Net latecomers could miss holiday profits

If brick-and-mortar retailers are just getting ready to sell on the Net, they're probably too late to cash in on this year's holiday shopping season.

3 min read
If brick-and-mortar retailers are just getting ready to sell on the Net, they're probably too late to cash in on this year's holiday shopping season.

The complex tasks of integrating Web orders with existing back-end computer systems, stress-testing the Web site, and creating back-up systems to avoid costly down time take too long to start from scratch now, e-commerce analysts and technology suppliers agree.

"If you weren't moving a couple months ago, then you probably aren't going to make it," said Karl Salonoske, general manager of IBM's e-commerce group.

Even e-tailers already selling online may soon put new features on hold. Site upgrades have caused costly outages at some highly visible Web sites, such as eBay. David Baltaxe, an analyst with Current Analysis, thinks some sites will delay new customer service features, merchandising tools, and personalization until after the holidays.

"Six months before Christmas is a little late to be thinking about making a splash in e-commerce," said Andrew Bartels, e-commerce analyst with Giga Information Group. "I can't see it going from a total dead stop."

Savvy retailers have been planning accordingly for months. Circuit City begins selling consumer electronics online tomorrow, giving itself several months to work out any operational kinks before holiday-related sales pick up. Other merchants have taken a similar tack--launching early in the year so they can work out problems now, not under a deluge of holiday orders.

The rapid approach of the holiday buying season could spell trouble for Toysrus.com. Last holiday season Net upstart eToys creamed the Toys "R" Us online effort, leading the brick-and-mortar chain to enter into an unusual pact with venture capital firm Benchmark Capital for a new online toy store they would jointly own.

But that deal ran into trouble earlier this month when Bob Moog, who had been recruited to run the online joint venture, backed out, citing differing business objectives with established management.

As a result, Toysrus.com may have to go back and beef up its system from last fall, which became overloaded with heavier-than-anticipated traffic. Toy buyers may not notice, but strategically the company could suffer online if eToys maintains its momentum. Neither Toysrus.com nor Benchmark could be reached to comment on this story.

Surprisingly, in categories such as pets where gift-giving wouldn't seem to be a major factor the looming holiday season has been a factor in strategic plans.

In May, for example, pet warehouse chain Petsmart hooked up with Internet pure-play PetJungle. Boosting Petsmart's fulfillment operation was a key element of the deal.

"We are expanding the facility to be done by October 1 in anticipation of being able to handle all the volume for this holiday season," Petsmart chief executive Phil Francis said in a May interview. "In supplies, there is a nice seasonal uplift in the fourth quarter."

Baltaxe thinks the quickly approaching time until holiday shopping begins plays into the hands of outsourcers such as Pandesic, which is already promoting its service as a easy way for retailers to become e-tailers for the holidays.

"If you weren't ready on your own, you probably could do it through an outsourcer," said Baltaxe. "You won't get the same level of customization, but at this point outsourcing may be the way to go for companies that have a short time frame--and outsourcers can manage scalability issues."

Indeed, Pandesic--a joint venture of Intel and SAP--says it can get companies up and running in eight to 10 weeks. It has built online stores for shoe manufacturers Adidas and Fila, and film director Francis Ford Coppola's winery, Niebaum-Coppola.