Survival of the Fastest

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What Can Go Wrong
Inc.: What are the biggest mistakes that the dot-coms are making today?

Briggs: I think the biggest mistake dot-com merchants have made in the past was pricing their items so low. Now they have two problems: They can't cover their own costs, so they are losing money. And they have set consumers' expectations for these low prices, and it's tough to ever go back.

Schwartz: Dot-coms are also spending prodigious amounts of money blitz-marketing their domain name, as if a general awareness of their brands were the only important factor. Just because a brand is well-known doesn't mean it's a strong one. Look at Music Boulevard versus CDnow. Everyone knew the names, but no one knew why one was better than or different from the other. So they merged. Then the merged company couldn't even survive on its own -- it was swallowed up this year by Columbia House.

McLemore: I think the biggest mistake of dot-com companies today is not satisfying the customer. For instance, eToys was famous last holiday season as the poster child of perfect customer service. A few other sites, however, evoked so much rage that their own customers launched special anti-dot-com Web pages in protest.

Also, strange as it may sound, many dot-coms aren't spending enough on technological infrastructure. It isn't always easy: just ask the folks at eBay -- an auction site notorious for its technological hiccups. Sites need enough sophistication to be reliable, quick, and friendly.

Owen: I agree. Many sites are struggling with performance and reliability. Ironically, many of the fundamental challenges with information technology have not gone away. Dot-coms also fail to invest in the quality of physical operations so that supply-chain performance is up to scratch. Many companies have the "nice site, shame about the product" problem, because they focus too much on customer acquisition and not enough on retention. Customer retention through excellent service will be the primary economic differentiator.

Inc.: Which emerging technologies will matter most to the success of Web commerce?

Schwartz: Ten years from now, I don't think there will be any such thing as an Internet company, per se. Every company will be an Internet company, and the technology will be ingrained into everything we do. Just think of all the everyday objects joining the Web and becoming Internet devices -- everything from industrial equipment such as oil rigs or factory machinery, to consumer devices such as refrigerators and children's toys, to cars and trucks. As more and more of these objects get embedded chips that can send and receive information from anyplace in the world, there will be thousands of new applications that we haven't even thought of yet.

McLemore: I foresee a huge boost for E-commerce when people become able to order anything they can imagine from anywhere on earth just by pulling out a PalmPilot.

Briggs: Technologies that save people time and money will have a big impact. The "one-click" payment used by many merchants is a good early example. On-line registries that simplify gift-buying for weddings, holidays, birthdays, baby showers, and housewarming occasions will be big.

I also think that technologies like shopping agents and alerts that notify customers when a product they are looking for is found in their price range could be popular. Those technologies essentially do the shopping for you. And if one on-line wallet standard ever emerges, it will also help simplify the checkout process and save consumers time.

Malone: In a certain sense, however, I think that new technologies will matter less than we think. Sure, all kinds of computational things will get smaller, faster, cheaper, and better. And as new technologies dramatically lower the costs of communication, many new possibilities are becoming economically feasible. But even if we had infinite bandwidth at zero cost in all parts of the world, the question becomes, What do we do with it?

What if, for example, most of us become "E-lance" workers -- independent contractors connected electronically to one temporary project team after another? Or, to take an opposite example, what if today's mergers keep increasing and we end up with 80% of the world's population working for five huge megaconglomerates? Is that something we want? Is there something we haven't even imagined yet that would be even better?

Inc.: Are there any myths or truisms about the Internet that you think have turned out to be surprisingly off base -- even dangerously wrong?

Schwartz: One is the myth of the Internet as a timesaving technology. It saves time for some things but sucks up time for others. Four years ago I didn't foresee people spending hours and hours bidding on obscure items on eBay. But people who collect antiques and such have integrated those pursuits into their lives.

Hoffman: Another common myth is that the Net is all about disintermediation. The Web was supposed to create direct access between buyers and suppliers, so why do you need intermediaries? But almost all our customers want to drive down the number of suppliers they deal with. They want intermediation. There will continue to be a demand for such services.

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