The same week we were putting the final touches on this month’s cover story, a national consulting firm made headlines with its prediction that most Internet-based retailers will be out of business by 2001.
Forrester Research, based in Cambridge, Mass., surveyed 50 leading online retailers, and concluded that the majority of them won’t be able to compete in the next few months, as competition intensifies and funding disappears.
In another independent, yet equally discouraging report, an Ernst & Young consultant to start-up companies told the Associated Press that out of the 30,000 e-tailers that exist right now, only 5,000 will survive.
What does all this mean for the local companies we spoke to for our cover story? Probably the same fate that awaits their competitors.
Because the Web has no geographical boundaries, the successes or failures of the area’s Web-based companies will most likely follow the national average, because they are competing in the same cyberspace.
In addition, many established national and international retailers set up very successful Web sites years ago, with the advantage of prepackaged customer bases. Why would one necessarily shop at homefurnishings.com, when a known quantity like sears.com already exists?
Is this all bad news for our smaller, local e-tailers? Not necessarily. As the cyber marketplace becomes too crowded, a natural weeding out will occur. What will be left is a marketplace with less competition and a growing, more intelligent customer base.
This doesn’t mean that the Wal-Marts will beat out the trendier entrepreneurial start-ups, either. Five years ago, where would you have gone to purchase a book? A store called Amazon, or Barnes & Noble? Now look at who has the market share in that area.
The report also points out that not every doomed entrepreneurial cyberventure ends in bankruptcy. Large companies are increasingly buying out smaller, Web-based ventures for their marketshare, concept, technology or, in some cases, simply for their address, leaving the owners, in many cases, with a windfall.
Of course, we wish the best for our local Web companies; many of which, like Twinsburg’s PlanSoft Corp., have found their niches and achieved market dominance. One thing is for sure — the gloomy news about the industry will not be the last cybertrend we’ll be talking about this year.
If there is one thing that is predictable in cyberspace, it’s change.
Connie Swenson ([email protected]) is editor of SBN.