E-tail expectations too high to counter doom declarations

by Eric Peterson

For those keeping score, here’s my e-commerce purchase tally to date: a Gene Simmons action figure ($7.50), an Andre the Giant poster ($2), a Sanity poster ($10), “The Simpsons” poster ($10), “The Book of the SubGenius” ($15), The Sims video game expansion pack ($30), a few bumper stickers ($15), a few CDs ($75), and one Compaq PC ($1,200).

I was quite happy with each and every one of these purchases ? aside from the PC, which didn’t work out of the box and, on my end, required re-packing, returning, re-assembling my old system and waiting. Note: I will never order a computer online again; however, I don’t think that my $1,364.50 in purchases has served as much consolation to the dot-coms that once envisioned selling me everything from tomatoes to cars and have since boarded up their windows and liquidated their servers.

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With the great e-tailing shakeout now in full swing, pessimism has replaced unbridled overconfidence, and with good reason. Like communism, a consumer-oriented Web store looks pretty good on paper, but most consumers are like me. One bad experience with a big-ticket item can sour even the most foolhardy technophile on the whole system.

Beyond impulse shopping for the few commodities that capture my fancy (see above), I’d much rather head down to the old brick-and-mortar store, part of a scheme that was never broken in the first place, no matter who tried to fix it.

Beyond all the gloom and doom in the media, the holidays were not all that bad for the e-tailing world ? with the experts reporting something around 100 percent growth from 1999 to 2000 ? but the expectations (and investments and previous losses) were so perversely high that anything this side of a Yuletide miracle amounted to bad news.

“I suppose, since it hasn’t matched expectations, somebody’s estimates were off,´ said Donald McCubbrey, director of the University of Denver’s Center for the Study of Electronic Commerce. “One thing I have been maintaining for three or four years, in the Internet space, particularly in the B2C space, there’s going to be bigger winners and many losers. We used to say 1,000 flowers are blooming. Now 1,000 flowers have sprouted and 998 of them are going to die.”

McCubbrey sees the current wave of e-tail failures as part of a natural evolution for the industry. Without a solid business plan, without a path to profitability, without big-time retail experience, without anything but an idea and a pile of ultra-flammable money, many e-commerce businesses were doomed from day one, he noted. “I think what happened is people thought this was easy, and it’s not easy.”

“The key is repeat business and the ones that build relationships will succeed,” McCubbrey said. E-tailing will be around for the long haul, but like brick-and-mortar and mail-order retail operations, he added, “If you don’t delight (customers), they don’t go back there.”

McCubbrey highlighted Greenwood Village-based eBags Inc. as one of Y2K’s holiday success stories, pointing to the company’s depth of industry-specific experience as a mitigating factor. “Look at the top eight executives, and they’re merchandisers. They all came from Samsonite,” he said.

“The holiday season, for us, was fantastic,” touted Peter Cobb, eBags’ vice president of marketing, citing a 100 percent increase in traffic and an 80 percent gain in sales over 1999. The icing on the cake: “We almost doubled our sales with one-third the marketing budget we had last year.”

Bags, Cobb added, are proving to be a nice match with the Internet. “In our category, there isn’t really a Toys ?R’ Us retailer or a Barnes & Noble ? it’s very fragmented.” Two more keys: eBags’ convenience and selection.

Will these factors be enough for eBags to succeed in the long term, considering they don’t project profitability until late 2001? “Our feeling is it’s going to be a tough next couple of months,” Cobb said. “But come early summer, people are going to look at who’s still standing and say, ?Now they survived a tough time ? they must have done something right.’ There’s a chance we’ll remain standing when a bunch of powerhouses have gone under.” Not exactly unbridled overconfidence, but not exactly pessimism, either.

While many onlookers view the current shakeout with a mindset comparable to that of crash aficionados at the speedway, Cobb watches with exhilaration. “From a business standpoint and a case-study standpoint, it’s a fascinating time. These are the challenges that you really like.”

In the end, the New Economy isn’t really all that new after all. It’s still about streamlined supply chains, customer satisfaction and, most importantly, the bottom line. “I’ve been telling my students for a while, if you want to buy a good dot-com, buy Wal-Mart,” McCubbrey said.

Contact Eric Peterson with ideas for upcoming E Report columns by e-mail at ereport@usa.net