Business-to-Consumer (B E-Commerce (2C) - Falling Stocks, Fulfillment Foibles

FULFILLMENT FOIBLES FALLING STOCKS

During 2000 the stock prices of many top online retailers fell dramatically as the stock markets in general, and technology firms in particular, suffered a broad and protracted sell-off amid investor concerns about future growth and general economic conditions. The E-Commerce Times Stock Index fell 82 percent from the end of 1999 through the end of 2000. The year 2000, as a result, was also the year of the dotcom shakeout, with many e-tailers going out of business. An estimated 150 dot-coms folded during the year, including Boo.com, Toysmart.com, Petstore.com, Living.com ,Pop.com, WebHouse Club, Eve.com ,Pets.com ,MotherNature.com, and Garden.com. While the downturn was devastating for many of the companies involved, not to mention their long-term shareholders, lower stock prices made it easier for large offline companies to acquire online retailers during 2000. German media conglomerate Bertelsmann AG, for example, acquired the struggling online retailer CDNow.

B2C e-commerce was also tarnished in 2000 by a rash of denial-of-service attacks on prominent Web sites and service outages caused by high levels of customer traffic. The attacks, believed to be orchestrated by individual hackers, forced well-known consumer destinations like Amazon.com offline for hours at a time and caused them to lose sales due to the down-time. Out-of-stock merchandise and late shipping continued to be problematic and, in e-commerce jargon, signaled a problem of scalability for some etailers who couldn't handle peak volume. In fact, some believed the biggest challenge to B2C e-commerce was order fulfillment, as consumers grew frustrated with out-of-stock merchandise, high shipping costs, and late deliveries of products ordered over the Web. For e-tailers, meanwhile, high shipping and fulfillment costs often resulted in negative operating margins. Successful B2C firms were those that focused on operational excellence and pleasing customers. Many in the business believed fulfillment was handled most economically by outsourcing it, not by attempting to fulfill orders in-house.