- Lastly, what about perceived low barriers to entry on the Internet? We argue that barriers to entry are larger than persons appreciate once an Internet franchise successfully carves out a specific niche and has scale - think Amazon (AMZN), Blue Nile (NILE), eBay (EBAY), 1-800-Flowers (FLWS), Youbet.com (UBET). There were and are plenty of me-too participants in the backyards of each player, but the spoils usually go the the number one player in a given market (on- and off-line). And -- a quick aside -- while many knock eBay's e-commerce segment, the reality is that the business generates gobs of free cash flow with excellent margins and isn't going away any time soon.
A nice illustration of the technical complexities of running a large, multi-brand Web business comes from a recent IBM Webinar featuring 1-800-Flowers.com. Note that we are pleased that shares of the latter company are garnering more Market attention thanks to President Chris McCann's appearance on 'Undercover Boss'.
The Webinar was the following: A 3-Part Plan For Working Smarter In Retail
- Join IBM, 1-800-Flowers, and Retail Solutions Online as we discuss how you can Develop Smarter Merchandising and Supply Chains by adapting and responding dynamically, Deliver Smarter Shopping Experiences by collaborating to maximize effectiveness, and Build Smarter Operations by enabling technology to meet business needs quickly. Matt Pillar, Chief Editor at Retail Solutions Online and Integrated Solutions For Retailers will moderate the discussion with Karen Parrish, VP of Industry Solutions for IBM and Nachiket Desai, VP of Enterprise Architecture and Business Intelligence at 1-800-Flowers.com
Building an "Agile" platform:
Putting it all together:
Conclusion: there is more than meets the eye in running an E-Commerce business. Those that do it well (e.g. effectively scale while planning for the future) create a major barrier to entry that makes possible (and further strengthens) a durable consumer franchise. For this reason, we continue to like 1-800-Flowers.com and Bidz.com (BIDZ). In addition, we retain our long positions in eBay (EBAY) and PetMed Express although shares of these companies are no longer the bargains they were in 2009. Finally, we should acknowledge that owning/operating a strong Web business is also a critical part of traditional, off-line retailers. In this case, companies that do both well likely find themselves in strong competitive positions.
Disclosure: long FLWS, EBAY, UBET, PETS, BIDZ.
© 2010 Jeffrey Walkenhorst
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