Now that it's apparent most e-tailing stocks will "never again" (read over the next two years) attain the lofty heights of a few months ago, many analysts have taken to analyzing who will win the shake out, and what its results will be.
This much is clear. The winners will be those who get fulfillment right. You don't just slap a FedEx sticker on stuff. You run an efficient warehouse, and seek efficiency in your delivery arrangements as well. To me this makes Webvan fascinating. FedEx chairman Frederick Smith insists it's impossible to out-do his company for distribution efficiency, and it's true that few will, but each one that does offers choice for merchants.
If Webvan proves out, the way is open to a world of opportunity. Local theaters could deliver tickets, dry cleaners could pick-up and deliver clothes - just imagine how many things might go back in those plastic Webvan cartons. These are local opportunities for local merchants that open only after Webvan achieves some success and economies-of-scale. If Homegrocer makes it you have another opportunity. Amazon has already opened its distribution system to others through its Zshops program, and while the execution hasn't been great (there's not enough marketing support, for one thing) a chance beats no chance any day.
Outfits like Webvan and Homegrocer are how the Web will become a truly local medium, catering to local tastes and supporting local merchants. Higher gas prices play into their hands - it's far more efficient for goods to share a ride in a Webvan than for each consumer to drive and shop for them. It's only with $3-4/gallon gas (still a few years away) that these savings will become apparent.
The problem with the last three years is most merchants have thought only about making people click. Not enough thought has been given to what happens afterward. The bigger the store, the bigger that problem becomes - that's why Wal-Mart.com remains a non-starter.
Ironically, many of the best opportunities lie hidden deep in the data warehouses of companies like Amazon. Wouldn't your business plan look better if you had hard data on which to base market estimates? Data warehouses can give you that information. But it takes programming and hard work to get it out.
UPS and FedEx still have opportunities here, but to seize them they'll have to invest heavily in warehouses, in scaled picking-and-sorting capacity, and in local distribution deals with local producers. They bring a limited amount of knowledge to the table, and the key word there is limited - if they come at this with a know-it-all attitude they'll fail.
The questions of distribution don't sound sexy. They're difficult, expensive problems to solve. But they have to be solved if e-commerce is to fulfill its potential. My prediction is they will be solved, just not right away. It's this transformation of distribution that may be the biggest business chore of the next decade.
At the end of this month I'll be appearing in New York, covering the ClickZ Marketing Strategies 2000 conference . If you need to become Clued-in, the speakers at this show can help.
I'm still making myself available for consulting to a limited number of clients, with an eye toward assuring their long-term success. If you're interested give me a shout at 404-373-7634.
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I write daily for ClickZ, and weekly at Andover.News. I write monthly for NetMarketing, Boardwatch, and Intellectual Capital. I've been in Advertising Age and the Chicago Tribune .Once every other month I'm in CLEC Magazine. You can always buy my book . Subscription instructions are at the bottom of each issue.
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Takes on the News
The Rule of Law
What's the most important ingredient for a nation's success today? Is it liberty, is it economic freedom, or is it (perhaps) simply civic order?
Nope. It's the rule of law.
The rule of law is more complex and difficult to achieve than anyone admits. It requires a balance of rights and responsibilities. It requires that police be respected - not merely feared. It requires a process by which the law can be challenged, and even changed. It requires more than the consent of the governed - it's a confederacy among the governed, one to which nearly every citizen subscribes.
After 40 years of trying to create different models for African development, for instance, thinkers like UN Secretary General Kofi Annan have awakened to the importance of the rule of law in economic development . The only African nation that has it - South Africa - is the only African nation that's succeeding. A similar nation that is destroying it - Zimbabwe - is sentencing its people back to the Stone Age as a result. The lack of ordered law that is respected by all keeps down Latin nations like Columbia and (now) Peru. The government of Indonesia is now engaged, not in a process of economic development, but of political and social development, a unique attempt to create a rule of law.
I bring this up because the Internet won't succeed either without the rule of law. And that law can't just be made by spies and police - it must arise with the consent of the governed. Absent rule of law the Internet is becoming balkanized, anarchic or (worse)autocratic. The promise of this medium is being destroyed because of a shortage of institutions, and of balance between state power and human rights.
Building a rule of law that will cover the Internet is the great task of the rest of our lives. Our cynicism has made us late at beginning it. The journey starts here and here .
There are attempts being made to bridge this gap, but they remind me of Internet start-ups from the 1980s. They don't have the capital or resources to really succeed. But I'll applaud them anyway (http://www.ipetitions.com/worldpolls/) and keep looking for solutions...
The Last Mile Battle is Over
At Supercomm last week, Nokia announced a real solution to the "last mile" problem, the one that has allowed @home to demand tribute from content owners and caused battles between ILECs and CLECs.
Nokia calls this "wireless broadband" infrastructure a RoofTop Network. It's basically a network of small stick-like antennae, sharing 12 Mbps of throughput and hopping among 79 frequency channels within the 2.4 GHz band the FCC is giving service providers "open access" to. Like the Internet itself, it becomes stronger as more antennae are added. Expect 2 Mbps residential service, Nokia said, and 15-20 different networks can share a city without contention.
I expected this kind of thing years ago, and I'm pleased a vendor is delivering. (Well, they'll deliver in the fourth quarter.) Wireless broadband moves the bottleneck in the network from the "last mile" to the "network edge," where devices like cache servers play.
When the Web was first being spun, in 1995, the magazine I was working for (Interactive Age) was forced to close because there weren't enough advertisers to sustain it.
A few years ago, on the other hand, demand for Web services exploded, and editorial budgets went through the roof. By late last year even ordinary writers could demand equity in big projects, or at least options.
Recently, things have gone completely the other way. Following the NASDAQ tank, and a few site closings, the editorial budgets I've seen are close to 1995 levels.
The boom-bust cycle must end before the Internet becomes a real business. Wise site managers can end it now with a system of fair (realistic) cash payments and contingent stock options based on the company's performance. Yeah, just like in the real world.
Clued-in is Paypal , a start-up backed by Idealab and run by X.Com of Palo Alto. It's a cash payment method for Internet transactions, as small as a penny each. There's no guarantee they'll succeed, but they've done some things right, and deserve praise for that.
Clueless is Microsoft. Assuming courts will overturn Judge Jackson's order is na´ve , and Gates' assumption that his new XML tools will lead to Microsoft's domination of the Internet is childish, not child-like.
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