How will E-Commerce companies survive? (April 2000)

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How will E-Commerce companies survive? (April 2000) (Page 3)

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Author	Topic: How will E-Commerce companies survive? (April 2000)
heister	posted 04-12-2000 12:04 PM "We believe that the vast majority -- perhaps 95 to 98 percent -- of all dot-com companies will fail over the next 24 months," My question is, what is his definition of failure? Without knowing that his statement is almost totally worthless. Without that definition he might as well just be saying that he doesn't see a highly profitable future for small internet companies, and that's not saying anything new.
trendy	posted 04-11-2000 07:06 PM One thing to keep in mind is that most of GartnerGroup's revenues come from old-school tech firms with bloated IT departments, rather than these upstarts that this guy is predicting the demise of. Also, his "prediction" is sufficiently nebulous that falsifiability will be impossible... what does "fail" mean? Not meet its goals? Go bankrupt?... and what does "dotcom company" mean? I would like to see him (or someone else) say "Of the stocks listed in the Merrill Lynch Internet Index, 18% will go bankrupt in the next 24 months, and another 48% will either have lower market caps in 24 months than they currently do or will be acquired within the next 24 months for less than their current market caps." OK, if no one else will, then I will...
KeithG	posted 04-11-2000 03:29 PM Here's a quote from the CEO of GartnerGroup. My question is how we define "dot-com companies" now. Is it only etailers he is writing the obituary for, or the b2b's and the content providers as well? "We believe that the vast majority -- perhaps 95 to 98 percent -- of all dot-com companies will fail over the next 24 months," said Michael Fleisher, president and CEO of GartnerGroup, in his keynote speech kicking off the market research company's annual Spring Symposium/ITxpo on Monday at the San Diego convention center. Conversely, "virtually no traditional companies will be able to survive without a significant Internet component as part of its business model," Fleisher said. In the wake of these many dot-com failures, there will be a resurgence to focus on "old economy concepts" such as market share, brand equity, distribution channels, financial control, operational integrity, and excellence, he said. "The result will be the rapid emergence of hybrid models in every industry." The era of companies trying to align IT goals with business goals is behind us, Fleisher said. "IT is the business," he said.
wassup?	posted 04-11-2000 02:13 PM You'll notice that I didn't choose to highlight the conclusions of the article, JHirsch. It was just the first thing that I had seen that said the portrayal may have been unfair. Your cash positive analysis is right on, though. The column is called Clueless Investor, so I guess the simplistic advice could be expected.
JHirsch	posted 04-11-2000 01:49 PM wassup? That was an interesting article. The one thing the author doesn't mention (and i'm suprised because i wouldn't expect this from CBS MarketWatch) is that all the old-line companies she compared these at risk companies to are actually cash flow positive. When you are cash flow positive you can pay down the debt and refinance. When you are losing money on every sale and about to default on your debt you aren't likely to get great refinancing deals or anything. Here's a pretty obvious quote. "The bottom line? Experts say you should back the future gorillas of the Internet and stay away from companies whose business models aren't hard to replicate, making it easy for competitors to enter the market. It's also a good idea to bet on Net companies with big money behind them.." Well, DUH. Why don't you tell me something useful in the next article please... Is this an exerpt from that "Investing for REAL Dummies" book?
wassup?	posted 04-11-2000 11:54 AM Here's a column that suggests the Barron's article about cash burn rates for internet companies might have been a bit unfair. Even old economy companies like American Express, AT&T, and Disney had more short-term debt than cash. From CBS Marketwatch: http://cbs.marketwatch.com/news/current/clueless.htx
heister	posted 04-10-2000 05:19 PM Machiavelli, I guess I agree and disagree with that comment. I agree in that I think it would be a lot more efficient if users could do exactly what he is saying, and not all have to be routed through the same point. It is also true that users will want to know from where they are purchasing a given item. Affiliate programs can make that somewhat clear, but i'd rather just have a link that gets me to the main site, and they'll still have to brand a lot to make sure that people trust that they'll get what they are looking for.
Machiavelli	posted 04-10-2000 03:10 PM Some strong words about the future of e-commerce (specifically e-tailing) from the Cyberstock Report: "Brick-and-mortar stores are constrained by physical location. A store located in New York City can't easily make a consumer living in China aware of its presence. Web sites are not hampered by any such limitation, and yet e-tailers spend vast amounts of ad dollars trying to drive consumers to one branded site, as if Web companies were shackled to that one digital location to sell their products. Think about it for a second. The end result of this knucklehead strategy is that it restricts e-commerce immensely. Commerce is forced to flow from one central point instead of potentially hundreds of locations. Kind of defeats the whole purpose of the Web, if you ask me. Therefore, I believe the evolution of e-tailing, and driving Web traffic as a whole, will include the rapid adoption of contextual e-commerce and affiliate marketing programs. Contextual e-commerce is the ability to weave relevant targeted commerce opportunities around related content, whereas affiliate marketing allows retailers and content providers to establish numerous new distribution channels."
infooverload	posted 04-10-2000 10:49 AM Now that so many net companies are trading at rediculously low levels (compared to previous levels - though now the low levels may be justified), don't you think we will finally see some offline companies buying low priced net companies instead of the other way around? It might finally be feasible for an offline co without an online presence to get on in a very cost-effective way, and this could save many etailing companies.
