Continued from Page 1
What went wrong? The dot-com shakeout has thrown a few lessons and one can
attribute many reasons for the failures. Ethan Harris, analyst, Lehman Brothers,
says, "Growth at all costs strategy makes no sense. For a couple of years
investors bought into this ‘first mover advantage’—that a company would
succeed by dominating a particular product category, pumping up sales, creating
consumer loyalty and blocking out new competitors." He adds, "The
problem with this approach was that it turned out to be easy for new competitors
to come into the market and steal customers. In addition, the dot-coms entered a
promotional spending race, which caused huge losses for every participant.
Eventually investors began to wonder when profitability would arrive and stopped
financing the least profitable companies." And under current buying habits,
not every product can be sold on the Web and in some sectors the Web can only
support a few sellers. In such a scenario, established brick-and-mortar
companies stand a better chance of surviving because they don’t need to spend
much on creating a brand name and are capable of serving customers better. And
they don’t have to build an inventory from scratch.
|
B2C Stocks: Sliding
All the Way |
| AOL |
Ebay |
Amazon.com |
Satyam |
Infoway |
Rediff.com |
| 15-Nov-00 |
49.4 |
45.8 |
25.3 |
8.8 |
5.1 |
| 15-Jun-00 |
54.4 |
64.1 |
46.3 |
24.4 |
25.9 |
| 15-Mar-00 |
61 |
94.8 |
63.8 |
79.8 |
— |
|
The stock slide shows investor indifference. Apart from
Ebay, all others are running financial losses. After the correction in the
stock prices, it is now the turn of a correct business model |
Sudhakar says, "There is nothing wrong with a B2C model
as such. Most Web sites started without a model in place and were based on pure
content. Such sites will find the going tough." But if a B2C commerce site
shows continuous increase in actual customers, transactions and transaction
values, while still being conservative with spending, it is likely that a
crossover will happen.
The future belongs to…
The future is bright only for those B2Cs who rely on the
business basics to earn money. Sudarshan says, "In all the chaos, we should
not forget that the premise of the Internet and what it can mean to people,
industries and global economy has not gone away."
The B2C scene is crowded and only those with a clear value
proposition for the consumer will survive. As E Abraham Mathew, president, CIOL,
says, "B2C sites that have a brick-and-mortar backing will find it easier
to enter as for such companies it is just utilizing another channel for
sales."
The message to all the B2Cs in India hiding behind the veneer
of inflated revenues and site traffic is clear: you can’t succeed on ideas and
cash alone.
BIJESH KAMATH
in New Delhi
| 
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