Added by on 2012-10-09

You may have heard talk about dotcom bombs and how the bottom fell out of the e-commerce industry. It is true, many companies were burnt early when e-commerce zoomed onto the Internet. However, those failed dotcom companies are providing a legacy for newcomers.

These days the businesses which failed to move online early are relieved they were not taken in by the dotcom hype.

However, they have not put the e-commerce idea on hold. They are now moving ahead using the past as their guide. The lessons learnt from failed ventures are being adopted by those entering the marketplace.

Knowing what not to do and how to avoid the pitfalls is extremely valuable. There is no room for business cockiness in the Internet..

Lessons learnt

E-commerce strategists have identified the lessons learnt from the e-revolution so far:

Revenue creation is important and value can be quickly created and destroyed

Power has shifted to the customers, who can now make more informed and faster buying decisions

In the future, companies should focus not just on value creation but value capture

Disintermediating forces will be exerted on high-value areas, and the natural reaction is to protect, not embrace the revolution

The land-grab mentality that drove Internet businesses early did not lead to a sustainable business advantage.

There is talk now amongst industry leaders that the technology boom is only just beginning. Independent surveys are also backing this up, painting a rosy future for e-commerce in light of the dotcom doom and gloom. However, there has been some debate over whether all retailing is heading to the Web. Experts continue to look at the Web’s potential as a marketplace and continue to predict what will and what won’t work.

One issue that is emerging is how it may become increasingly difficult to survive through “bricks and mortar” premises alone. As dotcoms fight for a greater market share by offering lower prices, it will be tough for “bricks and mortar” only premises to compete.

However, retail strategists are encouraging retailers to make decisions that best serve their customers.

The following is a brief look at some of the points, which may have added to dotcom failures.

Not enough research, no market

Dotcom failures basically boiled down to a lack of awareness, knowledge, foresight and planning. While many companies leapt at the opportunity to do business online, they weren’t aware of what constituted an online business and what markets were available. It was a hype-driven campaign.

Even now the Internet is still like fashion. You need to appeal to your customers and be able to take advantage of that appeal in the market.

Another issue was lack of consumer confidence in the online shopping experience. Previously held concerns about secure financial transactions and privacy are now fading with the introduction of new Web site security software.

On the whole, the Internet and online customers have changed considerably. Consumers are wiser and more tech savvy which is being reflected in the success of many online ventures.

High costs

The early dotcoms spent money at an almost alarming rate in an effort to increase product knowledge. Some companies spent tens of millions of dollars in setting up the online business, and sat back and waited for the financial rewards to roll in. The huge amounts of money they spent on their marketing magnified the impact of their failure. The e-commerce network as a whole was also still developing. Businesses were yet to fully appreciate the implications.

Costs were high in terms of merchandising and the money spent to attract customers. Customers were less likely to shop online and e-businesses needed to spend big to attract them. Companies and businesses are now setting a new, more measured pace based on steady investment.

Australian banks have started to inject money into the Internet and online trading. They are using the Internet as part of their organisational structure. This proves that the move is back on, however, at a more steady approach.

Low revenue

There are few benefits to being online when costs outweigh the revenue. Many dotcoms found their expectations of revenue were exaggerated as the market was flooded and demand for online shopping was yet to take off.

A return was often not seen to offset the expense of setting up the online venture and many were left with huge debts as a result.

Low revenue can partly be blamed on poor research and marketing. A market already saturated will not yield a financial return if you are not willing to cater specifically for customer needs or offer alternative products to your competitors.

Using bleeding-edge technology

Buying bleeding-edge technology is like jumping into the first taxi in the rank to realise it only has a quarter of a tank of fuel. Bleeding-edge technology was another factor in the demise of a number of dotcoms.

They invested money and bought new technology straight off the manufacturer’s conveyer belt thinking it would provide the edge they needed. However, this ended up costing companies and business a lot more than just the initial outlay.

Bleeding-edge technology is basically buying the first thing that comes out, which may not yet be a “proven” technology. In the long run, you are basically paying to experiment, and find out what works, and where the problems are. Having learned from these problems, the manufacturer can come up with a new model which will be mass produced and sold at a cheaper price.

You are left with technology that is dated, does not have as many features, is hard to pass on or sell and doesn’t really serve your purpose.

Another issue was the bleeding-edge technology new dotcommers were using had not yet hit mainstream. Many customers did not have the corresponding technology to access or download these sites properly or were reluctant to try it.

This is where the term leading-edge technology comes in. Leading-edge technology is still technology at the forefront but it has been tested, tried and proven on the market. Improvements may have been made on the original technology, offering a more reliable, functional and cheaper model.

It is important not fall into the bleeding-edge technology trap. If you just wait even just four to six months, it is highly likely the manufacturer will release a new version. It is also likely the price will drop once market competition for the product heats up.
If you aren’t sure, it is always wise to speak to professionals who have up-to-date product knowledge. They will also let you know how the original technology faired and if the manufacturer plans to update.

It is important to understand and appreciate where the early dotcom businesses failed. More importantly learn the lessons they have left and you will avoid being left on the dotcom heap.

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