Web merchants face a make-or-break Christmas season

Associated Press

SAN JOSE, Calif. — A year ago, Al Noyes of SmarterKids.com Inc. was forced into the trenches — a company executive working 14-hour days alongside assembly line workers to package customers’ Christmas gift orders.

This year, the online toy retailer’s chief operating officer has his sleeves rolled up again — not at the warehouse but at the corporate office, tightening expenses and completing a merger that the company says will accelerate its path to profitability and keep it alive.

Like many other e-tailers, SmarterKids.com is embroiled in what some analysts consider a make-or-break season.

E-tailers, having moved beyond the debate of whether online commerce will survive, are now under mounting pressure to demonstrate they have the know-how and the customer base to achieve profits.

"Christmas is the big time to prove yourself," said Jeetil Patel, an e-commerce analyst with Deutsche Banc Alex. Brown. "If companies don’t hit the revenue targets this year, then it would imply they did not have as many customer transactions and customer acquisitions, which implies how many repeat customers they’ll have for next year."

Web merchants also face increasingly fierce competition from deep-pocketed and well-established brick-and-mortar businesses. Stores such as Wal-Mart and Kmart have aggressively entered the cyber arena and are rapidly gaining sales.

Industry analysts are predicting a continuation of a shakeout that in recent weeks claimed Toysmart.com, Garden.com and Pets.com.

"At least half will not survive in the current state that they’re in, as a stand-alone pure play," Laurie Windham, an e-commerce consultant, of online businesses.

Many e-tailers are in financial intensive care, running low on cash and facing a limited amount of capital options and Grinchlike scrutiny from investors.

Compared to the 1999 holiday season, the name of the game for most online retailers today is less about gaining new customers than retaining existing ones.

"Last year, people were enamored with the Internet — it was a sexy thing to shop online," said Windham. "But now it’s part of our lives. Now they expect to get good deals and they expect to have a lot of choices and they expect it to be a whole lot more convenient."

SmarterKids.com has watched its stock plummet along with other Internet companies — it closed at $1 Friday, down from its 12-month peak of more than $14 — despite the robust 1999 Christmas season that sent fledgling online retailers like itself scrambling to handle orders.

"Last year, we looked like a duck — things looked calm on the surface but we were paddling furiously underneath," said Noyes. "But we’ve learned a lot since. Our (Web) site has evolved. Our merchandise mix has evolved."

Anthony Noto of Goldman, Sachs &amp Co. estimated in a Nov. 27 investment report that as many as 10 of the 22 publicly traded e-commerce companies he monitors will no longer be alive by mid-2001.

"The Better Business Bureau says that seven out of 10 businesses don’t survive — why should that be any different with the Internet?" said Robert Labatt, research director and Internet market analyst for the Gartner Group. "It’s all in the course of the Darwinian evolution of business."

Labbett acknowledged that his company, an online retailer and auction site for computer equipment, and its dotcom compatriots face a tough investing environment.

"It’s crazy that a company with a half-billion dollars in sales and a clear plan to profitability is worth $1 a share," Labbett said. "Our goal is to wait that overswing out."

Copyright ©2000 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Local News

Snohomish residents Barbara Bailey, right, and Beth Jarvis sit on a gate atop a levee on Bailey’s property on Monday, May 13, 2024, at Bailey Farm in Snohomish, Washington. Bailey is concerned the expansion of nearby Harvey Field Airport will lead to levee failures during future flood events due to a reduction of space for floodwater to safely go. (Ryan Berry / The Herald)
Harvey Field seeks to reroute runway in floodplain, faces new pushback

Snohomish farmers and neighbors worry the project will be disruptive and worsen flooding. Ownership advised people to “read the science.”

Grayson Huff, left, a 4th grader at Pinewood Elementary, peeks around his sign during the Marysville School District budget presentation on Tuesday, Nov. 28, 2023 in Marysville, Washington. (Olivia Vanni / The Herald)
State OKs Marysville plan with schools, jobs on chopping block

The revised plan would mean the loss of dozens of jobs and two schools — still to be identified — in a school district staring down a budget crunch.

IAM District 751 machinists join the picket line to support Boeing firefighters during their lockout from the company on Thursday, May 16, 2024, in Everett, Washington. (Ryan Berry / The Herald)
Amid lockout, Boeing, union firefighters return to bargaining table

The firefighters and the planemaker held limited negotiations this week: They plan to meet again Monday, but a lockout continues.

The Trestle’s junction with I-5 is under evaluation (Kevin Clark / The Herald)
Here’s your chance to give feedback on the US 2 trestle and its future

Often feel overwhelmed, vulnerable and on shaky ground? So is the trestle. A new $17 million study seeks solutions for the route east of Everett.

John Pederson lifts a flag in the air while himself and other maintenance crew set up flags for Memorial Day at Floral Hills Cemetery on Friday, May 24, 2024 in Lynnwood, Washington. (Olivia Vanni / The Herald)
Volunteers place thousands of flags by veterans’ graves in Lynnwood

Ahead of Memorial Day, local veterans ensure fellow military service members are never forgotten.

Brian Hennessy leads a demonstration of equipment used in fire training at the Maritime Institute in Everett, Washington on Wednesday, May 22, 2024. (Annie Barker / The Herald)
‘Ready to go full sail’: Maritime Institute embarks at Port of Everett

The training facility offers Coast Guard-certified courses for recreational boaters and commerical vessel operators.

George Beard poses for a photo outside of the the Stanwood Library in Stanwood, Washington on Wednesday, May 8, 2024.  (Annie Barker / The Herald)
From sick to the streets: How an illness left a Stanwood man homeless

Medical bills wiped out George Beard’s savings. Left to heal in his car, he got sicker. Now, he’s desperate for housing. It could take years.

Logo for news use featuring Snohomish County, Washington. 220118
Lawsuit says Snohomish County deputies not justified in Sultan shooting

Two deputies repeatedly shot an unarmed Sultan man last year, body camera video shows. An internal investigation is pending.

An airplane is parked at Gate M9 on Tuesday, May 21, 2024 at O’Hare International Airport in Chicago, Illinois. (Jordan Hansen/The Herald)
Good luck to Memorial Day travelers: If you’re like me, you’ll need it

I spent a night in the Chicago airport. I wouldn’t recommend it — but with flight delays near an all-time high, you might want to pack a pillow.

Editorial cartoons for Friday, May 24

A sketchy look at the news of the day.… Continue reading

Cascade’s Mia Walker, right, cries and hugs teammate Allison Gehrig after beating Gig Harbor on Thursday, May 23, 2024 in Lacey, Washington. (Olivia Vanni / The Herald)
Seniors Wilson, Tripp power Cascade softball past Gig Harbor

The pair combined for three homers as the Bruins won the Class 3A state softball opening-round game.

The original Mountlake Terrace City Council, Patricia Neibel bottom right, with city attorney, sign incorporation ordinance in 1954. (Photo provided by the City of Mountlake Terrace)
Patricia Neibel, last inaugural MLT council member, dies at 97

The first woman on the council lived by the motto, “Why not me?” — on the council, at a sheriff’s office in Florida, or at a leper colony in Thailand.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.