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to their needs. E-marketplaces will become an important and fundamental aspect
of most industries; some will become companies themselves and compete with
others in the industry. Companies who are not part of an e-marketplace and who
choose to stand by and watch the phenomena emerge may find themselves
paying fees to an e-marketplace and being disadvantaged.
e-backlash
During the last months of the year 2000 we began to see many failures of
“Internet” companies. In fact, webmergers.com reported that at least 210 Internet
companies folded in the year 2000. The Wall Street Journal ran a headline about
the failure of a European e-tailer called boo.com that said, “Boo.com's Collapse
Further Darkens E-Tailing Picture”. The implication is gloom and doom. Actually,
business failures are not a new thing. According to data from The American
Bankruptcy Institute, there have been an average of more than 60,000 business
bankruptcy filings in the U.S. per year since 1980. The failures have nothing to
do with the Internet. Business failures are caused by not properly segmenting
your market, not setting the right price, not having a great fulfillment system for
whatever it is you deliver, or not having world class customer service. Those will
be the factors that always separate the winners from the losers.
It surely isn’t the Internet that caused the business failures. A business not using
the Internet is like a business in the 1990’s that didn’t have a fax machine. The
last months of 2000 and continuing into 2001 have seen an e-backlash not seen
before with Internet startups laying off thousands, some closing up shop
completely, and market capitalization of many dropping from hundreds of dollars
per share to pennies. The layoff of twenty people, the acquisition, merger, or the
restatement of goals by an Internet startup company makes front-page news.
Some of the headlines make it sound as though there have never been any
business failures before. If there weren’t business failures we should really be
alarmed because that would mean that perhaps not enough innovative ideas are
being tried. The Internet provides a way to try business ideas at a much lower
cost and with a much greater speed than has ever been possible before, so we
should expect that not all the new ideas will turn out to be good ones.
We may see some existing “brick and mortar” companies fail too -- because they
studied the Internet too long. Some may not be able to come to grips with the
reach, the range, and the disruption to traditional business models made possible
by the Internet. Some may not be able to face the gut-wrenching changes
needed in their distribution channels or in the way they would have to provide
customer service and support. In other cases it may be the decades long
dependence on agents such as securities or insurance brokers, that became
sacred. Some of the CEOs used to be such agents for their company and they
may not be able to bear seeing their former colleagues be eliminated or
redeployed.
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