E-Commerce Faces Life After September 11th

I spent some time in New York after September 11th. The city's business community had at least temporarily shifted its focus from profit-making to recovering from the terrorist attacks. Not surprisingly, people were not spending much money.

Last week, the Bush administration finally uttered the dreaded word -- recession -- conceding that an economic downturn is inevitable.

"The president is very concerned about the effects of the economy in New York, but not only in New York, throughout the country," White House spokesman Ari Fleischer told reporters.

Economists coast to coast chimed in with a chorus of "little or no recovery for the rest of this year." Traditionally, in this country, analysts say recessions last 11 to 14 months.

This leaves the near future of the U.S. economy largely in the hands of consumers, who for their part, are too shell-shocked to rise to the occasion just yet -- online or off.

Depending on Consumers

One major industry after another has taken a plunge. For example, the nation's airlines are predictably suffering and have jumped into overdrive in their fare-cutting efforts and employee layoffs .

In healthier economic times, cutting fares almost always stimulates business. Right now it's more of a desperation move. The ripple effect is already evident. Business fares, which comprise more than 50 percent of tickets sold, have yet to rebound.

Oil and gas has taken a severe hit since September 11th. Construction of new power plants is on hold, Americans are not driving as much, and overall demand has taken a nosedive.

Will consumers hear the call of an ailing economy, pump their disposable income back into the economy and save the day?

Guilty Consciences

Well, in the heart of New York, consumerism is idle.

I spoke to a number of merchants in New York, some near the site of the terrorist attacks and others uptown. While every one of them is hurting, one antique figurine shop owner summed up the situation:

"Look at what I sell," she said. "I almost feel guilty about wanting to sell my own merchandise right now. I'm not selling necessities here. But I will do whatever it takes to keep my business afloat. I'll slash prices on this merchandise, and I can tell you I have never done that in 23 years."

Again, slashing prices is a desperation move.

"People are going to be nesting now," said a custom shirt maker in Manhattan.

"Look at the streets. It's prime shopping hours and you don't see anyone carrying packages or shopping bags."

The Role of E-Commerce

Where does electronic commerce fall in this mix?

In some ways, e-tailers are in good shape. There are those analysts who predict e-commerce will likely benefit if Americans indeed go into a nesting mode. Hesitant to go to malls and still in need of diversion and merchandise, perhaps Americans will adopt online shopping as a necessary alternative, some analysts offer.

I spoke to a brick-and-mortar travel agent in midtown Manhattan who told me she might have to close her business by the end of the month if something radical does not happen to boost her industry.

"People are learning how to buy the same inventory I have sold for 15 years just by sitting at their home computer," she said.

In Greenwich Village, an independent bookseller told me he was using his own funds to stay afloat. Already besieged by "big-box" bookstores, he said simply, "I wish my name was 'Amazon.com.'"

Switching Gears

Maybe and maybe not. Amazon (Nasdaq: AMZN), prior to September 11th, predicted fourth-quarter success. The company is now likely wondering if it spoke too soon. And Internet travel sites, once the high-flying heroes that showed how e-commerce should be conducted, are suffering mightily as well.

Just as the world was changing its course after the terrorist attacks, Amazon was unveiling its new alliance with Expedia (Nasdaq: EXPE) and Hotwire, the popular online travel sites. This came right on the heels of its announcement of a deal with Target (NYSE: TGT), one of the leading retailers in the U.S.. It all sounded so strategic before our national tragedy.

Now Amazon, like all other businesses, has to regroup and determine what works and what does not. It's a new world.

Meanwhile, Back in the City

At Elaine's restaurant, a popular Upper East Side eatery in Manhattan, a waiter said to me, "Look how crowded we are tonight. You're seeing America right here. Did you think those bastards were going to keep us locked up at home? Not a chance. They don't know who they're dealing with. Knock us down and we just pop back up."

Eloquently put, one might say. Let's hope he's right. Our economy and our way of life depend on it.

What do you think? Let's talk about it.