The E-volution of E-commerce Part V:
The Dot-com Demise

Regardless of the diversity of opinion when it comes to defining or measuring the impact of this burgeoning area, e-commerce has made its mark upon imaginations of many, particularly investors partial to dot-coms and other Nasdaq-listed companies leading the way into the new economy.

Recently, this has been particularly, and perhaps painfully, the case for many who either work or invest in the Internet industry. Recent headlines like “Death knell for e-tailers” (Reuters) “Two More E-commerce Players Felled” (Information Week) summarize the slew of similar stories.

In sum, recent reports indicate that the future holds a mixed bag of blessings for e-tailers. Along with the dozens of reports predicting that e-commerce sales will go through the roof in the next five years, research groups and Wall Street watchers are predicting doomsday for many, if not most, of the dot-coms leading the e-commerce charge. Forrester Research recently concluded a study interviewing fifty e-commerce players and concluded that based on frail financial structures, ever-increasing competition from not only new start-ups but brick-and-mortar online ventures getting their second-wind, and investors’ fears and subsequent flights, many e-tailers will go belly-up by 2001.

Several pundits have commented that the almost arrogant trampling of dot-coms in the retail space of brick-and-mortar companies is beginning to haunt them, because click-and-mortar efforts leverage several advantages absent from their pure-play challengers. These include well established brands and extensive consumer awareness, experienced management, a traditional channel structure, customer trust, targeted marketing, and proven customer service employing a friendly and reliable human interface.

In June, well respected Merrill Lynch Internet analyst Henry Blodget created a stir when he stated that his figures show that of the 400 or so publicly traded consumer Internet companies, only five currently show profits. The most rattling, was his forecast that in three years only 15-20 companies will prove profitable.

In June, well respected Merrill Lynch Internet analyst Henry Blodget created a stir when he stated that his figures show that of the 400 or so publicly traded consumer Internet companies, only five currently show profits. The most rattling, was his forecast that in three years only 15-20 companies will prove profitable.

Such predictions have had substantial support recently, with auditors from Web-based grocery services Peapod and online health firm Drkoop.com publicly doubting the financial viability of each company at year end. Other ominous signs which contribute to the belief that the honeymoon is over include the demise of several companies including APBNews.com, Beyond.com, CyberShop, eParties.com, Foofoo.com, RedRocket.com, Reel.com, toysmart.com and Violet.com; employee lay-offs at Amazon.com, Boo.com, Deja.com, Oxygen Media, Petstore.com, PlanetRX.com, Salon.com and ThirdAge.com; and the startling downgrade of once-coveted Internet stocks like DoubleClick, HotJobs.com, About.com and CDNow.com. Even stalwart and seemingly infallible market leaders America Online and Yahoo! have felt the backlash with their stock prices plunging during the first quarter of this year by 40-50% from their record highs.

Part VI: The Fundamentals

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