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“We see big retailers that are generating hundreds of millions of dollars in annual online sales that could also save millions of dollars by getting rid of inefficiencies in areas such as purchasing and ordering,” says Lobaugh. “When you are small, a boot-strapped operation run by a few heroes can lead to profitability. But at some point and as the organization grows, start-ups need to become grown-ups and put in place established business processes that drive out inefficiencies in their operation.”
The Internet Retailer survey finds that most merchants prefer to grow organically and aren’t expecting to sell their business or buy another company anytime soon. Only 9.7% of retailers are planning a merger or acquisition and just 15% have done a private placement to secure working capital. Of the companies that have approached investment bankers and others to raise capital, the amount raised was small as evident by the 62.5% that secured $1 million or less, and 75.1% that secured under $3 million.
Bulls over bears
Most retailers taking part in the survey are bullish on their immediate and long-term business prospects. More retailers also expect to become profitable within the year. Of companies taking part in the survey that still operate in the red, two-thirds-66.3%-expect to be generating a profit within 12 months, including 38.6% in fewer than nine months.
Industry analysts also foresee a solid future for most web retailers, providing they keep up with ever-changing customer demand, continue to maintain a balanced budget and invest prudently in business development. “There is no real mystery any more to building and sustaining a profitable e-commerce enterprise,” says Maris Daugherty, senior partner at retail consulting firm J.C. Williams Group Ltd. “Retailers who serve online shoppers well and do an excellent job of executing their business plan have a bright future.” l