Online Spending – The Latest News

TEC International just concluded their 2002 first-quarter survey of 6,000 CEOs of small-to-midsize companies. Most are, in Greenspan’s words, “cautiously optimistic.” According to BusinessWeek, this is what they found:

CEOs General Opinion On the Economy

26% recovery is at hand 49% growth will begin to accelerate in the second half of 2002

Which Industries Will Have The Greatest Gains?

26% tech 29% manufacturing 21% biotech

How Many Expect Sales To Increase and By How Much?

27% increase spending by up 10% 16% by more than 10% 20% decrease spending 37% making no adjustments

Regarding commercial borrowing, The Federation of Independent Business (NFIB) also held a survey. This is what they found:

5% Problems getting loans 35% Could Get Loans without major problems

The average interest rate for short-term loans was 7.2%

Source: The Small Business Section of Business Week

J Crew’s Online Success
There has been quite a lot of talk lately about ecommerce bouncing back. J. Crew did what a few clothing and general merchandise companies have done. For the first time in February 2002, J. Crew’s online sales ($13.1 million) have surpassed their catalog sales($10.7 million). [Please see source link below for more information] Yahoo!’s Awesome and Innovative Three-Day Auction

Yahoo! has also done really well lately. During the second full week of March, it offered an innovative auction discount sale. The company brought together the offerings of 100 of its retail partners, combined these with discounts of Yahoo!’s services—namely extra space for email and personals–and called it “the biggest sale in Internet history.” Furthermore, Yahoo! made tactical alliances for the sale with new powerhouses such as Sears Roebuck and Co. It worked! During the three day sale period, Yahoo! stated that they had a 25% increase in gross e-commerce sales. Astonishingly, some of its partners found their sales increase as much as 500%! [Please see source link below for more information]

ECommerce’s Movement to WebServices
Now that we are past the initial dot com explosion and have suffered the ramifications that followed because of the excesses of greed and gluttony, we seem to be entering a new phase of ecommerce. Companies want to connect to other companies using devices and computers that talk to each other requesting quotes and checking items and other business tasks in a smart way. This is called Web services. In doing this, the major Internet movers, namely Sun, Microsoft and IBM are working on their own dream of the next generation technology. The beauty of it is that they all seem to be subscribing to similar technology to make this happen: XML, SOAP, UDDI.

Venture Capital
Venture capitalists are watching start-ups carefully, but aren’t quick to jump on the pipe-dreams of 1999 and 2000. There is an estimated $40 or $50 billion sitting in the collective coffers of the venture capitalists. Recently, an online article from The New York Times did a story about a one-year study done by VentureOne, which started in early 2001. This study was conducted on 7,235 mostly high-tech companies which had previously received financing. After a year of observation, they found that over four-fifths (83%) of the companies survived the recession; some better than others, 11 percent went under and six percent were bought outright or issued IPO’s.

Interestingly, when Pricewaterhouse Cooper did a study on the same VentureOne group of companies, they found that 3,400 companies had received funding before the severe part of the 2001 recession and should shortly be coming back for more funds—which may or may not happen now. The 610 companies, which received $6 billion in the fourth quarter of 2001, is a far cry from the $27 billion received by the 1,711 companies in the first quarter of 2000. Furthermore, the time between successive financing has increased. However, the good side in this whole scenario is that the funding is being seen as stabilized and not perceived to further slide.

Other than taking a smarter, more conservative approach, what are the common denominators among the successful start-ups? Pricewaterhouse Coopers study asked 350 of the successful fledglings as to what where their secrets of success.

“Companies that said they were going to conquer the world were likely to fail for lack of focus,” said Michael Katz, managing director and chief operating officer at Pricewaterhouse Cooper’s global technology center in Menlo Park, Calif. They, therefore, determined that they needed a “narrow and manageable definition of the markets they were going after.”

The behavior among the companies before, during and after the Internet bubble seems to show that the start-ups who started slower but established a good customer base did well throughout the dot-com bubble phases. However, those who jumped on the bandwagon during the 1999 and 2000 boom, promising lofty returns to greedy venture capitalists lost their shirt because it was a scenario of getting a good management team to implement a good idea with the dream of making a huge amount on their return of investment. The problem with this is that a majority of the companies had poor business models—and oversized evaluations of the worth of the companies. According to the March 25th, New York Times article, Assessing the State of Dot-Com Start-Ups, of the last two decades, 70% of venture capital money was invested in 1999 and 2000.

Other than having a better focus on their target market, which is especially important in a solid business plan, smart start-ups are cutting out the excesses of the dot com boom. Furthermore, the successful business reported to Pricewaterhouse Cooper that they optimized the use of their venture capitalists by being helped in “recruiting, developing strategy and making introductions to potential partners and customers.”

[Please see source link below for more information]

Garrett French is the editor of Murdok’s eBusiness channel. You can talk to him directly at WebProWorld, the eBusiness Community Forum.