Amazon.com has finally turned the corner on the road to profitability, eBay set earnings records in the second quarter, and brick-and-mortar chains are buying into the e-commerce channel in droves.
Does this mean the e-tail shakeout is finally over? That depends on whom you ask. Analysts have differing positions about whether or not we have seen the last of the dot-com dropouts.
But industry watchers do agree on one thing: Multichannel retailing is the future of e-commerce.
Debate the Dot-Coms
Pets.com and Webvan are two of the most-recognized fallen dot-coms. But for all the highly publicized, pure-play failures, hundreds more quietly shut their doors.
“Most of the dot-com shakeout has occurred already, Nielsen//NetRatings analyst Dawn Brozek told the E-Commerce Times. “But some small players are still going under.”
Conversely, Gartner analyst Geri Spieler said the e-tail model will likely continue to evolve too much to declare an official end to the shakeout.
“Is the e-tail shakeout over?” Spieler asked sarcastically. “The answer is a big, fat, bold ‘no.’ There is still a long way to go — and for reasons from A to Z.”
Reasons A to Z
Analysts said that aside from financial issues there are three key challenges for e-tailers: gaining the trust of consumers, finding the right merchandise mix and enhancing services across the board.
True, new users are jumping on the e-commerce bandwagon every day. But it takes time to convert e-mailers and online game players into confident Internet shoppers.
For the most part, say analysts, it was the product mix that sabotaged many early e-tailers. Selling furniture online, for example, is as impractical as shipping heavy bags of pet food.
“The types of products that tend to sell well online are either inexpensive — meaning they are low-risk — or they are cheap to distribute,” said Brozek, noting that books, music, airline tickets and flowers are still leading the way.
Service Issues
But perhaps the biggest challenge — and the greatest untapped opportunity for corporate cost savings — lies with service issues.
Beauty shops and automobile service providers, for example, could let customers schedule appointments online. Then customers could synch their personal digital assistants with their e-mail clients and receive a reminder several days before the appointment.
These self-serve capabilities will be vital in the coming years as technology becomes even more pervasive.
“Service online has yet to be fully explored,” said Spieler. “The next wave of e-tail is combining e-commerce with a service component.”
Multichannel Experience
Brick-and-mortar players are better positioned, with deeper pockets, to provide the type of services Spieler described. Familiar offline brands also have something else that pure-play e-tailers do not yet have: established consumer trust.
“When we look at the major e-commerce categories, most are dominated by the trusted offline brand names,” said Brozek.
According to analysts, this shift toward multichannel retailing — and the beginning of the end of the e-tail shakeout — started in late 2000.
“The dot-com shakeout might continue, but it’s primarily among the very small players,” said Brozek. “I can’t see eBay or Amazon folding at this point.”
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I believe that e-tailing is much closer to retailing than anyone imagines. Amazon and e-Bay are survivors because they deliver good products. Retailers that move into the Internet space will succeed if they do it well. And I think it’s riduculous to believe that there will be any success stories from "Pure-Plays" (I don’t think Amazon is a pureplay anymore – they have been forced into the service business.) No one’s going to make it if they think they can do it all online. Customer Service is going to be the big winner here. That’s why LL.Bean and other mail-order brands are succeeding here too: because they had a solid base from which to deliver a good product with solid sales support.
I believe the next wave of successes will come from those "shopping helpers," such as PriceGrabber and MySimon, if they can measure up in terms of support functions – like answering the phone.
And finally, I believe that the Credit Card Companies (Visa, MC, AmEx) and Shipping Companies (FedEx, DHL) need to make a bigger commitment. They’ve all been watching what’s happening, gratefully enjoying the growth without really lending much help to the process. Those who get involved with services can really steal the show.
The broad segment of internet "lookers" will not be totally convinced to become "Shoppers" until all the services from viewing to delivery are covered off.
Guy White
CEO, TheThingsIWant.com