E-commerce: Winning the War

Unfortunately, just as the dot-coms have found there is no New Economy or New Math for measuring profits and worth, catalogers have found there’s no magic “new profitability” in producing a sale on the Internet.

A number of catalogers are finding that the Internet is less important than previously believed for creating new sales and increasing profits. Let’s recall a couple of the promises of the Internet revolution: (a) Drastically lower operating costs as customers fill out their own orders, and as customer service is conducted electronically! and (b) Hugely improved inventory control (and margins) as you sell only what’s available and sell it down to the last item! While five of the companies shown in the chart did show improved net income in the third quarter of last year, none has stated that Internet operating efficiencies are the cause. Add this to the recent earnings warnings from Lands’ End, Lillian Vernon, William-Sonoma and others, and we do not get the picture of an industry with rapidly rising profits and lower costs.