When Did Dot-Com Become a Dirty Word?

Online delivery service Kozmo.com appears to be quietly re-tooling itself, with a tip of the technological hat to the “old economy.”

The company quietly, yet significantly, dropped the “dot-com” from its name recently, and announced it would mail out almost a half-million printed catalogs, complete with a good old-fashioned toll-free number to call for ordering.

Although simple and straightforward, the move to catalog and calls may be a wise one on Kozmo’s part.

Why? Because in the eyes of many investors, consumers and industry observers, “dot-com” is yesterday’s news.

Not So Fast

Kozmo is not alone in its subtle move toward an offline business model.

In a culture that thrives on instant gratification, the dot-com revolution filled our needs on many levels. Yet after a few roller-coaster years, even the savviest of online players have found solace in hooking their wagons to the very business models they once decried as passe.

Amazon CEO Jeff Bezos — despite his own board members’ stock bailouts, the company’s continual downsizing and even a recent “sell” rating — reiterated last weekend his prediction of profitability by year’s end. Yet there is no denying his rumored association with Wal-Mart smacks of traditional commercial values. In fact, the possible new alliance is the only move that has caused Amazon’s volatile stock to climb this year.

At press time a deal between Wal-Mart and Amazon was nowhere near complete, but Bezos supporters are reportedly urging him to make it happen.

What Amazon needs, according to some industry observers, is some real-world presence.

School of Hard Clicks

When they write the history of these early days of e-commerce, readers will no doubt be amazed that throngs of twenty-somethings truly believed American consumers would shift the bulk of their buying strategy to the Internet.

Further, investors will likely wonder what all the fuss was about when tech and e-commerce stocks dropped. After all, hadn’t the same thing happened in most major industries during their formative years? One needs only to read a good history of the automobile manufacturing business to see how the market works.

Therein may lie the problem of young dot-commers whose dreams appear to be evaporating. Many of them rejected traditional business models in favor of rampant spending, overextension of debt and high-risk ventures backed by adventurous investors.Interestingly enough, some of those same entrepreneurs are now making moves to convince investors that they are somehow based in offline commerce.

Exhibit A? Kozmo.com’s metamorphosis into plain old Kozmo.

Brick Allure

The prophets of e-commerce, those who make broad-sweeping predictions about the future or fate of Internet merchants, are harmoniously suggesting that survivors of the current dot-com shakeout will be those who align themselves with brick-and-mortar winners (e.g. Amazon/Wal-Mart).

Others, (like me) who subscribe to the simple, common-sense philosophy of “Why fix it when it ain’t broke?” wonder why this is such big news.

If the brick-and-mortar model already works for American consumers, what made the dot-commers believe an entire new business model was wanted or needed?Worse, why did seasoned business people buy into a notion largely created by people taking their first baby steps into the business world?

Why did it take so long, for example, for investors to realize that young Shawn Fanning was blatantly breaking the law by enabling his Napster users to download copyrighted material?

Great Exaggerations

The essential lesson of the past couple of years is simply that while online commerce may have a place in the world, that place is not Nirvana.

Instead, it is a possible alternative buying method that some consumers may choose.As for efficiency and streamlining of business practices, business-to-consumer e-commerce has revealed itself to be the technological emperor with no clothes.

As it turns out, the labor costs associated with fulfillment are choking some dot-com companies, as are inordinately high salaries. And what about construction and operating costs for huge regional distribution facilities?

Although dot-coms may not necessarily be dead, they are gasping for air because of their inability to live up to early promises, and an unwillingness to grow their businesses slowly and strategically.

Calling All Gurus

As for investors, the bumpy online ride has offered a lesson most of them should have learned a long time ago — diversify your portfolios and spread the wealth. Under the high-risk column, make some educated guesses, study the market, and continue to take some chances on dot-coms. Then, wait for the inevitable market correction.

Above all, it’s time to call on the collective wisdom of American business gurus who made their fortunes through careful planning, controlled growth and an eye on longevity.

