Online Extra: Commentary: The Top Ten Myths About E-Commerce

Still believe expenses don't matter, shipping costs equal profits, and consultants care? If so, there's a sock puppet with a bridge for sale

Call it Popper's Law: A disaster hasn't really assumed its proper place in history until it has its own a Top 10 list. So I did a random poll among venture capitalists, Wall Street analysts, and consultants, most of whom don't have a sense of humor like the writers who compile the Top 10 List on The Late Show with David Letterman. But what follows is an amalgam of their ideas about what went wrong with e-commerce. Here now is BusinessWeek Online's Top Ten Myths about E-Commerce:

1. You can always find the best price online.

Smart shoppers know the best prices are in stores. After you've cruised online to find out what things cost, you use that information like a sledgehammer to beat down the price that your local retailer is hoping to coax out of you. Kudos to one group that has recognized this dictum for the pablum it is -- car dealers. Online car prices now tend to be more expensive than those on the lot.

2. You can make all your profit on shipping

Yeah, right. And you can make it up on volume, too. Many e-merchants have been dismayed to discover that you actually have to sell items that generate a profit margin, because clever e-shoppers are willing to go the cheap route and have their gizmos shipped via regular mail. Cheers for the U.S. Postal Service, the only organization that truly has turned a profit from e-commerce shipping.

3. There are enough stoners in New York City to keep Kozmo.com alive.

If you live in the Big Apple, as I do, you may not know this particular urban myth about Kozmo -- a vicious rumor started by Manhattanite wannabes in the suburbs. Supposedly Kozmo was born to cater to potheads' who get the munchies and lack the get-up-and-go to run down to the deli at midnight.

My guess: The truth is more subtle. It's likely that there weren't enough stoners in NYC to keep Kozmo on its bicycle. Alas, there were also vast numbers of people like me -- hard-working types stranded after a long day at the office in places like Tribeca, blocks and blocks from a video store. Kozmo's owners pulled the plug on a reasonably successful business. Tribeca mourns its passing. By the way, Tribeca has no stoners now that all the movie stars have moved in -- they're into designer drugs.

4. It matters that your pet can't drive.

Well, not if its owner can. So much for Pets.com, cute sock puppet and all. Poor Pets.com also gets a public-service award for proving that branding isn't everything. Everybody knew the sock puppet, right? Nobody bought the dog food.

5. A consultant with an equity stake in your startup is your pal.

Sure. Like the college roommate who buys a CD to support you in your purchase of a CD player. That's the same roommate who ends up jamming the CD drawer mechanism through overuse. Just ask any CEO who has had the benefit of "consulting advice" from a load of trainees foisted on him or her by an overeager investor. Not to mention that advice never comes free. Consultants were notorious for buying an equity stake -- and then getting the money back as fees. Nice deal, huh?

6. Airline travelers will make six stops between New York and San Francisco just to save a hundred bucks.

Captain, the consumer just can't take it! Come to think of it, neither could Captain Kirk. Once again proving his intergalactic cunning, Priceline.com frontman William Shatner bailed out before the stock plummeted.

7. That daffy Barry Diller...

Yea, like a fox. He was often ridiculed for not jumping onto the Internet bandwagon. Turns out point-and-click cannot compare to shopping from the Barcalounger with the footrest up. The evil genius behind TV shopping network QVC knew from couch potatoes.

8. Expenses don't matter.

Just ask the Street.com, or any of the other online media organizations that ran their companies like George Steinbrenner runs the Yankees. They're now either out of business or on the verge of it. You might win the World Series by overbidding for talent, but media profitability depends on ad sales that cover costs with some left over for the bottom line.

9. The Internet is a revolutionary advertising forum. No, it's a dead advertising medium.

Neither is true. Admittedly, it turns out there are more exciting ad media than those three-inch strips that blink at you while you're researching prices on the Web so you can go beat up on your local retailer. But Web advertising is by no means dead. Just ask the America Online division of AOL Time Warner, where advertising and commerce revenues were up 37% for the first quarter of 2001 -- accounting for 34% of total sales. Web advertising isn't dead. It just hasn't replaced all other forms of advertising. Go figure.

10. What this world needs is a business-to-business exchange for odd lots of bubble wrap.

Forget it. The world doesn't need it, the bubble-wrap makers don't need it, and even the movers don't need it. That's because businesses, including the tiny ones, don't make all of their buying decisions on price alone. There's as much value, if not more, to knowing that the guy selling you the bubble wrap will get it to you on time in the right amount and in the right condition. That's why myriad small and midsize business owners have stuck to their arcane systems of nurturing supplier relationships and left B2B exchanges wallowing in plastics.

By Margaret Popper

Edited by Beth Belton

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