.

Strong sales also show Barnes & Noble University to be a success, says Len Gilbert, Barnes & Noble.com's VP of distance learning, though he declined to disclose figures. "If you provide free education wrapped around the book, people will be eager to purchase it, much like offering comfortable reading chairs in the stores." Since the program's inception in June 2000, more than 500,000 students have registered, and the average student takes two classes.

While Barnes & Noble University focuses on a direct connection between courses and sales, which are generated by the required-reading materials, other retailers use edu-commerce to home in on different business objectives. One of those is discount broker Charles Schwab & Co. "Our Learning Center was designed to deepen relationships with existing clients and to attract prospective clients to our offerings," says Barbara Haynes, director of integrated client experience and application development for the San Francisco company. "It's not only to educate but to provide a sample of what kind of quality service and content you would have with Schwab."

The Charles Schwab Learning Center offers more than 50 online courses, with titles ranging from Investment Fundamentals to the unsurprisingly popular Navigating Today's Market. The Schwab courses, which are developed in-house, tap various E-learning formats. There are 16 self-paced online courses, plus 40 live, virtual-collaboration classes that use conferencing software from WebEx Communications Inc. With WebEx, a presenter's course is streamed out live to attendees. The students can ask questions in real time via E-mail. Since Schwab started offering the classes in December 1999, more than 200,000 people have enrolled, with enrollments in the past three months averaging 1,000 each week.

The live-collaboration aspects of Webcasts are particularly appealing for edu-commerce. Datek Online Financial Services, the discount brokerage of Datek Online Holding Corp. in Jersey City, N.J., used Yahoo Broadcast Services to offer its first live Webcast 18 months ago. The course on decimal trading attracted thousands of registered users, says Dave Whitmore, Datek's VP of customer development. Today, Datek uses Webcasts and interactive lessons, in addition to standard online informational resources, to offer education on topics such as how to use certain Datek services, how to get quotes, and how to place orders.

"There's ample evidence from J.D. Power and other surveys that individuals want education," Whitmore says. "Working with Yahoo Broadcast, which understands the hurdles and the challenges of streaming media, has made our own attempts have a successful turnout, so far."

Many businesses partner with E-learning firms on edu-commerce to reduce the cost of trying to handle it in-house. Those who go it alone could spend $3 million to $5 million on the hardware, software, and staffing required to develop, implement, and maintain an edu-commerce program over a six-month period, Eduventures. com says. For companies that work with E-learning partners, the development-only costs of basic courses can start at $60,000 per course, Giga's Schooley says.

Working with Powered Inc. keeps the costs for Barnes & Noble University down dramatically, Barnes & Noble.com's Gilbert says. Powered develops and hosts courses for 10 retail customers. Two million registered users are taking classes on Powered-hosted sites, Powered VP of marketing Eric Newman says.

Several technology companies have established partnerships with E-learning companies to offer computer and software courses on their Web sites. Powered's customer roster includes Motorola Inc. subsidiary Metrowerks Inc. and Hewlett-Packard. And Dell Computer, which hosts its own edu-commerce offerings, worked with E-learning content provider SmartForce LLC to create EducateU, a program that offers more than 1,200 free and fee-based courses.

More than 250,000 users have registered since Dell's EducateU went live in December 1999, says Nicole Crain, brand manager for the site. New courses are developed to correspond with new products, such as a digital-photo-editing class for a line of digital cameras. When customers buy Dell products, they're offered two EducateU courses for free, in the hopes that they'll return for others, Crain says. "It gives us a competitive difference and enhances the experience of buying from Dell," she says.

Industrywide, the average conversion rate of Internet browsers to buyers is 25% with edu-commerce, compared with a 1% conversion rate without it, Powered's Newman says. His company's customers see a return of $7 for each dollar of edu-commerce investment, typically within a year of implementation.

Many online businesses, such as Dell, decline to discuss their return on investment from edu-commerce. And analysts question edu-commerce's ROI potential, which could indicate a precipitous downside for the strategy in these times of cautious IT spending. Eduventures projects a $430 million edu-commerce market in 2004, a fraction of the $4 billion that International Data Corp. projects for the overall E-learning market that year.

Plus, only one pure-play edu-commerce provider, Powered, remains in business, notes Eduventures' Stokes. "The relationship between content and collaboration is pretty clear, and edu-commerce has a viable business rationale," he says, "but I wouldn't say this is the next biggest thing."