Global E-Commerce: North America - Dot.com Fallout

DOT.COM FALLOUT

Total North American online consumer sales in 2000, according to eMarketer, reached an unprecedented $38.3 billion. However, concerns regarding the performance of many Internet-based firms, including leaders like Amazon, caused stock prices to plummet during the second half of the year. In June, Lehman Brothers analyst Ravi Suria publicly criticized Amazon's financial status, prompting a share price drop of 19 percent. Suria pointed out that although Amazon had experienced incredible sales growth in the late 1990s, its $2 billion debt was costing about $125 million in interest each year and competition was heating up from the likes of Wal-Mart and other major retailers who were opening their own online stores. In fact, Amazon lost $720 million on sales of $1.6 billion in 1999. By August 2000, Amazon's stock prices plummeted to $28 per share.

Dot.com funding started to dry up when stock prices began to fall, leaving many upstarts short of cash. When dot.com like Pets.com and X.com began closing their doors, Yahoo! found itself scrambling to find advertising customers to take their place. As a result, Yahoo!'s stock also took a drastic nosedive. By the end of 2000, it was clear to even the most bullish analysts that the North American "Net craze" had come to an abrupt halt. As stated in an April 2001 article in BusinessWeek Online, "Of the 367 Internet outfits taken public since 1997 that are still trading, the stocks of 316 are below their offering prices, according to Thomson Financial. Only 55 companies, or 15 percent, have made money for public investors. And a staggering 224 have tumbled 75 percent or more since their IPOs. A total of $2.5 trillion has disappeared from Net company market caps since the peak last year."

The dot.com debacle was further exacerbated by recessionary economic conditions in North America. Despite the downturn, however, companies like AOL and eBay continued to thrive. And although the rate of e-commerce growth slowed, many analysts predicted that North American e-commerce sales in the early and mid-2000s, both B2C and B2B, would out-pace 2000 figures. With an estimated 180.68 million Internet users in 2001—compared to 154.63 million users in Europe and 143.99 million users in Asia—North America remained the e-commerce leader of the world.