Agree, Ben.
B2C has definitely been tarnished by the wasteful business plans and practices of a majority of the people that jumped on the bandwagon. A majority of these companies were just run by kids - and they ran them as though they were still kids. I still have to deal with these people every day, and it still amazes me with lack of business knowledge they generally have. Granted, looking back, a strategy was definitely to try and get swallowed by one of the big players on the strength of your possible competition. Also moving to B2B, Cisco made 26 acquisitions since March 2000, which is interesting and shows the opportunities to purchase assests, and more importantly, staff.
eBay is an example of a near ideal B2C business model. Revenues increased by just under 100% (to US$440 million) for 2000, gross margins of 82%, very low (comparatively) customer-acquisition costs. They do have a very competent management team also, which is obsessed with cost reduction. This just shows the potential of B2C, and when done properly it can be very powerful.
Amazon are having problems at the moment with delivery, with that sort of volume they cannot continue to eat 30% of each shipment. Also, branching out too quickly...If they had stuck to books and CD's, they could possibly be turning an operating profit, at least.
Anyway, a company that sells purely over the internet is going to have a very hard time in NZ for a long time to come - it is all about thin margins and large volumes - there is just not the population base required.
It is also interesting to note the only superbowl ads this year were hotjobs.com and etrade, who were the major sponsor. Not as much free money sloshing around this year.
Regards,
Callum
----------
From: "Ben Dutton" <bendutton@sharechat.co.nz>
To: <sharechat@sharechat.co.nz>
Subject: Re: [sharechat] E-Tailing and net use
Date: Thu, Feb 1, 2001, 4:58 PM
Hi Graeme,
Good to hear from you, I thought I'd make a couple of comments on your post below...
If, as you say, the "marketing whizz kids" are saying "business to business (B2B) there is the next growth area" they are a bit behind the times and perhaps should get with the program a bit :-)
I do agree that the B2C bubble has burst - that happened in March/April last year when most of the B2C stocks imploded. B2B stocks were not marked down as much at that time (they suffered later), but the B2B sector of the Internet economy is still undergoing a massive shakedown.
While the potential B2B market is huge (dwarfing B2C) it's still early days yet and investors should think carefully about investing in companies that are solely dependant on a B2B concepts for revenue.
I remember reading venture capital newsletters during the first half of 2000 that detailed countless B2B fundings - most of those marketplaces will go out of business (or have already) soon - there's simply too much competition.
Actually, the latest Unlimited magazine has a great article on B2B in New Zealand. I'll try and get a copy of it for ShareChat.
But I digress, we are talking about B2C here, after all.
I've always been bullish about B2C - long-term forum members will remember me defending Amazon.com etc. over a year ago.
And my views have, for the most part, not changed - I still think that the B2C sector will be a future success for retailing - however B2C has been given a horrible name by the sickeningly wasteful business plans and practises of many companies.
Even Amazon.com has made some extraordinarily foolish moves in the market, and, as for sites like Pets.com and Garden.com....how they could burn through hundreds of millions of dollars in such a short while is anyone's guess (lots of cool launch parties and Super Bowl ads among other things, I suppose...:-)
So Graeme, I think that you are right being wary about companies in the sector, but you shouldn't write the sector off completely, as many investors and commentators have.
B2C will still be a growth area, just not as fast as what was originally predicted. Internet uptake is slowing, and many consumers are still not using the web for their purchases (there are a whole lot of reasons for this).
Also, as Colin pointed out, bandwith is perhaps one of the biggest impediments to B2C taking off - it simply takes to long for many webpages to download, and frustrating potential customers is not normally the best way to make sales.
Hang in there and keep on following the sector. The next five years is gong to be interesting indeed.
Best Regards
Ben Dutton
----- Original Message -----
From: Graeme Martin <mailto:Martin.Graeme.S38@xtra.co.nz>
To: sharechat@sharechat.co.nz <mailto:sharechat@sharechat.co.nz>
Sent: Thursday, February 01, 2001 9:15 AM
Subject: [sharechat] E-Tailing and net use
Share chatters
There are lies and statistics - in the Christchurch Press an article "
Sega considering dumping dreamcast" p17 it quotes 40% of Americans, 25% of Canadians are happy to purchase online, only 12% of Australians are."
On page 18 the article "Sending e-mail dominates net use" John Naughton says that only "4 or 5% regularly engage in online banking or shopping."
I go to my local Tertiary Educational Institution and I still get bombarded that E-tailing
is the best thing - the real growth sector. Have the marketing whizz kids got it wrong - has the business to consumer website bubble burst? They very quickly tell me "Are, but what about business to business (B2B) there is the next growth area."
I am very wary now about buying into E-commerce related technology stocks. Too many are chasing too small a section of the retail section of the market. Am I a modern luddite?
Graeme Martin
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