Meet the Mighty Morphin’ E-Commerce Rangers

There’s only one directive that seems to hold true across the e-commerce landscape these days: to survive, literally, at all costs.

While some e-tailers are desperately seeking new revenue sources and better grossmargins to stave off hostile investors, others are completelyreinventing themselves, morphing their business models into entirely newentities.

But is changing a company’s stripes from armadillo to zebra ever worthwhile, or is it just another fruitless attempt to keep the lions at bay?

“Mostly they’re doing it out of sheer terror, and terror’s a greatmotivator,” IDC analyst Jonathan Gaw told the E-Commerce Times.

Examples of dot-coms reinventing themselves abound.


Take online deliveryservice provider — or at least, take its suffix. Last month, Kozmo laid off 60 employees and shed the dot-com part of its name, in realigning its business away from the Web and toward catalog and call center sales.

Software retailer Egghead switched from brick-and-mortar to click-only, while chic clothing store went the opposite direction, from brick-and-click to brick-only.

According to published reports, made the switch because of the marketing costs involved in doing business on the Web, not poor online sales.

Gym Dandy

After reportedly spending US$13 million on marketing in2000, sold off its Web assets, but kept itsbrick-and-mortar store, called Lucy@crunch, inside a New York City gym.

For its part, Internet postage startup E-Stamps decided to get out of the floundering Internet postage business altogether, jumping into Web-based shipping and logistics — although no name change is planned.

The list goes on and on, and includes companies switching from business-to-consumer (B2C) to business-to-business (B2B), or from B2B to infrastructure/application service provider (ASP).

Giant Shift

Even Microsoft is beginning to change its colors, morphing from PC software vendor to a leader ofInternet platforms, all the while fighting off a federal court’s order that the company break into two.

According to many analysts, Microsoft gave yet another signal that its future lies in the .NET strategy — and beyond the PC — when it announced in February that Rick Belluzzo, the group vice presidentoverseeing the development of the Windows.NET operating platform and the MSNNetwork of Web sites, will become Microsoft’s president and chief operating officer.

Indeed, Steve Balog, director of global technology research forMerrill Lynch, recently assigned Internet stock analyst Henry Blodgetto cover the software giant, saying in published reports that “we thought Henry could do a good job with Microsoft, since it is morphingmore and more into the Internet space.”

Identity Crisis

How can a company and its workers with one mission and set of job responsibilities possibly make a smooth transition to a brand new business model? The ability to adapt to shifting goals is key.

“The rules have changed somewhat,” Yankee Group analyst Christine Loeber told theE-Commerce Times. “Success is gained by achievingprofitability. The companies that are changing are adapting to these rules — they’re adapting from where they’ve been to what they need to do to beprofitable long-term.”

Said John Challenger, chief executive officer of job placement firm Challenger, Gray & Christmas: “I think these companies are searching for revenue and viability. They’restill in start-up mode, and during a period of start-up you constantly morphas you look for where the gold is.”

According to Challenger, the best companies “are creative and attentive to the marketplace, they listen towhat their customers are looking for, and if that means bricks and clicks,or purely digital, that’s okay – they have to find a model that really worksto create a revenue stream that outweighs their costs.”

This Way Please

Will these changelings ever find the elusive pot of gold? IDC’s Gawsaid that depends on the goal behind their repositioning strategy.

“If they have the idea that maybe they should have been brick-and-click instead of a pure play or vice versa, that generally is not going to work,”Gaw said. “It’s difficult to go from pure play to brick because there’s generallysomeone already in that market with a better brand name.”

It’s much easier for an established brick-and-mortar chain to open an online store, the analyst said. Moreover, the better strategy for a struggling e-tailer may be to sell itsassets or partner with an established brick-and-mortar company.

Survivor Island

Still, giving in to a natural change when it presents itself may be the best bet.That was the case at, a domain name registered by a software company years ago, with no inkling that beginning in 2000, it would be inundanted with e-mail and Web traffic from fans of the hit CBS TV series “Survivor.”

In response to traffic, decided to morph into a fan site for the series.

“Because of the huge volume of people looking for information about the Survivor TV show, we moved the software Web site while the show is running,” a message on the Web site reads. “We will move it back after the show goes away. We have no idea when that might be.”

Reinventing the Web

Unusual examples aside, e-tailers who adeptly leverage their varioussales channels, rather than just chopping one off, will “fare best in the long run,” according to Loeber.

Loeber pointed to as an example of a company that is reinventingitself by rethinking the product categories it sells online.

“Many products that have low gross margins or high shipping costs relativeto revenue produced by their sales don’t make sense to sell online,” Loeber said.

In other words, it’s not the sales channel that matters, but how well the company uses it.

“Kozmo’s business model is inherently flawed [because] they’re pinned down bytheir one-hour delivery promise,” Loeber said. “Going to a catalog will help [Kozmo] customersbecome more aware of what they’re doing, but they still have serious issuesto deal with,” Loeber said.

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