Here's a good argument for owning ZANY instead of ETYS...
from InfoWorld Magazine
infoworld.com
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November 1, 1999
By Michael Vizard
Dot-coms need a few cures for red ink
A dirty little secret about business-to-consumer electronic commerce is that the cost of acquiring a customer is a lot higher for dot-com companies than it is for traditional brick-and-mortar companies. This is because, once a brick-and-mortar operation has built an actual store, all it has to do to generate traffic is to advertise locally to publicize its sales promotions.
In contrast, companies such as Amazon.com have to constantly advertise on national television programs, in major periodicals, and yes, even on the Web. In fact, some companies such as Yahoo have even taken to painting entire San Francisco taxis with advertisements.
However, experience is the best teacher, so a lot of online companies are now discovering what many traditional businesses have always known: The cost of acquiring a new customer is usually ten times higher than getting additional business from an existing customer. And the best way to retain a customer is through superior customer service.
Because of this, as noted in Dan Briody's special news report on applications that enhance customer service on the Web are in huge demand as we ramp up for the holiday season. But as online companies adopt more efficient customer retention models, the fundamental cost issues do not go away.
This is a big part of the reason that the only thing more staggering than Amazon.com's sales growth is the size of its projected losses. This means that traditional operations may have the last laugh, because they can use their existing storefronts to generate Web sales more cheaply by offering existing customers discounts for using their sites.
None of this is lost on Amazon.com, which by all accounts is building warehouses nationwide to extend its operations into the physical world. But other dot-com companies may not be so lucky.
So the question is: Have we come to the end of the road for the pure online company, or are the losses that such companies are racking up acceptable costs in the pursuit of some great unfulfilled promise yet to come? |
