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Technology Stocks : Internet Analysis - Discussion
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To: Chuzzlewit who wrote (218)3/28/1999 9:57:00 AM
From: jbn3  Read Replies (2) of 419
 
re E-value-ating the e-tailers:

Chuz, you stated
... The principle advantage that e-tailers have over physical retailers is the elimination of the expense associated with a physical presence: rent, sales clerks, inventory carrying costs, etc. But the major saving will be in capital expenses. e-tail is poised to generate truly astounding gains because of the extremely efficient use of assets. This will manifest itself as very high ROIC and inventory turnover numbers, and very low CCC numbers. ...

Query: will not the 'elimination of the expense associated with a physical presence', which potentially allows e-tailing to be so profitable, also greatly reduce the start-up costs of competitive ventures? By reducing or eliminating many of the physical presence costs, you have eliminated one of the major barriers which have historically acted to limit successful competition. I believe that, while it is true that the potential market is huge, the barrier to entry is so minimal in historical terms, that competition will serve to effectively limit margins and profitability in most e-tailing arenas. I think that this effect will be most pronounced in those areas in which the e-tailer merely serves to distribute an already finished product.

just a thought...

thanks, jbn3
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