The Seven Deadly Sins of E-Commerce

E-commerce companies made a lot of mistakes in theearly days, and the same errors torpedoed hopefule-tailers over and over.

The Web is haunted by the ghosts of those faileddot-coms, but at least the ones that have survived nowhave a good understanding of what not to do.

Pride Goeth Before a Fall

“The first deadly sin is to believe that you can sellanything over the Internet,” Giga InformationGroup analyst Andrew Bartels told the E-CommerceTimes.

That attitude led to e-commerce disasters likePets.com, Furniture.com and Living.com, which weretrying to sell things that did not make economic senseon the Web. “Product selection is one of the keysuccess factors,” Bartels said.

Some companies just had poor business models thatwould have failed online or offline, LoriIventosch-James, director of e-commerce research at HarrisInteractive, told the E-Commerce Times.

Some businesses were “poorly run, not well thought out ornot the greatest fit for an online market,”Iventosch-James said.

Gluttony for Growth

The second deadly sin was thinking that e-commercecompanies could look forward to skyrocketing growthfor the foreseeable future.

Because they thoughtonline sales would keep growing by 100 percent or 200percent year after year, many companies rushed to setup shop on the Web and just as quickly learned theerror of their ways.

“Except for EBay and Amazon, first-movers by and largehave not been successful. It has often been thesecond- or third-movers who have been able to learnfrom the mistakes of the first-movers,” Bartels said.

Channel Envy

Channel blinders were an unfortunate accessory worn by many failed dot-coms, according to Iventosch-James, who cited Circuit City and Best Buy as examples of companies that have an integrated channel strategy.

“It’s clear that one of the things e-commercecompanies have learned is that they have to integratetheir online and offline operations,” she said.

“If they don’thave a comprehensive channel strategy, they are reallymissing the boat. That is one of the lessons that waslearned early on — online is just one piece of thewhole picture.”

In some cases, e-tailers simply ignored otherchannels, which Bartels said was a huge mistake.Those companies failed to recognize the value ofother marketing channels, including paper catalogs andphysical stores. “A growing number of successfulretailers have now learned,” he noted.

Lust for Customers

A common but deadly sin was not paying enoughattention to customers. “People are learning that goodcustomer service is really critical in this particularenvironment,” said Iventosch-James. That is one reasonwhy catalog companies like Eddie Bauer are doing sowell online while some more traditional companieslike J.C. Penney and Bloomingdales have struggled.

Part of the customer service equation is customerfulfillment, and many e-tailers failed to make surethat the goods were in stock — or at least that thecustomer was informed when the company was sold out of a particular item.

In other words, companies did not “[make] sure that the promise of the online sale was met by the reality of the delivery,” Bartels said.

Another key aspect of e-commerce that manycompanies neglected was user experience on the site.

According to Bartels, “Good sites did this well. Bad sites lost customers they may have enticed with marketing by failing to make the experience a satisfying one.”

Greed with the Green

One of the deadliest sins committed by e-commerce companies wasturning a blind eye to costs. “A lot of the ones that failed burnedthrough an incredible amount of cash in a very shorttime — think of Blue.com,” Bartels said.

Caught up the Web whirlwind, many companies spent gobsof money on facilities, parties and perks — and theircarelessness led to many an e-commerce downfall.

Some firms did it right, however. According to Bartels,NetBank is famous for its penny-pinching president, who mandated the purchase of used computerequipment and low-rent office space. As a result, thecompany is one of the most successful Internet banks.

Slothful Planning

Deadly sin number six involved e-tailers’ single-minded focus on lowprices, ignoring other value propositions likeinformation, good service and unique products.

“The problem with being a low-cost provider is that you’reconstantly in danger of being beaten out by the nextguy,” Bartels said.

“Amazon does not usually have the lowest price, butthey compensate with superb execution, and they have alot of information that people can use to makeeducated buying decisions. That gives them moreloyalty,” he added.

And that leaves just the last sin — anger. That showsup after all the other sins have been committed, whene-tailers realize they have done everything exactlywrong and that they have no one to be angry at butthemselves.