And the Dot-Com Survivors Are …

Take a look around Dot-Com Island. There isn’t an e-tail site still alive that hasn’t been affected by the recent shakeoutto some degree. However, some of the Web merchants are more likely to survive than others.

The defining characteristics of those companies vary slightly, but one thing they all have in common is the potential to provide a return on investment for their shareholders.

After a careful look at all the players, analysts agree that eight companies have a great shot at beating the shakeout and making it into the final rounds. After the big three of eBay, Yahoo! and Amazon, the analysts see multi-channel companies such as iQVC and JCPenney on top of the dot-com game.

And, like the hit TV series”Survivor,” the dot-com winner’s circle includes a few surprises.

(1) eBay

With fourth quarter financial results that convincingly beat analystestimates and US$48.3 million earned in 2000, eBay is poised forcontinued spectacular growth.

Despite bumps along the road that have included serviceoutages, disputes with users over making off-site deals, and fee structure changes, eBays business model and its first-to-market advantage put the company far ahead of its rivals.

Indeed, the company has so dominant a market share that many believe it has no real rivals. eBay’s fundamental strengths have led the company to rapid global expansion.

“Theyve created a brand that is stronger than the newspaper classifieds,” Gartner Group research director Robert Labatt toldthe E-Commerce Times. “Theyve globalized and regionalized the classifieds at the same time — that’s pretty powerful stuff.”

(2) Yahoo!

Like eBay, Yahoo! does not have to deal with fulfilling orders or shippingproducts to buyers. The portal giant still expects a profit of between 33 cents to 43 cents per share in 2001, despite the current downturn in Net advertising sales.

Although the company’s shares have fallen along with the cooling economy,Yahoo! is gradually trying to wean itself off its dependence on ad revenue.

Ranked the No. 1 shopping portal in December, Yahoo! will surviveas long as it continues its current trend of partnering with brick-and-mortars such as Circuit City and Target.

(3) Amazon

Despite lowered revenue estimates for 2001, Amazon has been successful intrimming costs and staying on target for reaching profitability by the endof the year.

Amazon’s U.S. pro forma operating loss decreased from 24percent of net sales in the fourth quarter of 1999 to less than 2 percent inthe fourth quarter of 2000.

“They look to be in pretty decent shape as far as financial health and thedrive to profitability, but they may not end up being as big as they hadhoped,” said Morningstar.com stock analyst David Kathman.

(4) iQVC

With strong customer service reviews and the No. 1 ranking in Forrester’s most recent general merchandise rankings, iQVC, the Internet arm of television powerhouse QVC, excels where so manyother dot-coms have failed: delivery and distribution.

According to Gartner analyst Labatt, iQVC is successful because of a deep understanding of direct selling. Labatt commented that iQVC is “a strong contender” because of its background in catalog and television sales.

(5) JCPenney.com

Like iQVC, JCPenney.com is able to draw on a history of shipping individualpackages to people efficiently. Rather than relying solely on e-commerce,both companies use the Internet as an additional sales channel to enhancetheir business.

These companies do not care how people buy, asalong as people buy from one of their channels. Other Internet clothing merchants in that category include Eddie Bauer, J.Crew and Lands’ End.

“The catalog to Web apparel companies will be successful becausethey already have the model,” Labatt said. “They’ve got an established brand, customer baseand distribution in place.”

(6) Active.com

Active.com has captured the supply side of a unique million-dollar market:the registration and data management of services for participatory sportsevents, teams/leagues, and park activities. Through the company’scomprehensive database, users can find, learn about and register online forathletic events and activities.

“They provide activities that are a deep part of peoples’ lifestyles, and atthe same time are things people pay for on an ongoing basis,” said Labatt.

Active.com is backed with $52 million in venture capital financing with strategic investments from Ticketmaster Online-City Search and a recent second funding round led by Deutsche Bank’s ABS Ventures.

“Active.com’s recent closing of second-round funding confirms that investors are still interested in consumer-oriented Internet business models that deliver utility, convenience and revenue,” Labatt said.

(7) Barnesandnoble.com

By merging its sales operations and inventories with its retail namesakelate last year, Barnesandnoble.com may have successfully integrated itsproduct inventories and distribution channels.

The move cut back onshipping costs and gives consumers more options for pickup, purchaseand returns.

“They’ve stayed focused on their core competencies and grown that category,”Labatt said.

(8) Travelocity

According to Forrester Research, online travel sales will skyrocket to US$29billion by 2003, and Travelocity is in line to reap those rewards. Handily surpassing Wall Street expectations in its fourth quarter revenue report, the company expects toreach profit status by this summer.

Boosted by its partnerships with America Online, Priceline.com and AT&T, further consolidation efforts could ensure that Travelocity will continue to grow into profitability.

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