Massive e-tailer shakeout foreseen

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E-tailers generated traffic and orders during the holidays, but many struggled to deliver the goods. Only 65% of shipments from pure Internet e-tailers were delivered on-time and correctly during the holidays, according to a study by enamics (, which helps e-commerce ventures improve their business through computer modeling (AA, Jan. 3). Bricks-and-mortar stores on the Web did better, delivering orders as promised 80% of the time. Ad Age Interactive Editor Bradley Johnson spoke last week with enamics Chairman-CEO Faisal Hoque about lessons learned.

Advertising Age: How did e-tailers do during the holidays?

Faisal Hoque: It depends on who you're talking to. Bricks-and-mortar companies who have opened up [Web] storefronts have done a better job than the pure Net players.

AA: Doesn't this conflict with what a lot of people expected?

Mr. Hoque: It absolutely does. Net commerce is nothing but utilizing technology. It's not supposed to replace your business.

AA: Dot-coms had all the buzz in 1999. Was the buzz placed on the wrong e-commerce players?

Mr. Hoque: No. Look at it this way, when the telephone was first invented, what was the thinking? People came up with all sorts of hypotheses. How would the telephone be used? It's no different for Net technology. So, as people try out different things -- just like telephones -- Net technology will become part of our lives. It will enhance our business process. It will enhance the way we work, but it will not replace the things we do.

AA: Among the new e-tailers, who are the standout performers?

Mr. Hoque: Amazon[.com] has done a good job. EToys has done a pretty good job.

AA: EToys last week bragged that it had delivered 90% of its orders on-time. Is that performance to brag about?

Mr. Hoque: If you look at it from a traditional business prospective, it is embarrassing that you could not fulfill you customers' orders. But if you look at the fundamental overall performance of Net commerce, it's something to brag about because most of the other the people didn't reach that point.

AA: What's your grade on advertising and marketing done by dot-coms?

Mr. Hoque: I think that the pure dot-com plays are doing a much better branding and marketing job than the traditional bricks-and-mortar companies. Bricks-and-mortars are still very much lacking [in] e-enterprise strategies, let alone the idea of branding and marketing. Dot-com players [such as] Amazon are doing a phenomenal job in marketing.

AA: Many traditional retailers have the infrastructure and brand name, but lack a Web strategy. If they get their act together this year, are they poised to win?

Mr. Hoque: Without a question, because I think the opportunity you see in e-tailing is an element of becoming an overall e-enterprise. That is supported by both [business-to-consumer] as well as [business-to-business] strategy, which really supports the e-tailing infrastructure -- the relationship you have with suppliers, with your distributors. It's how to become an effective e-enterprise vs. just an e-tailer.

I think year 2000 and 2001 are going to be the year of the buzz [of] B-to-B vs. B-to-C. How does it impact e-tailers? There is a massive element of B-to-B profit, application, infrastructure and strategy that is required to be a successful e-enterprise, then to be a successful retailing e-enterprise. That was one of the bigger problems because people didn't focus on that.

AA: Instinct tells me it's easier to turn a traditional player into a successful e-tailer than it is to turn an e-tailer into a successful retailer.

Mr. Hoque: Yes, that's absolutely correct. But a pure e-tailer [also] can develop a concept of partner sourcing. They still have a pretty good chance of being extremely successful. Their success will be determined by how well people have integrated [their] strategies -- regardless of [whether they are a] bricks-and-mortar or a pure Net play.

AA: You say pure Net-play stores delivered only 65% of their orders correctly and on-time. How serious is the damage?

Mr. Hoque: I don't think that there is massive damage. The winners in the marketplace are going to be the people who give 100% customer satisfaction.

AA: It was easy to get into e-tailing last year. You set up a site, had venture capital FedExed and you were in business. How much of a shake-up do you see this year?

Mr. Hoque: I think as time goes by the shakeout will be massive, because it is not that easy to [achieve customer satisfaction]. There will be massive consolidation, because I think the traditional bricks-and-mortar companies have a journey to acquire some of these pure e-tailers, and jump-start the process. [At the same time, pure Net plays] have so much cash available that it is not going to be that difficult or unforeseeable where a [dot-com] would buy a traditional retailer out.

AA: It sounds like customer service is where e-tailers should focus.

Mr. Hoque: Net commerce in general is about serving your customer [in] real time. If you can't serve your customer [in] real time, which is 100% customer satisfaction, then you're not going to be successful.

AA: When is the honeymoon over? When will customers demand service on the Web that is superior to stores?

Mr. Hoque: I think [e-tailers] possibly have two [holiday shopping] seasons. By 2001, you will see the absolute winners and the losers. I think the deciding factor [could] be [as soon as] the end of 2000.

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