Will the Tech Shopping Spree Hit E-Commerce?

IBM (NYSE: IBM) went on a bit of a shopping spree late last month, dropping US$80 million over here for Internet consultant Mainspring and another $1 billion over there for database company Informix.

Not to be outdone, Compaq (NYSE: CPQ) laid $266 million on the line for a Web consulting firm of its own, Proxicom. Intel (Nasdaq: INTC) has been buying too, figuring you can’t get more of a buyer’s market than you have right now.

So where are the e-commerce equivalents of these deals? Should the fact that so few Internet merchants get bought out before they go under be a big red flag of warning for e-commerce as a whole?

Something for Everyone

After all, these big tech companies like IBM are all about long-term value. They’ve got the cash to lay out, so why shouldn’t they stock up when the stocking is good? With e-tailers straddling two industries — technology and retailing — there ought to be potential suitors in both markets, right?

In theory, yes. But unfortunately, most e-tailers are going to continue falling through the cracks, because they have done neither technology nor retailing well enough to warrant a serious bid.

eToys Anyone?

Think — if you can bear to just one more time — about the eToys example. A few weeks back, it was revealed that book publisher Scholastic (Nasdaq: SCHL) was interested in acquiring the defunct e-tailer’s assets. But before the electronic ink was applied to the bid, Scholastic withdrew after discovering (suddenly?) that eToys would “not meet Scholastic’s threshold for accelerating or reducing the costs of its Web initiatives.”

In other words, the people at Scholastic could do it better themselves. Here was an entire e-tail company in eToys — all the parts, technology, brand name and Web sites in place — and Scholastic would rather start from scratch.

That’s bad news. And it would be nice if it only applied to eToys, but that’s clearly not the case.

There are exceptions. Pets.com was able to sell its domain to Petsmart.com (Nasdaq: PETM) and Wal-Mart Stores (NYSE: WMT) yanked much of Garden.com out of the compost pile. But those examples are after-the-fact purchases. Buzzard pickings. Junkyard salvage jobs.

Wait and See

And it’s not as if most dot-coms go quietly. Even if they don’t headline the evening news, e-tailers let everyone who might be in a position to help know about their dire straits. For all the good it does.

Kozmo certainly got the word out before it shut down, but no one came riding in on a white horse.

Maybe people are watching to see if the best example to date, the rescue of Peapod.com (Nasdaq: PPOD) by grocery giant Royal Ahold, bears any fruit. Peapod has kept a fairly low profile of late, bagging some markets but otherwise keeping its nose to the grindstone. Peapod’s stock has not exactly recovered, but there have been fewer distress signals now that it has a cash-rich backer like Ahold.

Will that alliance work? It should, that’s for sure. Peapod gave the grocery chain a working Internet service (just add cash), something that it would have taken Ahold years to develop on its own.

Follow the Leader?

Yet other offline retailers have not made the connection themselves. None of the multitudinous furniture sellers scooped up Furniture.com before it went to the big warehouse in the sky. And despite many close calls, MotherNature.com couldn’t get a health food chain or other retailer to pull the trigger on an acquisition.

Could it be that millions and millions of dollars were poured into these companies and nothing of value remained at the end of the day? Or is that e-commerce companies are getting lost in the valley between technology and retailing, the great divide they themselves set out to close?

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

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.

1 Comment

  • It is quite true what is said in the article. Very little value is left at the end of the day. So much hype,and VANITY! Yes vanity, if every one else is doing it than I’d better too!

    What I mean is let’s hype the web, e-commerce, cell phones for every one, a quick million as well. With this philosophy, the hope was that ordinary folk would line up to give you their cash! WRONG. These e-tailers forgot, or never knew the real basics of real retail, marketing and what the living individual needs, therfore bust!

    The web can and will succeed, slowly, with trust, and understanding of both the seller and buyer.

    It is not a get rich quick, sell out, proposition.

    If you get in for the long haul, and not looking for a HYPE-JUNKIE to sell out to, we will all do well.

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