Inc.: So what age will we give way to?
Hoffman: The next Internet age will be the era of business-to-business commerce, which represents a huge opportunity. Forrester Research estimates revenues for business-to-business E-commerce of more than a trillion dollars by 2003. Today most of that business is happening on a regional basis: North American buyers buy from North American suppliers, and the same with Europe, Asia, and so on. The next big phase will occur as regional trading communities begin to do business with each other.
Inc.: How are dot-com-company founders today different from those of a couple of years ago?
Owen: Too much capital is chasing too few good ideas. Many dot-com founders are poor businesspeople who are attracted by the potential to get rich rather than to create something that is -- in the words of authors James Collins and Jerry Porras -- "built to last." The mix of quality has changed in the past year as the providers of capital have become less discriminating.
McLemore: I disagree. I've noticed that investors want a lot more management experience in founders because competition has increased. Repeat Internet entrepreneurs such as myself and savvy founders from outside the Internet with extensive management experience are becoming much more common.
Briggs: And more dot-commers now come from traditional retailing backgrounds. They really understand their customers and the value of superior customer service. That is very different from early Web-centric companies, which simply offered a big selection at low prices.
Current (and Future) E-vents
Inc.: Right now, many big dot-com companies are experiencing considerable success. Look at Amazon, with its ever-expanding tentacles. Will small dot-coms get squeezed out?
Schwartz: People misunderstand why Amazon is growing so fast. It's not just the low prices and wide selection; it's the attention to detail in customer service and the wide range of services, like one-click payment, personal recommendations, and a powerful affiliate program. But Amazon won't be like Wal-Mart coming to a small town, wiping out everything else. There will be thousands of other winners in niche categories, especially in business-to-business markets.
McLemore: There is plenty of room and opportunity for well-funded world-class brands as well as small, shallow-pocketed players. Small players just need to focus on a niche where their expertise can provide a value-added experience for the consumer. I just ordered a book on vintage soda machines from a collectors' site because of the expert editorials I saw there.
Owen: You could view this as an argument between big department stores and specialty stores. A lot of people still shop at department stores, and they are not going away, but America has chosen specialty stores. Amazon-style companies will have to compete against the specialty players, who may dominate their own spaces. And price will increasingly disappear as a method of differentiation and will be replaced by content, community, and customer experience.
Inc.: The crossroad at which the dot-com companies intersect with land-based business represents both an opportunity and a challenge to new, shallow-pocketed entrepreneurs. What model offers more likely success -- the pure-play dot-com or the hybrid?
Schwartz: The conventional wisdom is that new dot-com start-ups have an imposing advantage over traditional corporate species because they don't have the brick-and-mortar baggage holding them back. But the companies that are tying the new together with the old -- by tightly integrating digital commerce with physical commerce -- are the ones that are going to survive and thrive. Look at what Dell is doing in the computer business; or what REI, the chain of outdoors superstores, is doing in retail; or what Streamline is doing using the Web to coordinate the in-person delivery of consumer goods to people's homes.
McLemore: But Evan, the conventional wisdom isn't always wrong. Millions of customers all over the Internet are voting with their wallets. Dot-com stores are still a lot more nimble than many land-based retailers caught in their antiquated structures. Many land-based retailers begin to move only when they feel they need to in order to survive.
Briggs: Greg, the traditional players are coming. They see the threat and the opportunity, and they are moving their businesses on-line at a furious pace. These retailers can offer services, such as holding items for same-day pickup or even offering same-day deliveries. Web-only companies cannot compete with that.
Inc.: So what should small companies be doing? Changing their business models? Deepening their brands?
Malone: Certainly, an important part of the rationale for giving high valuations to dot-com companies is that they are establishing brands in the E-commerce-based economy. But I believe that brands themselves will become less important in the future.
Here's why: Right now, brands provide a signal of quality that buyers can use to judge the potential value of a product they are considering buying. That is important in today's "frontier" world of E-commerce, because brands provide one of the few ways to judge the value of products you can't see or touch. For example, most people would assume that a TV from Sony would be of higher quality than one from Joe's Garage Electronics.
But in the not-too-distant future, there will be many Consumer Reportstype rating services on the Web, perhaps including Gomez.com, Deja.com, and Epinions.com. These services will make it very easy for you to get summaries of many buyers' experiences and of expert evaluations of products. In this world, would you rather buy a TV from Joe's Garage Electronics that was rated excellent by numerous buyers and experts or a TV from Sony that everyone thought was terrible?
