Blinded By The E-Commerce Gold Rush

Not a day goes by without the press reporting yet another story about a small start-up that has suddenly exploded into the e-commerce stratosphere. From literally nowhere, a company appears, gobbles up an untapped market and becomes an IPO Cinderella.

Welcome to the new Gold Rush, my friends.

It seems that the Internet Gold Rush has fostered the same kind of hysteria that its 19th century counterpart did. As people stumble all over themselves to stake a claim to the e-commerce motherlode, everyone who ever dreamed of “making a mint” is heading west in cyberspace.

Well, get ready to step over a sea of broken hearts on the cyber-trail to the Promised Land, because those who think that the Internet has leveled the playing field so that anyone with a modem, an idea and a Web site can just show up and compete with the corporate giants is sorely mistaken.

Reality Versus Dreams

Now, I will be the first to admit that the Internet has created an arena in which the small start-up has the potential to compete with larger, well-established operations, and I applaud the way in which it has enabled those who have traditionally been faced with more challenges, e.g., minorities and women, to compete without the stumbling blocks of the past.

Still, the problem is that so many people have gotten caught up in the rush to make “easy money” that they have failed to consider what it takes to run a profitable business of any kind. The proliferation of store hosting Web sites such as Yahoo!Store and other simple access venues has caused many of these claim-jumpers to act irrationally.

I wonder if these same people would blunder into a multi-year lease for a storefront. Perhaps they cannot see the similarities between a virtual store and a brick-and-mortar operation, but it is difficult to believe that people would consider opening their operations without planning how they are going to handle service, distribution and fulfillment.

A Mad Rush

The truth is that the mad rush to grab a piece of cyberspace has infected both the small start-up and established brick-and-mortar businesses. Even major companies such as Wal-Mart and Levi Strauss have found e-commerce to be a more challenging task then they once thought.

Just as Wal-Mart put off the launch of their Web site, we were notified that cyberspace and Levi Strauss didn’t have that “tapered fit.” Only 12 months after they began selling their products through their Web sites, the venerable zillion year-old clothing company decided to pull the plug on the operation.

Yet another established company that has been eaten by the Internet monster is Britannica.com. The encyclopedia unveiled its online venture a little more than a week ago, but unexpected traffic has jammed the site and has made it unavailable to most visitors. I have tried to log on several times and have never gotten past the apology letter on the home page.

Let’s face it, even the successful companies face down demons on the Internet. eBay has been dogged by meltdowns and outages for quite a while now, and let us not forget the battles that AOL faced in trying to convince the public that constant busy signals were not something for subscribers to be concerned about.

Is There A Moral?

I suppose that I could launch into a seminar about planning for scalability and ensuring that sites are equipped with appropriate hardware and software, but I’m certain that if would-be Web denizens haven’t already thought to do it, then what I say won’t matter.

The Net will be a place in which dreams are created, but it will also be a factory of nightmares. If small companies hope to survive, they must learn from both the mistakes and the success stories and remember that get-rich quick schemes promoted by technology-savvy peddlers are the snake-oil of the new millennium.