Apres Le Deluge: Or Click, Bam... Thank You, Ma'am.

In November, I discussed how those of us who would be conducting e-commerce transactions during the 2000 holiday season would need to do a much better job of providing service than what occurred during the 1999 holiday season. Judging by the positive response I received regarding that column, many agreed.

It is rough to believe that less than a year ago, it seemed that pure dot com companies were guaranteed runaway success stories... this applied to advertising-driven sites as well as e-retailers. You remember the logic: brick and mortar meant overhead and overhead meant decreased profits; subsequently companies like Barnes & Noble saw their valuations drop while Amazon.com saw theirs skyrocket.

Dot Coms Seemed Invincible

There was more to it of course; the media gave a lot of attention to e-commerce startups, thus working for these companies became much sexier than any other job you opportunity available. Whenever you couple a sexy company with the potential to rapidly become a millionaire, you're sure to have the best talent flocking to you. If you combine this with the fact that dot corns had armies of headhunters working for them (when you have a seemingly endless flow of investment capital, you can afford to pay headhunters whatever they want) then you understand why brick and mortars had an almost impossible job of attracting technical and other types of workers. So dot coms seemed invincible: they were flush with investment cash, they had stock prices that consistently headed northward and they had the ability to sell additional shares at will to raise more capital.

It is incredible how quickly the bubble burst and how many dot coms bit the dust orate now struggling to stay alive. Some television news programs have devoted regular segments of their news coverage to the death of dot corn companies and, of course, there are countless Web sites chronicling layoffs and general problems in the dot com space. The most popular of these sites is the profanely named www.fuckedcompany.com.

Why The E-toilet Flushed

So what happened? There were people who predicted the dot com bubble would burst, but why did it burst so violently and could anything have been done to slow the pace of these companies being flushed down the e-toilet? Before we proceed, let's make sure not to lump all dot coms in the same basket; among all the new economy companies, perhaps the two biggest categories are advertising-driven and e-commerce sites.

I really thought advertising-driven dot coms would do well forever. My logic was as follows: as mote new dot corn companies started, more advertising would be needed to sustain these companies, and as long as the VC (venture capital) money poured in, there would be no stop to the success of new advertising-driven business models, which in turn would spend a portion of their ad dollars on Web-based advertising. Well, I was wrong. When VC money dries up, many start-ups' marketing budgets get cut and the circle breaks, Of course, this applies to today's market. I still believe that the Internet will be the biggest form of advertising within the decade. Why? Most every magazine (including this one), all newspapers, television and radio make the majority of their profits from advertising. As more eyeballs and eardrums are drawn to the net, it is only logical that the broad reach of this medium will eclipse any other.

But what about the e-commerce companies? They are having a tough time as well, Jr is my belief that many of these companies would still be around, and others would be doing considerably better, if they simply went about their business differently. A great deal of these sites took tremendous amounts of money and devoted these funds to advertising and Web site design figuring that it was all they needed to do. In hindsight, this was a huge gamble. They figured live customer help wasn't needed; after all, their customers would be shopping on the Web, so why would they ever want to speak to a human being? These customers could just use self-help Web-based systems...perhaps a FAQ section was all that was needed, Anything more, like being able to (heaven-forbid) contact a live, breathing being would be sacrilegious and would defeat the whole purpose of using the Internet, right? They couldn't have been more wrong.

They thought interaction centers were a thing of the past and all that was needed was a flashy Web site and the thrill and convenience of e-commerce would guarantee the success of their site. Who needs to call and speak to a live person on the Webs They were wrong again!

While these companies were delivering lackluster service to their customers, and turning them off in the process, the dot com world was exploding with competition as the barrier to entry was minimal and venture capital flowed like Niagara Falls. But, alas, overpopulation of e-retail companies is not unlike species overpopulation in nature -- too many animals are forced to compete for limited food and shelter. In the e-tail world, an overpopulation of companies is forced to fight for the same customers. Survival of the fittest is not just a law of nature, it now also applies to dot com companies. The healthiest companies will emerge -- battered and bruised, but alive.

There is no truer test of a company's ability to survive than a slowing economy. Rising fuel prices, a near record number of annual interest rate increases, the bursting of the dot com bubble and the deflation of the NASDAQ are factors contributing to this downturn, which were all, of course, compounded with election uncertainty. At this time more than any other in the last few years, people are less likely to take their wallets out until they get a sense that the future is more certain.

But, in the wake of tremendous tech turmoil on Wall Street, it seems that those brick-and-mortars (you remember, the companies that were doomed just over a year ago) certainly look like they will do very well as commerce moves to the Internet. These companies have the added advantage of integrating e-commerce into their existing channels. Sure, many don't have the best technical people (but I can tell you from experience in the Northeast that there is infinitely more Web talent to choose from today than just six months ago), but they have something overlooked just a few years ago: solid management skills and a good sense of their own company identity honed over years of doing business the traditional way. Beyond that, these more traditional companies have an understanding of their customers and business plans that are built to last.

Please don't accuse me of blindly praising all brick-and-mortar enterprises; many certainly have made numerous mistakes, not the least of which is entering Web channels late, reluctantly and half-heartedly. These slow-moving companies will learn the hard way and lift their heads our of the sand or forced to close down. The companies that are doing it right and are embracing the Web and adding the latest technology to satisfy their customers will have a huge advantage over their dot com counterparts. They know that shoppers still want personal service, any way they choose to contact the company. They understand that one of the communications channels customers still want to choose is walking into a store and talking face-to-face with a salesperson. They also understand that by integrating their brick-and-mortar and Internet presence, they will offer the best of all worlds.

Certainly there is room for pure dot as well as dot com/brick-and-mortar blends (often referred to as clicks-and-bricks or dot hams). Some people, e.g., technical people, are more inclined to shop online while others still prefer the hands-on, in-person shopping experience.

It would be a mistake to think that everything will sell well on the Web. Through trial and error, there seems to be a general consensus at this point that some things just don't lend themselves very well to e-commmerce. Pet supplies are one such example (no matter how endearing your advertising campaign mascot). There are many other items that do seem to lend themselves to e-commerce: anything commodotized, inexpensive to ship and expensive enough to justify building a business around. Consumer electronics, sunglasses and watches are a few categories that come to mind. Services such as classifieds and long-distance are others.

Of course, there are many other categories of products and services that will sell very successfully over the Internet, but to be successful, they should have all (hopefully) learned something from the events of the past year. First and foremost is the need for every company to allow their customers to always contact a live person, whether it is through e-mail with immediate response, char, IP telephony or some other means. Also, in many cases, having brick-and-mortar locations will help dot com companies differentiate themselves. Finally, I would like to propose a new theory on customer service in this age of the new economy. Almost everyone on the customer interaction front lines has heard the golden rule that, "It takes 10 times more money to attract a new customer than it does to keep an existing one." But this rule was made before the Internet took off and certainly doesn't take into account Web sites like sucks.com where the world can complain about any company and the rest of the world can instantaneo usly read about it and respond. Consequently, I feel this rule needs to be brought into the 21st century, where Web sites, chat rooms and email allow customer opinions to spread more rapidly than ever before, I would like to call this new rule Tehrani's Law of Customer Service and it states, "In the Internet era, it takes 100 times more money to attract a new customer than it does to keep an old one." It is generally agreed that the next 12 months are going to be more competitive than the last 12 and there is an ever-growing focus on increasing profits. It is my sincere wish that companies begin to place more emphasis on pleasing their customers, and I hope that Tehrani's Law of Customer Service helps quantify why we all need to provide our customers with the best customer service in the 21st century.

Sincerely,

Rich Tehrani

Group Publisher

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