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eCommerce, the Dot-Com Bubble and Why Today is Different

More than a decade ago, many analysts predicted that eCommerce would be unprofitable. The dot-com bubble had burst, and with it, many prospects for online business. But since that time, the retail landscape has changed drastically. Innovators who were willing to risk Internet sales after the dot-coms would succeed admirably, and the number of people using the Web also grew considerably. Dial-up gave way to broadband and cellphones upgraded into smartphones. The world that created the dot-com bubble has since been replaced by one that nearly demands an online presence to succeed.

However, some may believe that another bubble approaches. Wired recently reported that the swift growth of  one tech company, Square, and enterprises like it might lead some people to believe that the Internet is about to run into another dot-com bubble. Yahoo’s $1.1 billion purchase of Tumblr came as a surprise to some, since it was not yet fully profitable at the time. Meanwhile, the disappointing initial public offering of Facebook and the decreasing value of companies like Groupon and game developer Zynga might give the impression that the Internet economy of a decade ago has returned. Companies that lack a clear business model are drawing in a substantial amount of money, but their continued value seems questionable.

Offer Value

However, grocery stores and other retailers are not social networks, game developers or image-sharing sites. They possess a definite value and service through their sale of produce and other items. These factors alone set them apart from the sites that some analysts believe may herald another dot-com bubble. Meanwhile, grocery stores can obtain more than a decade worth of data about what works and what doesn’t when selling their goods online because of successful dot-coms. A number of delivery-based grocery services already exist, in addition to  a variety of other sales sites, such as Zappos and eBay. These retailers can provide grocers an experienced viewpoint on how to succeed at Internet retail.

Unlike the of yesteryear, today’s e-commerce sites are thriving and have realized how to balance the price of shipping against the bottom line. The merchants at risk now are those that don’t exist in the digital realm. The dot-coms from the late 1990s are now physical stores like Borders. There are no digital equivalents to food and drink, but shops that don’t appeal to consumers through integrated commerce are closing themselves off to a critical segment of potential sales. Shoppers expect to find e-commerce for their favorite stores and brands, and those that don’t may turn to other retailers for their needs.

Plan Ahead

Furthermore, one of the major causes of the last dot-com bubble arose because companies didn’t utilize comprehensive business plans or implement a type of structure. This is arguably the case with groups like Tumblr or Facebook, which initially lacked goals or ways of creating a profit. Additionally, as Wired pointed out, one of the problems with past dot-coms was that they expanded too quickly, while their modern equivalents are usually more careful regarding overhead. Professionals involved with grocery chains should be less concerned about another bubble and more about sufficient foresight and strategy.

Rather than worrying about the failures from more than a decade ago, industry professionals should instead turn their attention to the success stories of today. Multi channel marketing efforts and improvements in retail intelligence have helped turn some stores into all-inclusive retailers. Some of the most popular brick-and-mortar retailers like Target and Walmart enjoyed the business of millions of customers during July, according to Nielsen. These companies can offer guidance to grocers in navigating the current integrated commerce landscape.

Articles and resources by the Mercatus team to help guide you on your eCommerce journey.

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