The festive season was a groundbreaking one for many online merchants, writes David Shapshak
From a conventional business perspective, the startling news about Amazon.com last week was not that it unexpectedly made a loss, but that it had so unexpectedly turned a profit.
The online bookseller is the ultimate posterboy for the e-commerce revolution; and its sudden, albeit pro forma, profitability is highly encouraging.
In fact, last year’s festive season has been a groundbreaking one for many online merchants, or e-tailers, who have seen their sales soar both locally and internationally.
Amazon’s profit, though, has a much deeper significance. Started by Jeff Bezos at the height of the dot com mania, it famously lost a fortune and was the most punted stock in the investor-frenzied late 1990s. In more than a subliminal way, Amazon’s success is a powerful signifier of what is already well known: the Internet is a good place to do business.
Amazon’s initial online sales flurry was based on fast-moving consumables, such as books, CDs and DVDs, which have sold like hotcakes since the video format was launched. But Amazon also sells a lot of other items, including home appliances and tools.
It is highly debatable whether people will ever buy a car or a sofa online, but they are happy to buy electronics and technology online just ask Dell, the world’s number-one computer seller that cut out retail stores and let consumers custom-build their machines online. Dell’s websites at one time apparently were selling $1-million worth of computers daily.
Amazon can thank the end-of-year sales, which saw its final-quarter sales rise by 15%. It managed $5-million, which may not appear to be much until compared with the $545-million it lost for the same period in 2000. It still made a $567-million net loss for the year, but that is distinctly better than the $1,41-billion it lost the year before.
Locally, several big-name e-tailers have also gushed about their fes- tive season. Online shopping site TheShoppingMatrix.com had a 173% increase in turnover compared to the previous year, selling R6-million for the fourth quarter. M-Web Shopping saw a 46% increase, compared to the same period in 2000, and this contributed 24% of its annual turnover.
Kalahari.net saw a 200% increase, although this was from April to December last year, as its customers spent R14,4-million.
Research house Nielsen/NetRatings put the global increase at 15%, says M-Web, adding that Jupiter Media Metrix traditional retailers’ sites saw a 73% increase in traffic compared to the same period the previous year.
This good news bears out predictions by local research house BMI-TechKnowledge, which says it is still compiling final figures but that these don’t differ much from its predic- tions of R800-million of business-to-consumer e-commerce by the end of last year and R4,7-billion for business-to-business transactions.
“This is obviously off a very low base and we are looking at double- and triple-digit growth over the next three to four years,” says senior analyst Andreas Bertoldi.
Everybody then has good cause to be happy. It can’t be stressed enough that the Internet as a means of service delivery and online convenience far outweighs the misplaced, and now defunct, hype associated with it as an investment. Much repair work still needs to be done in terms of consumer confidence, it has been suggested, but the small market of Internet-active shoppers appears to be doing just fine.
Pick ‘n Pay Home Shopping, the online arm of the retail chain of supermarkets, has induced people to transform their shopping habits from in-store to online, says its GM Adrian Naude. “This year we are going to see the service really grow and become more mainstream and less novel.”
Although Naude won’t reveal earnings and costs yet, he says the service is on track to break even in 18 months. It is based on the United Kingdom shopping chain Tesco, which was completing about 60 000 orders a week six months ago. “That is people changing the way they shop,” says Naude.
Meanwhile, another surprising Internet statistic has also emerged: Microsoft’s array of websites usurped the leading role usually filled by the one industry that has never struggled to make money online: porn.
In the early days of the World Wide Web, it was considered the fastest-growing market segment as demand for online smut outstripped anything the corner caf had ever seen. The uptake of new technology was often swifter and more dynamic than anywhere else. Streaming technology, for instance, made its first big splash as it was used extensively for online strip shows or sex acts.
Once posted abundantly in the user-groups, a kind of all-access public bulletin board, and free to download for anyone, porn migrated into a paid-for service. Using credit-card payments, viewers bought monthly subscriptions. Porn, in a way, was the model for paid-for content, which many other news sites now are moving towards.
Sex and pornography have dropped to 12th spot in viewership, according to a survey released this month by Internet monitors Jupiter MMXI.
“People have more important things to do than look at porn sites,” says Jupiter’s marketing director Lucy Green. “In the early days it may have been number one perhaps because then there was not much else to do online.”
Microsoft was the most visited destination, many might argue, because it is the default homepage on all new computers and most users do not know how to change the homepage; while many of its own services point to each other.
l Meanwhile, this week the Internet saw another bizarre e-commerce transaction when a British woman, who put her hand in marriage up for auction on an Internet auction site last year, accepted a staggering 251 000 offer.
Kay Hammond, a 24-year-old managing director of a web-design company, apparently turned to online auctions because she didn’t have time to date and find the man of her dreams.
“So often I have complained to my friends, family and colleagues that I never have the time to meet any men. I thought that by creating an online auction I would be able to reach as many men as possible and hopefully prove that the Internet is not full of cyber-geeks, there are normal people out there,” she said, albeit somewhat ironically.
The lucky man, a certain Ben Webb, must pay her the money, promise she can keep it if they divorce and be checked for a criminal record before he can take her hand in marriage. No details are available of a warranty.