Why one web merchant thinks the days of the pure-play appear numbered
The online retail entrepreneur who co-founded OutdoorDecor.com thinks the days of many pure-play merchants may be numbered—unless they can build a robust infrastructure and conduct marketing campaigns successfully across multiple channels.
As the web retailing industry matures, more consolidation is inevitable, says Nathaniel Burke, co-founder of OutdoorDecor.com, an online retail home and garden business. To survive and grow, companies will need to think about operating across multiple channels and building a robust infrastructure that can accommodate heavy-duty web traffic and transaction volume.
"What we have here is a textbook case of an emerging market. What happened in the railroad business, the oil business, the computer business, the software business? There used to be thousands of players in each of these industries, but now the dominant leaders in each are household names, and history is littered with the economic failures,” Burke says. “Add to that, the economic principles of `pure competition,` which is taught in economics classes largely as theory, but is now emerging in the Internet marketing world. With the costs of marketing online today nearing a pure competition model, only the extremely efficient will be able to afford to stay in the game, and most will likely fail."
In the early days of e-commerce, start-up companies could create a web site, stock inventory and then use search engine marketing to drive traffic and sales. But as the market consolidates, the web retailers that survive or that aren’t the target of a merger or acquisition will be the ones making the best use of multiple channel marketing and technology. “Catalogs and stores can greatly buoy the online company to weather the storms that are inherent in technology and technology-based marketing, as a simple change in the technology environment can decimate the business model of an online company based solely on online marketing," Burke says.
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