E-Commerce Meets e-Reality

It wasn't much more than a year or so ago when most of us who worked regular 9-to-5 jobs were suddenly labeled as old economy, old school, tired thinkers, or perhaps even behind the times. A new technology was taking over with a new economic model that was causing a reinvention and reawakening of American business. As a result of our collective inability to think "new," we were told over and over that we risked being left behind, and that our perceptions of the retail marketplace were clouded by antiquity.
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It wasn't much more than a year or so ago when most of us who worked regular 9-to-5 jobs were suddenly labeled as old economy, old school, tired thinkers, or perhaps even behind the times. A new technology was taking over with a new economic model that was causing a reinvention and reawakening of American business. As a result of our collective inability to think "new," we were told over and over that we risked being left behind, and that our perceptions of the retail marketplace were clouded by antiquity.

It wouldn't have been so hard to swallow had it not been for the arrogance of many in the "new order." That, and the fact that no matter how one might protest the apparent fallacies and weaknesses of this new way of doing business, the smart and the arrogant knew how to put you in your place with a torrent of techno-babble.

To make matters worse, all those supposedly "brilliant" venture capitalists threw money at the new order. Money flowed, empires arose, and newfound wealth was flaunted. It was a world sans dress codes, climbing walls by cubicles, free lunches, Super Bowl advertising spots, New York media boondoggles, and salaries so high it made anyone's head spin. Profit? No need … this is the New Economy, remember?

And then the market hiccuped. Overnight, it seems, VC's tightened purse strings, leaving execs who couldn't even spell the word "retail" desperately trying to slash overhead while running an on-line store efficiently enough to make – gasp! – an actual profit.

As granddad used to say, "The chickens have come home to roost." No matter what new manifestation the captains of the e-commerce ship adopt, they've been uncovered for what they really are — business adventurers without a compass whose incredible chutzpah made people really think they knew what they were doing and where they were going.

Compare two realities:

  • REI, which managed $41 million in Internet sales in 2000 under the leadership of Matt Hyde, who we can assure you does not have millions in stock options or a salary exceeding $150 thousand.
  • Fogdog, which recently laid off 116 employees, reported only $7 million in sales in 1999 (The company may eclipse $16.5 million, barely, for 2000), and pays its CEO Tim Harrington $240 thousand and more stock options than we can fathom.

Little wonder Fogdog struggles while REI prospers.

At last count, the total layoffs from e-commerce sites alone, as reported by The Standard, hovered at 6,096. The epitaphs on company gravestones were revealing: Cost-cutting. Closing business. Business model shift. Merger consolidation…

No, e-commerce is not going to disappear. BizRate estimates on-line sales will have inched beyond $4.2 billion for 2000, up from $3.2 billion in 1999. And, yes, more folks are shopping on-line too – 49 million compared to 40 million in 1999 according to Harris Interactive. Still, we've a long way to go. Even a good retailer such as REI who sells effectively both on-line and through brick-and-mortar channels is still realizing only 7 percent or less of its total revenue through the Web.

There will be more layoffs and more sites shutting down in the next year, that's for certain. Even with the current negative climate, SNEWS® would venture a guess that the Web-economy will become as significant an influence on business in the future as the automobile was on business through the early to mid 1900s. Despite that outlook, though, we imagine that a look back on the youthful days of e-commerce 10 or 15 years from now might be viewed similarly to how our forebears viewed the Alaska Gold Rush — there will be a number of notable winners but, frankly, far too many losers.

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