E-Commerce Times Talkback
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We may have seen the worst of e-tailing attrition in the last two years, but we have not
seen the last of it. Surviving online retailers still have substantial work to do in order
to reach the end of 2002 without closing up shop. "The shakeout is not over," Gartner
Group research director Geri Spieler told the E-Commerce Times. "Unless pure-play
e-tailers get the attention of the consumer, they will have a difficult time surviving."
Based on press releases, some pure-play retailers like BlueNile and eBags seem to be posting profits last quarter (Q4). eBags reports $10 customer acquisition costs, nearly $500,000 revenues per employee, 1.2 million bags shipped, inventory turns of 25x per year, way better than average margins. So, a few e-tailers seem to have managed well through the dot bomb, the economic downturn and the terrorist attacks.
Contrary to what most people believe, the pure-play sector's downfall wasn't caused by mismanaged marketing budgets, but by 1) the Internet public's concerns about the security aspects of online shopping, 2) the somewhat difficult task of using electronic shopping carts, and 3) the public's innate slowness to embrace new technical innovations.
It will be incorrect to lump all the pure players together and perform their last rites. As we saw in the last Christmas, Target, bluelight and several others actually increased their internet sales. I think it is more important to know which products sell on the net and how to maximize the sale.
Most brick-and-clicks, including those you noted in your post, are doing reasonably well, but the entire retail pure-play sector will undoubtedly collapse unless the pure-plays can relieve their excessively high customer acquisition cost and improve their extremely poor customer retention performance.
Those are all factors, but it is a mistake to discount the mismanagement of the revenue streams, the poorly written and thought out business plans and the multitude of other things that killed the dot-coms.
Many pure-play failures were indeed caused by mismanagement, poor planning and other factors, but most failures, probably in excess of 80% or more, were caused by the sector's extremely high customer acquisition costs, which were largely aggravated by the factors I noted in my post.