Heavy Weather

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Perhaps the most important thing e-retailers can do is to recall and leverage what helped make the web so appealing in the first place. “What was so wonderful about the web had nothing to do with giving AOL millions of dollars or buying Super Bowl ads on TV,” says Schwartz. “It was these interactive features to build loyalty among customers that keeps them coming back. The great thing about the web is that it knows who you are.”

For that reason, e-retailers like Staples.com send periodic reminders with discount offers to regular customers, and LL Bean emails customers on sales coming up or when the new seasonal fashions are out. Such strategies to better leverage the existing customer base are winners, and merchants can make them work by getting to know customers in a way uniquely possible on the Internet.

While time will be the ultimate test of which e-retailers survive the shakeout (and how), industry watchers agree that the web is creating an entirely new business climate with new rules. Winners will adapt quickly, combining what’s best about the offline world with the best of what only the web can offer. “The dot-com’s have the advantage of moving fast,” says Schwartz, “but the traditional companies have the infrastructure, brands and distribution channels.” In the end, he says, it’s the hybrids that will win-and it won’t be the first time survival of the fittest has created an entirely new species.

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