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

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Note: The opinions expressed by our columnists are their own and do not necessarily reflect the views of the E-Commerce Times or its management.


3 Comments

  • If ecommerce companies are losing money on fulfillment, then they have only their own ignorance to blame!

    With the right facility design and systems, it is almost a certainty that most ecom companies (including grocery home delivery) can make a profit from their fulfillment operation.

    In fact, I remember one company I did a redesign project for that said that the only area in the company that made money was the shipping operation, because the rest of the industry was so competitive that margins were very thin (as in the grocery industry).

    Art Avery

    Principal Consultant – Avery & Assoc.

    http://www.elogistics101.com

  • Excellent article by Paul Greenberg!

    Many of us who have been involved in business for a while knew that the dot.com business model could not survive. With so many start up companies buying into the notion that growth-at-any-cost, regardless of profits and cash flow, is a viable business strategy, it’s no wonder that we are seeing a rash of business failures. Likewise, the notion that any traditional brick-and-mortar business is inherently inferior to its born-on-the-web counterpart is as flawed as it is arrogant.

    So why were so many of us so easily fooled? The short answer is based on three things, the first of which is demographics. There has been a lot of investment capital available because the “Baby-Boom” generation is in its peak savings and investing years. This coupled with the belief that most of us will need more than Social Security and company-sponsored plans for our retirement has fueled a tremendous AM ount of activity in the markets. Secondly, the Internet truly is a major technological advancement that will indeed change the way most business is conducted. Finally, yes, there is the greed factor. Many of us simply did not want to miss out.

    However, one needs to keep a sense of perspective in all of this. E-business is not dead. Consumer spending on the Internet continues to grow unabated. The growth in the B2B sector is even more dramatic. On the consumer side, the Internet continues to provide convenience and information at unprecedented levels. On the business side, the Internet will allow supply chains to operate more swiftly and efficiently. In both the B2C and B2B sectors, the Internet will enable businesses to develop one-to-one relationships with customers, opening the door to value-added services and products.

    So what happens next? Get ready for more change and sustained growth and gains. Who will the winners be? Those technology companies that provide the tools for companies to transform or even reinvent themselves. And, those businesses that learn how to use those tools and form productive partnerships so that they are not swept aside by the dramatic changes and improvements that are sure to come.

  • In my opinion, dot-com retailing has two main constraints:

    (1) Since most consumers can’t be sure that they’ll be home when their goods are delivered; most aren’t willing to buy many home-delivered goods in the first place; and

    (2) Since *delivery rate x average order size = revenue*, delivery rates have been too low.

    Nevertheless, it appears that both constraints can be overcome.

    Several months ago, an analyst with the US Postal Service called to tell me that the average number of residential deliveries made per hour by letter carriers in the Kansas City region was 85.24. The reason I requested that data was to get a home-delivery benchmark. For example, drivers for online grocers Webvan and Peapod now probably make around 3 deliveries per hour; but if only it was 6, their sales would double and their delivery costs would be cut in half. And even though the home delivery rates for FedEx, UPS and even Kozmo are undoubtedly higher than online grocers, “nobody” would even come close to the rate of a mailman. Why? Because all homes have mailboxes; and as a result, mailmen can deliver even when no one is there. …And bigger/more functional boxes — like the one described at http://www.ideo.com/studies/brivo.htm — should soon give exactly the same advantage to the entire consumer-direct economy!

    For additional evidence, I cordially invite you to see a 1992 survey found at http://www.pond.com/~hhorning/dp/survey.html (paying particular attention to questions 6 & 7); as well as the info found at http://www.fastlaundry.com/evidence.htm Furthermore, a relevant bit of trivia can be found on the Smithsonian’s National Postal Museum site at http://www.si.edu/postal/learnmore/knocker.html

    Sincerely,

    David Porter

    Kansas City

    ph: 816-221-1066

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