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E-Commerce: Boom or Bust?

© 2001 Virginia Lawrence, Ph.D.

We are all reading about e-commerce companies laying off workers and/or closing down completely. Since we are also reading about the e-commerce companies that are exceeding expectations, what does this imply about the future of e-commerce? Can anyone be successful at e-commerce?

Let's look at a few of the recently closed or nearly closed companies. The unsuccessful companies have made big mistakes in the amount of money spent, the type of offer, the type of presentation, or the final delivery.

Furniture.com had a reasonable offer, but they signed an advertising agreement with Amazon.com to pay Amazon.com $45,000,000 over five years for a button on the front page of Amazon. With $9,000,000 per year committed to Amazon.com, the Furniture.com site required an incredible income stream just to cover their advertising. They went out of business this year.

Boo.com spent almost all of the $120,000,000 invested in the company before they closed recently.

Most of the e-commerce companies that advertised during the Super Bowl have already closed down. Their ads were confusing and cost millions to appear to the untargeted Super Bowl audience. Those businesses were operating on testosterone rather than careful business planning.

DrKoop.com is still limping along. They've spent $300,000,000, and they've been hoping to build revenues by selling advertising space on the site. It's a wonderful site, but it seems unlikely that it can earn the initial investment within the next few years.

The unsuccessful Internet startups in the news spent astounding amounts of money and counted on even more astounding revenues. Remember, most new businesses go out of business within the first few years. The stupendously-funded Internet startups get headlines when they go out of business.

What about the successful companies? The successful companies have spent a reasonable amount of money to put together the right offer, the right presentation, and the right final delivery. They have avoided overspending on untargeted advertising.

According to Forrester, shoppers spent $4.22 billion online in September. The Web is clearly growing as a place to shop. A few of the many successful sites are: VictoriasSecret.com, Shoebuy.com, AlbrightSeed.com, Ashford.com, eBay.com, and VirtualHardware.net. These companies don't make headlines, because they aren't throwing money around. They simply offer products people need, at a good price, with reasonable customer service. They spent sensibly on their site development and their marketing.

Yes, e-commerce will survive. Some companies are doing it well. Take a look at the e-commerce meter from Adventive. It shows exactly how sales are progressing.

~ Virginia Lawrence, Ph.D. is an Information Architect who publishes both in print and online. Contact her at virginia@spawn.org or visit her Web site at http://www.cognitext.com

 

 

 

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