Tech Industry

Online elves push gobs of holiday goodies

'Tis the season for piles of brightly colored packages and flocks of e-commerce companies, each selling similar products but hoping to produce outstanding returns for investors.

'Tis the season for piles of brightly colored packages, myriad renditions of "Deck the Halls" and "Jingle Bells" and flocks of e-commerce companies, each selling similar products but hoping to produce outstanding returns for investors.

This holiday season, you can find scores of online merchants offering beauty goods, health and vitamin products, food and wine, luxury gifts, sports equipment, party favors and of course, pet supplies.

The press has seized upon the slew of pet sites and portals as a symbol of market redundancy, but with a touted market potential of $20 billion, it's no wonder these companies are staging huge marketing campaigns replete with talking animal puppets.

And while the press world critiques, the markets have been receptive. Pets.com, which just registered for its initial public offering (IPO), has a $100 million maximum offering size--presumably to the delight of Amazon.com, Hummer Winblad Venture Partners, and its other investors. Petco and Petopia.com have partnered and raised additional funds from a combination of serious retail corporations and venture capitalists such as Technology Crossover Partners, Comdisco Ventures, and BancBoston Ventures, which together have invested $114 million.

After a $10.5 million first round in March, Petstore.com reported a $97 million second financing round last month. Petsmart.com, a former Idealab incubator company, is also in the fray. And German start-up Zooplus, the largest pet portal in Europe, recently received approximately $7.2 million in venture funding. If Fido's on your Christmas list, you've got plenty of online choices.

But let's talk about real people's needs, like beauty products. You can visit eve.com, Gloss.com, Indulge.com, Ingredients.com or Pantresse. But wait--general health and personal care sites such as SelfCare.com, Gazoontite.com, Enutrition and Vitamins.com also offer health and beauty care selections. And content sites for women, like iVillage, recommend and often sell products.

So where will Jane shop? For beauty sites, as for many categories of e-commerce companies, the Holy Grail is the right "package," that magical combination of features and spin that will make a site synonymous with the products it sells.

Packages may include reviews or recommendations, an extensive directory of products, auction services or "exclusive" deals. Other possibilities include the capacity to send products as gifts with various packaging options, the capability of maintaining a list of personal preferences, calendars to keep track of that birthday you always forget, unique distribution structures, or inventive pricing or shipping arrangements.

Venture-backed online wine merchants offer a good example of the range of possible package combinations.

Founded in 1994, VirtualVineyards.com was the first wine merchant on the Web. The company purchased the wine.com URL, and changed its name. Backed by an impressive roster of investors almost as long as its wine list, wine.com is aiming to be the global wine portal. CEO Bill Newlands, formerly of Domaine Chandon and Simi winery, plans to lead the company to an IPO in the coming year. So--first to market, and an experienced management team--what's not to like?

Wineshopper.com has developed a wine-locator system and wine-shopping Internet site. The Web site allows consumers to locate and purchase wines and have them delivered to their homes or to a nearby retailer. The system distinguishes itself by eventually supporting legal delivery in all states, and is the result of a partnership between wineries, wholesalers, retailers and regulators. Backed by Kleiner Perkins Caufield & Byers, wineshopper.com received its first round of venture financing in March 1999. But how do they set themselves apart from the competition? By offering a wide selection and providing an efficient distribution system.

Send.com, formerly sendwine.com, has expanded beyond wine to champagne, scotch and unique, "exclusive" gifts, including private golf lessons, fine dining, spa treatments, flowers, cigars, crystal and gourmet seafood. Noted investors such as Charles River Ventures, Benchmark Capital and Highland Capital Partners have contributed $40 million to date, betting on a blend of variety and cachet.

WineAccess.com provides wine consumers with online content and a connection to other retailers. The company uses a unique data engine, developed by Cambridge, Mass.-based ArsDigita, to facilitate online interaction among retailers, wineries, consumers, and experts. The company's goal? To be the all-inclusive wine information and commerce site. Now, where have we heard that before?

And mixed in among these "wine giants" is evineyard.com, a recent Portland, Ore.-based startup backed by Shaw Venture Partners. The company provides full-color product images, information on varietals, appellations and vintages, as well as winemaker notes and winery descriptions. To gain a foothold in the market, it is initially offering free shipping.

Yet with all the players in this space, you'd think the folks at evineyard.com would have chosen to push an alternative beverage--like milk, or maybe orange juice. After all, there are certainly fewer legal issues associated with nonalcoholic fare, and the market for milk and for groceries in general is huge. Not everyone has to send gift bottles--or Urban Decay Flaming Lip Gunk, or Luv-A-Pet Holiday Charity Ornaments, for that matter--but we do all need to eat.

Yet since grocery distribution is a daunting task, the players are now limited to Webvan, which completed a $375 million IPO last month; Peapod, which went public in 1997; and non-venture-backed Netgrocer.

Aside from some niche players such as Ethnicgrocer.com (Evanston, Ill.), Yourgrocer.com (Port Chester, N.Y.), and Los Angeles' Pinkdot.com, potential market entrants seem to be gathering information from the original few, waiting to enter when successful strategies become clearer.

And when that virtual roadmap materializes, we'll probably see an online onslaught in the grocery category. Until then, we can look forward to expanded opportunities for purchasing jeweled pet collars, face creams, golf clubs and spices for the kitchen rack. Merry Christmas!