Chad Ghosn joins the online furniture retailer from Expedia.
If you are an aggressive and committed e-retailer, the future—and particularly the next couple of years—should not frighten you.
Economists love debate. Ask three of them a “yes-no” question and you’re likely to get three different answers. They can’t even agree whether their discipline is art or science. So when, as now, they speak in unison that 2009 will be a terrible year, we can take that prediction to the bank.
But you already know we are experiencing something none of us have seen before. The U.S. Treasury has so far injected $350 billion into the nation’s financial system and the Federal Reserve has lowered the discount rate to near zero, and neither has thawed the credit freeze. The government controls the mortgage business now and owns the largest insurer. U.S. automakers won’t survive without massive federal loans and, even with an auto bailout, unemployment is likely to soar this year from 6.5% to 9%. And the incoming Obama Administration is preparing the biggest economic stimulus package ever-about $850 billion over two years-roughly double what FDR spent in today’s dollars on the New Deal. As a result, the federal government this year may well borrow as much new money as its owed when Ronald Reagan took office.
While some see all of this as the second coming of the Great Depression, I think we are entering a period of enormous opportunity, albeit one that will be very painful for those bent on doing things as they have always done them. Conversely, forward-looking businesses that have a strong green component, such as e-commerce, have a unique opportunity for advancement during the next two years. Here’s why.
The hundreds of billions that the Bush Administration gave to the financial industry last year did not create jobs, make mortgages available, stem foreclosures or increase productivity. In fact, it did little more than calm the nerves of panicky bankers who put the money in their vaults rather than lend it. The stimulus checks the Democrats in Congress approved last spring were no more productive economically; most people used the $300 to $600 checks to pay down debt instead of buying things.
But the money the Obama Administration is planning to lay out isn’t going to sit in a bank account. It will involve huge investments in rebuilding our aging roadways (and hopefully railways), adding thousands of new classrooms and increasing pay for teachers who perform, and funding clean energy programs to reduce oil imports and shrink our carbon footprint. It will be used to fund production of super-efficient cars, increase the efficiency of the power grid and spur development of high-speed Internet systems, a welcome initiative given that the U.S.-the Internet’s inventor-now ranks 15th among nations in broadband access.
In time, investments like these are paid back through higher GDP and increased employment. To an extent, FDR’s New Deal proved the merits of this type of stimulus. Production grew to pre-Depression levels by 1937, but then Roosevelt put on the brakes to the fiscal stimulus and the economy slipped back into severe recession. If the new Congress enacts Obama’s plan, the stimulus seems more than adequate to revive the retail economy.
That’s the opportunity I see ahead in macro-economic terms. For e-retailers, the opportunity is bigger. A huge stimulus is a tide that lifts all boats, but e-retailing will enter the recovery better positioned to capitalize on it. Everything that made e-retailing grow faster than store-based sales before the recession will favor e-retailing after it. But there are additional factors that seem certain to favor e-retailing during this recovery. First, if the new administration succeeds in expanding broadband Internet access, this part of the stimulus package directly impacts e-retailing for the better. Nothing powered the growth of e-retailing in the last decade more than improved Internet speeds.
Second, the 3G touch-screen, web-savvy mobile phone is no longer an Apple-AT&T; exclusive. All phone makers and carriers now have similar offerings. Furthermore, we are seeing a growing number of solution providers marketing relatively inexpensive services to adapt conventional web sites to mobile e-commerce platforms. So the charges are in place to detonate an explosion in mobile commerce this year and next.
Finally, any regular user of YouTube knows that the Internet and television are coming together. In a few years the TV is a computer and the remote is a keyboard. You Google the Civil War and you download an episode of Ken Burns’ award-winning documentary. While it’s downloading, you click on an ad and buy the late Shelby Foote’s three-book work on the Civil War from Amazon.com. You’re a news junkie and a CNN.com feed is scrolling on the bottom of your set warning you that a foot of snow is expected to blanket your region. You pause the movie and buy the snow thrower you’ve always wanted on Sears.com.
My point is this: If you are an aggressive and committed e-retailer, the future-and particularly the next couple of years-should not frighten you. Keep focused on running an excellent web store, keep current with the technology and stay positive. As our new President says, you have your hands on the arc of history, and you can bend it in your direction. Happy New Year.