Amazon.com has finally turned the corner on the road to profitability, eBay set earnings records in the second quarter, and brick-and-mortar chains are buying into the e-commerce channel in droves.
Does this mean the e-tail shakeout is finally over? That depends on whom you ask. Analysts have differing positions about whether or not we have seen the last of the dot-com dropouts.
But industry watchers do agree on one thing: Multichannel retailing is the future of e-commerce.
Debate the Dot-Coms
Pets.com and Webvan are two of the most-recognized fallen dot-coms. But for all the highly publicized, pure-play failures, hundreds more quietly shut their doors.
“Most of the dot-com shakeout has occurred already, Nielsen//NetRatings analyst Dawn Brozek told the E-Commerce Times. “But some small players are still going under.”
Conversely, Gartner analyst Geri Spieler said the e-tail model will likely continue to evolve too much to declare an official end to the shakeout.
“Is the e-tail shakeout over?” Spieler asked sarcastically. “The answer is a big, fat, bold ‘no.’ There is still a long way to go — and for reasons from A to Z.”
Reasons A to Z
Analysts said that aside from financial issues there are three key challenges for e-tailers: gaining the trust of consumers, finding the right merchandise mix and enhancing services across the board.
True, new users are jumping on the e-commerce bandwagon every day. But it takes time to convert e-mailers and online game players into confident Internet shoppers.
For the most part, say analysts, it was the product mix that sabotaged many early e-tailers. Selling furniture online, for example, is as impractical as shipping heavy bags of pet food.
“The types of products that tend to sell well online are either inexpensive — meaning they are low-risk — or they are cheap to distribute,” said Brozek, noting that books, music, airline tickets and flowers are still leading the way.
But perhaps the biggest challenge — and the greatest untapped opportunity for corporate cost savings — lies with service issues.
Beauty shops and automobile service providers, for example, could let customers schedule appointments online. Then customers could synch their personal digital assistants with their e-mail clients and receive a reminder several days before the appointment.
These self-serve capabilities will be vital in the coming years as technology becomes even more pervasive.
“Service online has yet to be fully explored,” said Spieler. “The next wave of e-tail is combining e-commerce with a service component.”
Brick-and-mortar players are better positioned, with deeper pockets, to provide the type of services Spieler described. Familiar offline brands also have something else that pure-play e-tailers do not yet have: established consumer trust.
“When we look at the major e-commerce categories, most are dominated by the trusted offline brand names,” said Brozek.
According to analysts, this shift toward multichannel retailing — and the beginning of the end of the e-tail shakeout — started in late 2000.
“The dot-com shakeout might continue, but it’s primarily among the very small players,” said Brozek. “I can’t see eBay or Amazon folding at this point.”