E-tailers and Space Invaders

Some thought Internet startups would wipe out whole sectors of traditional bricks-and-mortar firms. But old-economy companies are carving out their own presence, and some may become the biggest winners on the Web.

Ecommerce experts say some investors are starting to worry about the parade of parentheses on the financial statements of many dot-coms. “We’re still in a very frothy market, but I think that by the end of this year and certainly by the first quarter of next year, it’s going to come time to count the chips for E-commerce companies,” says Mary Modahl, vice president of research at Internet consultant Forrester Research Inc. Modahl says the reckoning for E-tailers may come in January. “After the Christmas season, people are really going to start to take stock. Are these companies profitable or aren’t they? Some companies will not be able to raise more financing.”

But James Vogtle, director of E-commerce research for Boston Consulting Group, cautions against becoming too shortsighted when demanding better bottom-line performance from dot-com startups. “It will only become more expensive to acquire customers online,” Vogtle says. “So why not try to build your business now instead of forcing yourself into profitability immediately?”

Some industry watchers aren’t so sanguine. “Any American firm knows there’s going to be a day of reckoning,” insists Richard Linowes, assistant professor of management at the American University’s Kogod School of Business, in Washington, DC, and longtime student of Japanese business. “What we might call the Japanese mistake may yet play out for Internet companies.”

Some observers point out that managers at many Japanese companies are just now focusing on E-commerce. Ironically, Linowes says the late start may prove beneficial. If established E-tailers in the US hit a rough patch over the coming months, he believes startup dot-coms in Japan may be able to coin it off mistakes made in the United States. —R.M.

Mapping the Universe

Typically, an E-commerce initiative will be championed by a company’s CEO. But considering that a corporate Web-site rollout can cost upward of $30 million (depending on the business), you can lay odds the company CFO will be involved in the project somewhere along the line.

Management relies on the finance chief mostly to accurately gauge how well the company Web site is doing. But for many CFOs, assessing the performance of an online shop requires a different set of metrics. Besides getting a fix on the number of unique customers at a site, CFOs must measure how much time each customer spends there, if the purchaser is a repeat shopper, and if buyers are visiting the sites of rival E-tailers

Robert Swan, CFO at online grocer Webvan, knows all about it.

“I not only participate in the formulation of strategy and development of the operating plan,” he says, “but also develop the metrics internally that will allow us to allocate and align all our resources so that we can achieve our objectives.” Swan notes that the finance department at Webvan tracks the number of active accounts at the company, the percentage of repeat customers, and their average order size.


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