Survival of the Fastest

Tweet

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?

I think most people would clearly prefer to buy from Joe's -- and therefore brands will become less important in the future. I also think E-commerce investors who are betting primarily on the future value of today's brands will be disappointed.

Schwartz: Tom, I respectfully disagree. All the evidence so far points to the fact that strong brand names are becoming more and more important in a world in which we can't rely on the typical visual clues. People will always need strong brands to cut through confusion and clutter.

And the brands that dominate the Web economy are not the ones we grew up with in TV commercials. There are no new brands of soaps and deodorants, cars and trucks, jeans and sneakers and such that have been made prominent on the Web. The brands that are thriving are what I call "solution brands" -- the ones that help you find the right information and services and complete tasks and transactions in a unique way. I think that Yahoo, E*Trade, eToys, Dell, and many of the emerging business-to-business start-ups are good examples of this.

Malone: I completely agree with you that, so far, strong brand names are becoming more and more important in the world of E-commerce because they are the best way we have of establishing trust. But what's coming next? I just think people are more interested in trust than in brands, as such. When services that aggregate and refine the opinions of real people are widely available, brands will be less important.

Schwartz: Well, Tom, perhaps these new aggregators become solution brands in and of themselves.

Owen: Doesn't the answer to all this depend on what you are selling on the Web? There's a difference between selling your own product and acting as an intermediary. You may have a brand that the manufacturer is selling directly on-line. Fedex.com, for example, has Federal Express behind it, and people want the FedEx customer experience. But if you are an "E-tailer" like BestBuy.com or Buy.com and simply act as a low-cost, on-line intermediary, the brand belongs to the product you are selling. A Sony microdisc player is branded Sony regardless of whom you buy it from. In these markets, some branded intermediaries are already having a tough time, and things will only get worse.

 PREV  1 | 2 | 3 | 4 | 5  NEXT 

Read more:

Sign-up for our Sales and Marketing Newsletter

Email Address: