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E-commerce investments for 2009
Shop.org is hosting an intriguing discussion regarding "investing in e-commerce for 2009". Apart from salesmen pitching their angle, there's a slew of commentators with real insight.
We like what Todd said:"e-Commerce is the only sector in retail where the is growth and it comes at a fraction of the cost of traditional bricks and mortar retail. The reality is that both channels can drive one another; consumers use the web to research the products and services they are interested in and shopping online with companies one trusts saves time & money and it is generally more convenient. Personally I find it hard to take a retailer seriously if he/she does not have a decent online presence, it’s a big indicator of their commitment to their customers."
And BMAY: "Want to know which large retailer grew the fastest in 2008? Amazon. By 2012, if it only grows at a 13% CAGR (half as slow as current growth mind you), the company will be as large as Sears Holdings (Sears + Kmart).
Certainly there is channel shift occurring, but consumers are voting with their wallets. And while online and offline work best together, the fact remains that e-commerce businesses provide a better return on investment in the current economic climate than capital spent on new or existing real estate. The head of ecommerce knows this; the CFO and CEO do not. While the upfront capital costs may be more than opening a single store (or even multiple stores), that investment pays returns the equivalent of 5, 10, or 20 stores. It also scales more easily and is more easily adaptable to meet consumers changing tastes. Margins are generally better, inventory costs are generally better, economics are generally better.
Sure, brick and mortar won’t go away, but with an over-stored retail landscape, it simply makes sense to a.) invest in the best locations, b.) shutter the worst locations, c) divert capital to growth and return. For item c), you have to argue e-commerce is the right investment ESPECIALLY in a challenging environment."
And HJ: "Ecommerce investment is a MUST. Many CEO’s fail to appreciate how much a world-class online experience can enhance and differentiate a retail brand. Weird, given that well-branded (ie, respected, trusted, and relevant) companies frequently enjoy greater asset turnover, wider operating margins, and have access to more and cheaper capital than their poorly-branded competitors. Mathematically, all of these things drive ROE — which, coincidentally, is the CEO’s job. You’d think CEO’s would make ecommerce their pet. But no.
In my mind, failing to invest in ecommerce is akin to neglecting one’s brand. Crazy, given the rise in adoption of internet technologies and how quickly those technologies change. And “When the rate of change outside the organization is greater than the rate of change inside the organization, the organization is in trouble.” -Jack Welch"
Read the whole debate.
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