CB	posted 04-07-2000 06:04 PM quote: Originally posted by smario: Question, do you feel that 2-300K site visitors is enough for your business to succeed going public this quickly? No not at all. That's the mark I am looking for before we engage the ecommerce portions of the site. If I can get that many people on the site on a regular monthly basis - without selling them anything I think I will be able to ease them in to participating in the ecommerce sections of the site. Public? I'd want to have at least a million a month and positive cash flow before I did that - which I think we will achieve by the first of the year. Don't know if you've looked at the site itself but it is a bit different - In short we expect to be one of the most profitable entertainment destination sites on the net. We began as an effort to publicize an independent feature film we will be shooting in Scotland next May - but have discovered a whole lot more. The film, (which you can read about on the site) is a comedy/horror pic which can be described as Waking Ned Devine meets Creature from the Black Lagoon. Early on we decided that rather than put up a site to promote the film we would build a site that looked like this small village in Scotland (entirely fictional at the moment) where the film takes place had put up a site to promote itself. Now this village has decided to produce a feature film (confused yet?) And all of the ecommerce sections of the site will apeared to be developed by this crazy little village in an attempt to raise capital for their film venture. For instance - one of the sections we will be opening in the coming months will be live cams and chat in the town's pub (The Pig & Bicycle) We will be setting this up in a real pub in Ft. William Scotland which is presnetly called The Grog & Gruel - but is about to officially change their name to - The Pig & Bicycle (confused yet?) Anyway - one of the features here will be the ability for people to give the site a credit card and "buy the lads a round" You'd be surprised just how many drinks we can sell over the internet and the people in the bar can't wait. BYL CB
smario	posted 04-07-2000 02:00 PM CB, I think another problem that may relate to your situation is that many of these ecommerce companies probably went public too soon. Sure they needed a nice infusion of cash, but many of them didn't even have a plan for using this new money! And if they had waited to go public, until they had a more tested business plan, serious traffic, good margins, and even profit, then sure they may have opened a little lower, but they would have left less money on the table, and had a more stable stock price and business. Question, do you feel that 2-300K site visitors is enough for your business to succeed going public this quickly?
CB	posted 04-07-2000 12:52 PM It seems to me in reading all of these posts that one of the pitfalls here for a lot of these sites has been their rush to spen millions on advertising/marketing rather than take the time to build some grass roots support and look to alternative means of moving potential customers to their sites. In response to wassup's Amazon article and the figures for drugstore.com - I am amazed that they could spend that much on advertising in only one quarter. It seems to me that a lot of these co's are looking at the net like it's television - which it isn't - yet. anyway - I'm building a destination site with ecommerce on it and hope to be in a position to consider an IPO in a year or so. So far (and I know this is small potatos to some) - we've managed to move over 125,000 visitors to the site for about 7.5K in advertising and marketing expense - that's about 6 cents a pop. With all the attention paid to the cost of conversion I hear very little about the cost per visitor which I think needs more attention. A site needs traffic (and traffic that hangs around) before it can start to "convert it". While we haven't enabled the ecommerce sections of our site yet I imagine that if we did and we converted say 2% of our traffic and the average net sale (after cost of goods to us) was the same as the drugstore.com numbers - we'd be in the black. But we're holding off and waiting till we get about 2 - 3 hundred thousand a month before we open up. www.glenlachart.co.uk So any suggestions would be more than appreciated. CB
gatsby	posted 04-06-2000 03:27 PM KeithG, good article. It's something I didn't realize - that the collapse of the etailing market has been GREAT for venture capitalists. Before, startups could pick and choose from the VC's ready to jump at the chance of financing a new venture. Now though, with stock prices no longer predetermined to be at high levels, VC's have the power, as more and more startups are having trouble getting financing. To get the cash, they are giving up more and more control of their companies, a VC's dream.
KeithG	posted 04-06-2000 03:00 PM This is an interesting article on e-companies doing business with falling stock prices--something they have never had to do. Interesting implications for recruiting and keeping employees--the article implies that salary costs are going to increase greatly because the promise of stock options creating value doesn't hold. These guys are having a hard enough time dealing with the bottom line--if they need to use their minimal resources to pay people higher salaries, it could mean even more trouble. http://msnbc.com/news/391377.asp
Machiavelli	posted 04-06-2000 12:35 PM That's a agreat point about Amazon. I've thought for awhile that the key to Amazon's future growth and success was their VC side. But now that alot of their investments are tanking, when will that finally spill over to their own stock price? Also, here's another one: VarsityBooks.com. They sell books. That's it. But if they went public two years ago, or even one year ago, their stock price would have lasted high enough for them to expand and grow, and maybe add something tangible besides 'books.' But they didn't - they went public recently, closed below the offering price, and are now languishing around 3. And recently, the CEO Tim Levy stepped down (though he will remain on the board). Timing is an amazing thing. But VarsityBooks can easily be the poster child for the death of any company whose business plan is based solely around etailing. At least those who expect lots of cash and growth.

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