Beyond The Net
Brick and mortars should add clicks
By Janine Warner
Dot bombs, IPO failures, bankrupt paper millionaires.
Those were the headlines of 2001. But as the Internet crash slows to fender-bender pace, many of the real winners on the Web are being overlooked.
Anitesh Barua, associate professor of information systems at the University of Texas, Austin, put the Internet economy into perspective with a study he conducted last year. He says to fully appreciate what has happened on the Web, you must make a distinction between the Internet economy and the dot-com economy. The dot-com economy, he explained, is mostly made up of companies that started out with weak business plans, received exorbitant funding in the craze of Internet IPOs, and then crashed.
The real Internet economy is made up of everything else. If you separate the dot-coms from the companies that developed Internet strategies with solid business plans, clear paths to profitability, and prudent investment, the true Internet economy looks very different, and it continues to grow at a steady pace.
If all of the pure dot-coms went out of business, Barua said, they would only take 10 percent of the total Internet economy with them.
Even among the best recognized names in the dot-com arena, it's hard to find companies that are really making money. Of the pure dot-coms, most analysts agree that eBay is the hands-down winner with the best moneymaking business model to date. Amazon has built a powerful brand, but we have yet to see if the online retailer can ever make enough money to pay off its debts.
Yahoo! has done an extraordinary job of gaining traffic share -- once perceived as the golden egg of the Internet -- but even the king of Internet portals is still struggling to figure out how to make that traffic cover costs.
In contrast, you don't have to look far to find clicks and mortar success stories, as more and more traditional businesses find ways to use the Internet to do what they've always done, only better.
Many of these companies are still getting over the criticism that they moved onto the Internet too slowly a few years ago, but those who took the time to develop Internet strategies based on realistic business goals are now reaping the benefits.
While many new online retailers were going bankrupt, Recreation Equipment Inc. did $92 million in online sales last year. Not only did REI increase online sales more than 50 percent, the outdoor clothing and equipment retailer claims that it managed to increase sales without hurting its local stores.
How'd they do it?
By making sure online efforts complimented brick-and-mortar ones. REI allows customers to return or exchange online purchases at any store location. The result, according to company research: Online shoppers spent 24 percent more in REI's real-world stores last year than they had in previous years.
General Motors credits the Internet with making procurement more efficient, improving manufacturing systems and cutting average vehicle delivery time from 70 to 47 days. GM is also using the Internet to better serve foreign markets, reporting that it sold 53,000 cars through its website in Brazil alone last year.
Expect to see more traditional companies develop Internet strategies in their businesses this year. Some of the best uses of the Web involve saving money and better serving the customers you already have, not just launching new businesses or attracting millions of visitors.
To dismiss the growing value of the Internet just because a few businesses have bombed is to risk missing the real opportunities and losing out to the real Internet success stories.
First publication, The Miami Herald, Mon, Jan. 14, 2002
