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Some of you may think I'm stating the obvious here, but it seems to me to be a point that is often overlooked, anyway, if everybody is sitting comfortably, I shall begin!
Welcome to todays lecture entitled "Why Internet Prices Must Rise."
Back in the days of the 1990's the internet grew vastly in popularity. Retailers saw the opportunity and set up online stores.
They needed something to really kick it off though, to get people out of the shops, and onto their PCs.
The answer was low prices.
The theory was to offer low prices to entice people to buy online, when a suitable user base had built up, bump up the prices, and make a profit.
However, customer loyalty doesn't seem to be so easy to come by on 'the web' so the low prices have stayed.
As a result of this many online retailers are going bankrupt, and the whole 'e-commerce revolution' is in danger of collapse, as there seems to be no money in it.
What needs to happen is that prices need to rise, so that these companies can make profits, and expand, then they may be able to offer lower prices due to the economies of scale that they may benefit from, rather than trying to build a customer base.
So people beware, prices will have to rise online, or else you won't have the opportunity to buy online anymore.
meka_dragon PQMS8/00
Welcome to todays lecture entitled "Why Internet Prices Must Rise."
Back in the days of the 1990's the internet grew vastly in popularity. Retailers saw the opportunity and set up online stores.
They needed something to really kick it off though, to get people out of the shops, and onto their PCs.
The answer was low prices.
The theory was to offer low prices to entice people to buy online, when a suitable user base had built up, bump up the prices, and make a profit.
However, customer loyalty doesn't seem to be so easy to come by on 'the web' so the low prices have stayed.
As a result of this many online retailers are going bankrupt, and the whole 'e-commerce revolution' is in danger of collapse, as there seems to be no money in it.
What needs to happen is that prices need to rise, so that these companies can make profits, and expand, then they may be able to offer lower prices due to the economies of scale that they may benefit from, rather than trying to build a customer base.
So people beware, prices will have to rise online, or else you won't have the opportunity to buy online anymore.
meka_dragon PQMS8/00
Quite right, Special Reserve is sucessful because it was already a business with a good business model, and they just used some of their profits to make a good site.
As you say most new startups think that they can chuck money on advertising and expensive publicity stunts and everyone will buy goods on their website, of course the consumer visits the site...but once the item they want is found, they shop around for a cheaper price, this is usually on a smaller less flashy site... The result these big internet companies go bust, I just feel sorry for the people who bankroll these companies they must be losing loads, and all because they dont understand how the internet works! Its also ridiculous the wages some of the IT guys get at these companies, especially when you consider some smaller internet companies run their sites more efficiently with a smaller dedicated IT team.
As you say most new startups think that they can chuck money on advertising and expensive publicity stunts and everyone will buy goods on their website, of course the consumer visits the site...but once the item they want is found, they shop around for a cheaper price, this is usually on a smaller less flashy site... The result these big internet companies go bust, I just feel sorry for the people who bankroll these companies they must be losing loads, and all because they dont understand how the internet works! Its also ridiculous the wages some of the IT guys get at these companies, especially when you consider some smaller internet companies run their sites more efficiently with a smaller dedicated IT team.
I suppose you could relate these web shops to your normal bricks and mortar shops.
Most sensible business people would open a smaller shop in a quieter location where rent and overheads are cheaper and then build up to a bigger location if they become profitable. With a website you would open with minimal advertising and product range and then increase as your takings go up.
These big new web startups chuck millions at their site are doing the equivalent of opening their first ever shop in Oxford Street where overheads are massive and rent probably runs into millions.
It's then they actually realise that a customer is no more likely to shop online with them than the small e-tailer with a less flashy website and smaller overheads.
Each site may sell a product for say £10, with the small e-tailer making 50p profit, the larger e-tailer has such high overheads he will end up making a loss on every product until the inevitable happens...
Examples: boo.com, e-toys and more recently letsbuyit.com(alledgedly!)
Most sensible business people would open a smaller shop in a quieter location where rent and overheads are cheaper and then build up to a bigger location if they become profitable. With a website you would open with minimal advertising and product range and then increase as your takings go up.
These big new web startups chuck millions at their site are doing the equivalent of opening their first ever shop in Oxford Street where overheads are massive and rent probably runs into millions.
It's then they actually realise that a customer is no more likely to shop online with them than the small e-tailer with a less flashy website and smaller overheads.
Each site may sell a product for say £10, with the small e-tailer making 50p profit, the larger e-tailer has such high overheads he will end up making a loss on every product until the inevitable happens...
Examples: boo.com, e-toys and more recently letsbuyit.com(alledgedly!)
Some of you may think I'm stating the obvious here, but it seems to me to be a point that is often overlooked, anyway, if everybody is sitting comfortably, I shall begin!
Welcome to todays lecture entitled "Why Internet Prices Must Rise."
Back in the days of the 1990's the internet grew vastly in popularity. Retailers saw the opportunity and set up online stores.
They needed something to really kick it off though, to get people out of the shops, and onto their PCs.
The answer was low prices.
The theory was to offer low prices to entice people to buy online, when a suitable user base had built up, bump up the prices, and make a profit.
However, customer loyalty doesn't seem to be so easy to come by on 'the web' so the low prices have stayed.
As a result of this many online retailers are going bankrupt, and the whole 'e-commerce revolution' is in danger of collapse, as there seems to be no money in it.
What needs to happen is that prices need to rise, so that these companies can make profits, and expand, then they may be able to offer lower prices due to the economies of scale that they may benefit from, rather than trying to build a customer base.
So people beware, prices will have to rise online, or else you won't have the opportunity to buy online anymore.
meka_dragon PQMS8/00
Welcome to todays lecture entitled "Why Internet Prices Must Rise."
Back in the days of the 1990's the internet grew vastly in popularity. Retailers saw the opportunity and set up online stores.
They needed something to really kick it off though, to get people out of the shops, and onto their PCs.
The answer was low prices.
The theory was to offer low prices to entice people to buy online, when a suitable user base had built up, bump up the prices, and make a profit.
However, customer loyalty doesn't seem to be so easy to come by on 'the web' so the low prices have stayed.
As a result of this many online retailers are going bankrupt, and the whole 'e-commerce revolution' is in danger of collapse, as there seems to be no money in it.
What needs to happen is that prices need to rise, so that these companies can make profits, and expand, then they may be able to offer lower prices due to the economies of scale that they may benefit from, rather than trying to build a customer base.
So people beware, prices will have to rise online, or else you won't have the opportunity to buy online anymore.
meka_dragon PQMS8/00