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DJN WSJ(4/5): Ghost Of Nasdaq Haunts US E-Retailing Conference
Apr 4 2000 20:07
By Rebecca Quick
Staff Reporter of The Wall Street Journal
LAS VEGAS - When Goldman Sachs & Co. began planning its first annual
e-retailing conference in December, online retail stocks were giddily going
gangbusters. But as the conference convened here this week amid a pummeling of
dot-com stocks, a decidedly more somber mood has taken hold of the industry.
"The rules have changed all of a sudden - these companies have to have
earnings as part of their plans now," says William N. Simon, managing partner
of Cre-8-Net Ventures LLC, a venture-capital firm based in Mill Valley, Calif.
A constellation of former e-retail stars has plummeted in recent months,
including eToys Inc., CDNow Inc. and even giant Amazon.com Inc., as investors'
lust for consumer dot-coms began to fade along with any hope that they might
soon be profitable.
Yesterday's roller-coaster ride, with the Nasdaq Composite Index plunging 575
points before rebounding, aggravated the feelings of insecurity. And while top
executives such as Amazon's Jeff Bezos and Toby Lenk of eToys tried their best
to reassure investors here about the outlook for their respective companies,
plenty of conference attendees privately sweat that the heady stock-market days
of e-retail are gone for good.
A few attendees at the conference, which began Monday and runs through
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tomorrow at the Venetian Hotel here, tried to make light of this week's market
woes. Gary Bengier, chief financial officer at eBay Inc., showed off a series
of slides focusing on dinosaur products for sale on eBay at dinner Monday
night. "Why am I talking about dinosaurs?" he quipped. "I think we'd all rather
talk about dinosaurs than the Nasdaq today." No one laughed.
Other speakers blamed dot-com woes on investors, who haven't exactly been too
discerning lately. "Every kid who graduates from Harvard or Stanford thinks
they can go into the business as whatever.com," Bill Gurley, general partner at
Benchmark Capital, told an audience.
Still, Mr. Gurley thinks the market's correction of late is a good thing -
even though many of the conference attendees may not agree. "I think it's
healthy in the long run," he said, to some snickers in the back of the room.
Back in January, Goldman Sachs settled on a bold tagline for the conference:
"e-tailing and Beyond in the New Century." And speakers at Goldman's
conference, which included top executives of dozens of companies, including
Webvan, Nordstrom Inc.'s Nordstrom.com and eBay, exuded plenty of optimism.
But with investor euphoria starting to wane right after the wrapping paper
was cleaned up from the holidays, the continued shift in sentiment couldn't be
ignored. The theme for the first day's lunch session - "Putting the Sizzle Back
in e-Retailing" - had become painfully apparent in the last month or so.
Goldman Sachs tried to paint this week's market tumble as an added bonus for
conference attendees. "It's the perfect timing," said Anthony Noto, Goldman's
e-retailing analyst. "It allows us to focus on who's going to survive this
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shakeout."
Indeed. John H. Howard is president and chief executive officer of
ControlTop.com, a soon-to-be launched Web site selling hosiery. And he vows not
to overspend on advertising, something he thinks many other online retailers
have done, to their detriment.
"It's like the kids who went to college with a year's worth of their parents'
money and spent it all the first week," Mr. Howard says. "Now they're selling
back their books so they have money for groceries," he says.
From here on out, investors will be looking for more responsible spending
from the start-ups they fund, Mr. Howard suggests. "At the end of the day, it's
about selling a product for more than it cost you to buy it," says Mr. Howard.
But some speakers at the Goldman conference brushed off audience concerns
about exorbitant marketing costs, saying things are under control. "You will
see us leverage holiday advertising spending downward in regard to revenue,"
said eToys' Mr. Lenk, when questioned by an audience member.
Investors worry that e-retailers can't afford to keep up the costly marketing
assaults like the ones launched this past holiday season. "I think these guys
will find that they're more hooked on the marketing spending than they
realize," says Christian Koefoed-Nielsen, an online retail analyst for J.P.
Morgan & Co. "Ultimately, they'll need to come back for more money, and the
market is going to say, 'No.' "
Most of the 500 or so conference attendees were surprisingly laid back,
considering the market turmoil taking place. While the markets quakedyesterday, conference attendees, all of whom are Goldman clients, lunched on
petite filet mignon in a pinot noir sauce, served up with a sweet potato
croquette and a wild mushroom strudel. In between sessions, they munched on
popcorn and chocolate-covered apples, and sipped Snapple iced teas.
(END) DOW JONES NEWS 04-04-00
11:07 PM- - 11 07 PM EDT 04-04-00 |
