Subj:
Lessons from Dot-Com Deaths
All
of us should now be able to
glean some lessons from the
success and failure of businesses
operating on the Internet.
Many
of these lessons indicate that
an online grocery is NOT an
appealing business idea, unless
you're a major grocery store
chain or distributor. Below
are some of the lessons that
can be gleaned so far; I think
everyone should consider them
if they've got a dot-com business
plan in mind:
Lessons
Learned So Far:
1. Don't expect to make money
selling low-margin items on
the Internet unless you can
rapidly build 'killer scale'
(like eBay), particularly if
delivery of those items is involved.
Fulfillment and delivery channels
always cost your business more
than you think. Witness the
dying Kozmo.com, Urbanfetch,
and online grocery stores like
Peapod and Webvan. (BTW, grocery
items are very low margin.)
And chances are you won't get
the funding to allow you to
build that killer scale--you
won't be the next eBay.
2.
Don't expect to make money forcing
consumers to do something difficult
or cumbersome like adopting
a new method of buying. Witness
the failure of almost all 'digital
wallet' programs to date. You
may think people want to buy
groceries online, but most people
don't, at least not yet--there's
no compelling value proposition.
3.
Don't expect 'vested interests'
to support your great idea if
it cuts into their profits.
Priceline's 'name your own price
for gas' program didn't work
because gas stations and oil
companies had absolutely no
reason to join and support selling
their product for a lower price.
If you plan on luring consumers
to your online grocery store
with lower prices that cut into
the already low margins of your
suppliers (supermarkets), then
don't expect those supermarkets
and suppliers to jump on your
bandwagon. They'll let you twist
in the wind and die slowly.
4. If you lose money on each
order, don't expect to make
it up on volume. Examples of
this are found in most of the
dead B2C dot-coms to date.
I bring all this up in the hopes
of raising business considerations
foremost in people's minds.
Many have commented on rather
abstract execution principles
of starting an online grocery
business and even the idea that
a store might have to "raise
prices across the board to pay
for the online component", which
is about as smart as cutting
off one of your feet to save
money on shoes. Just because
a business can be established
on the Internet doesn't mean
it should be, as many are finding
out now that reality is taking
its toll on eBusinesses that
never should have been launched
in the first place.
--WebGunForHire,
10/00
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