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Among those retailers who did survive, news continues to improve. The report finds that online retailers have been able to reduce their losses as a percentage of revenues. Operating losses decreased as a percentage of revenue from 19 percent in 1999 to 13 percent in 2000. As for elusive profitability, even more happy tidings. By Internet retail type, 72 percent of catalogers (sites owned by offline catalogs), 43 percent of store-based retailers (sites owned by brick stores) and 27 percent of Web-based retailers (Net-only retailers) are profitable at an operating level.
The report finds that movement toward profitability is due, in large part, to online retailers placing tighter controls on their marketing budgets. You think?. As a result, customer acquisition costs for all online retailers fell from an average of $38 in 1999 to $29 in 2000. Web-based retailers (the stickiest of wickets), in particular, were able to bring them down from a high of $82 (ouch) to $55 (still not great) over same period. The best-performing Web-based retailers (the top 50 percent) reduced acquisition costs to an average of $14 (yea!) per customer rivaling performance of catalog-based retailers.
The report concludes that Internet retailing is alive and very much healthy. Yet it also warns that each category of Internet retailer still has plenty to learn about running online stores. "Web-based retailers need to learn basics of retailing," said Peter Stanger, vice president and leader of Boston Consulting Group's business-to-consumer topic area. "Store-based players are new to home delivery and selling to consumers one-on-one from a distance. Catalogers have a leg up in many dimensions, but they need to perfect ways to exploit relationship-marketing opportunities. The winners will be those companies that can most effectively acquire or develop capabilities they lack and integrate them with their existing strengths." Amen.
Hats off to Net boom. They say king is dead. We say, long live king.
Rob Spiegel is the author of Net Strategy (Dearborn) and The Shoestring Entrepreneur's Guide to the Best Home-Based Businesses (St. Martin's Press). You can reach Rob at email@example.com.