Fashionable ecommerce wisdom these days says online retailers must have a brick-and-mortar complement. Therefore,
the old-guard retailers will win since they've already got a real-world store.
The same wisdom says it will be the old-guard retailers taking over or killing the Internet pure plays, which are doomed.
That's only half right.
E-tailers are pure-play people. They don't have a storefront. They got a lot of attention last year, which led to huge valuations on Wall Street. Now the pendulum has swung completely in the other direction. The truth is that there is plenty of room on the elevator for Internet-only retailers. At the same time, old-guard companies aren't the only ones that can create a combined clicks-and-mortar presence. I'll tell you why after a short recap of some the ecommerce news of late.
Recent headlines may be giving some people the jitters as they wonder about the health of their favorite ecommerce sites. Here's a sample.
Furniture.com lays off 40% of its workforce and withdraws plans for a public offering. The move is an attempt to make the most of the money the e-tailer still has in the bank.
Webvan Group will acquire HomeGrocer.com in a stock swap valued at $1.2 billion. This is natural consolidation on a very competitive field.
Kozmo.com, deliverer of food, entertainment and household products, lays off 24 workers but may still be planning to go public.
What's the message here? Not all e-tailers will survive the continuing shakeout, but the ones that have their eyes on the prize are beating a path to profits, and fast.
They know what Forrester Research is predicting: that global ecommerce will reach $6.9 trillion in 2004, or 8.5% of the world's sales of goods and services.
A couple of Wall Street analysts and a stack of investors gave Amazon a no-confidence vote Friday, sending the company's stock tumbling 19%. Seems Amazon took the whole ecommerce sector with it.
This is a classic case of bandwagoneering on the part of investors. I say there is nothing wrong with Internet-only business models, and beating up on Amazon simply because they had a bad quarter is just plain shortsighted.
In fact, something like the Internet pure play existed long before the Internet. They were called catalog retailers, and those same companies are successfully migrating to ... guess where? The Internet. The idea that you must have physical stores to succeed is nonsense. Anybody ever heard of Fingerhut or Spiegel?
When Kmart entered the cyber world with its BlueLight.com, pure-play retailers and others got the jitters. Does this mean that the old-guard retailers will be taking over the Internet-only sites.
Hardly. In fact, we're already seeing in other areas where online businesses are gobbling up the old guard. The proposed AOL-Time Warner merger is an example, as are the half-dozen Internet magazines or sites that are now generating print versions of their offerings.
So, do you have to have a physical store to succeed in the new era? No, there will be plenty of successful pure plays. Will the hybrid clicks-and-mortar model be successful too? Yes, but it's not automatic that it will be an old-line company that will be the conqueror. We may see just as many Internet companies acquiring offline companies in order to create a powerful hybrid.
What do you think? Will e-tailers kill Main Street businesses or will it be the other way around? Hit the Talkback button and tell me.