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Strategies & Market Trends : Take the Money and Run -- Ignore unavailable to you. Want to Upgrade?

To: Jorj X Mckie who wrote (12856)	8/4/2002 7:37:58 PM
From: Libbyt	Respond to of 17639

E-Services Show Staying Power, Especially In Travel And Leisure BY BRIAN DEAGON INVESTOR'S BUSINESS DAILY The dot-coms may have bombed long ago, but you wouldn't know it by looking at what USA Interactive (USAI) is up to. It's offering $4.5 billion in stock to buy the shares it doesn't already own in three Web firms that provide consumer services. It's a bold move, given that most retail Web sites lose money. But USA isn't betting on retail; it's betting on consumer services - one of the few bright spots for e-commerce. In the first quarter, consumers bought $9.85 billion in goods online, up 19% from a year earlier, says the Commerce Department. The Commerce data don't include the shining star of online commerce. That goes to Web sites offering airline tickets, hotel rooms and related services. Consumers laid out $8 billion for online travel in the first quarter, up 87% from a year ago. Travel accounts for 40% of the total. That's more than triple the No. 2 category - computer hardware. Dan Hess, vice president of research firm ComScore, explained the lure of services: "Selling tickets and related types of services are not subject to the same fear, uncertainty and doubt they might get with some other products. Consumers know just what to expect when they buy a seat on a plane or make a stock trade." Happy Middleman Which explains why USA Interactive has such a keen interest in Expedia.com (EXPE), Hotels.com (ROOM) and Ticketmaster.com. (TMCS) "We think that dealing in a middleman position, between supply and distribution, is a good space where there can be a lot of profits and strong upside," said Victor Kaufman, USA's vice chairman. The best performing sector for online in the first quarter was tickets for events like concerts and sports. Consumers spent $581 million, up 103% from a year ago and 52% from the prior quarter. Another successful online offering is stock trading. Consumers paid online brokers about $2.25 billion in commissions last year. The stock market collapse has roiled the industry, but it's holding up. E-Trade Group (ET) has stayed profitable. Ameritrade (AMTD) has posted a profit in each of the last three quarters. Online retailing has been a money-losing operation for many. A recent study by research firm Shop.org found most online retailers lost money in 2001, though less than in 2000. Catalog retailers, however, were profitable. Big retailers like Wal-Mart (WMT), Kmart and Federated Department Stores (FD) learned this lesson the hard way. All three initially designed their Web operations to sell their instore wares online. Each has struggled to find the right formula. Amazon.com (AMZN), a pioneer in selling goods online, has had just one profitable quarter. Travel services firm Expedia, in contrast, has posted five straight quarters of profit. "It's taken retailers a long time to make it work because it was a new way of doing business for them and their customers," said Elaine Rubin, chairwoman of Shop.org. "They are still feeling their way through this, but they have a better understanding now about the key issues and aspects ." Many big brick-and-mortar retailers have revised their Web site plans. Wal-Mart and Kmart spun out their Web sites and ran them as stand-alone business operations. Kmart even gave its Web site its own name: Bluelight.com. That business has since been brought back in house, and is now called Kmart.com. Wal-Mart also pulled its Web business back in house. In both cases, the retailers had to rethink what they sell online. They also began viewing the Web sites more as a tool for customer service. "The more successful retailers have found that it's better to blur the lines between sales channels and let the consumer choose where they want to do the shopping process," said Hess. One reason retailers stumbled online is they did not have a good sense of what products consumers wanted. Bloomingdale's, owned by Federated Department Stores, seemingly threw in the towel on this matter. Now, Bloomingdales.com is up mainly for people needing to buy wedding gifts. Its main page is a bridal registry. Other parts of its Web site offer service-related information and offerings. Better Example Some retailers have done a better job of figuring out what works. Sears, Roebuck & Co.'s (S) Web site mainly offers products that consumers typically research before buying, such as appliances, outdoor products and electronics. You won't find basic apparel. For that, Sears is turning to an expert. It bought Land's End for $2 billion. The catalog retailer has been selling apparel online since 1995 and has been consistently cited as one of the top Web merchants in terms of repeat customers. Online bankers have gone through a similar shift. Rather than being a revolutionary business model that would change the way people bank, the Internet is now viewed as just another distribution channel for bankers. It's not a revenue generator; it's a service for customers. "So rather than listening to data, customers are looking at it onscreen," said Jim Bruene, editor and founder of Online Banking Report. About 20% of bank customers do some business online instead of by phone. "It's another channel for customers and more of a cost of doing business for bankers." investors.com