Connect the DOTS

Entrepreneur, March, 2000 by ROBERT McGARVEY

ONLINE OR BRICK-AND-MORTAR? TOUGH QUESTION. BUT IF YOU HAVE A CLEAR PICTURE OF YOUR BUSINESS, YOU ALREADY KNOW THE ANSWER.

THE SMARTEST THING I'VE DONE IN BUSINESS IS SHUTTING DOWN MY STORE AND GOING EXCLUSIVELY ONLINE. NOW I HAVE A REALLY NEAT BUSINESS. I LOVE IT," SAYS SHERRY RAND, 54, A SALISBURY, MASSACHUSETTS, RETAILER WHOSE ONLINE STORE SELLS ONE THING AND ONE THING ONLY: GEAR FOR CHEERLEADERS. YOU WANT POMPONS IN ANY STYLE AND COLOR? YOU WANT MEGAPHONES FOR LEADING CHEERS? THEN YOU WANT TO KNOW ABOUT POM EXPRESS (WWW.POMEXPRESS.COM), WHERE RAND HAS CONDUCTED E-BUSINESS IN THE TWO YEARS SINCE SHE SHUT THE DOORS ON HER BRICK-AND-MORTAR OPERATION.

"ONLINE, I DON'T HAVE TO CARRY THE GREAT OVERHEAD OF A STORE, AND--FROM A QUAINT TOWN IN NORTHERN MASSACHUSETTS--I'M SELLING GLOBALLY. WE GET LOTS OF ORDERS FROM EUROPE, WHERE CHEERLEADING IS REALLY PICKING UP," SAYS RAND, WHO ADDS THAT SHE HERSELF WAS A CHEERLEADER THROUGH GRADE SCHOOL AND COLLEGE. IN THE YEARS AFTERWARD, SHE SOLD CHEERLEADER SUPPLIES AS A MANUFACTURER'S REP UNTIL SHE OPENED HER OWN STORE. NOW THAT SHE'S OPERATING SOLELY ON THE WEB, SHE SAYS, "THIS IS A GREAT NICHE, AND, ON THE INTERNET, I CAN CONDUCT BUSINESS WHEREVER I WANT TO BE."

Another devoted dot.commer: Nancy Zebrick, 46, the onetime owner of a traditional travel agency in Cherry Hill, New Jersey, who launched a Web site in 1995 to complement her storefront. In early 1998, Zebrick decided the online operation had so many strengths going for it, she shut her brick-and-mortar store.

"The profits aren't there in a B-and-M travel agency. Online is much more profitable," she says. "The gross profit margins [per sale] are lower online, but we make it up in volume because we can sell nationally, in fact internationally," says Zebrick. Once her focus became exclusively online, her Web business took off--so much so that in late 1998, Zebrick plunged deeper into the Internet by merging her agency with online travel superstore 1travel.com (www.onetravel.com), where she now owns a slice of the company and serves as director of leisure sales. "If you believe in the Internet--and I do--this is a great place to do business."

Egghead.com Inc. would agree. An early leader in storefront software retailing--it staked out its turf back in 1984 and promptly won significant brand awareness--Egghead hit tough times in the mid-'90s as it faced both big-box retailers, such as Best Buy and CompUSA, who carried more titles and often discounted deeply, and a crush of new Web-based software retailers, from Beyond.com (www.beyond.com) to Buy.com (www.buy.com). Staring at dwindling sales and the mounting costs of running traditional retail stores, Egghead threw in the towel and closed its realworld shops in early 1998 to concentrate exclusively on online retailing at www.egghead.com. where, says the company, it now has over one million customers.

SHOULD YOU GO?

Sound good? Is it good enough to persuade you to dot.com? Shut down a brick-and-mortar operation, go strictly cyber, and, whoosh, you've distanced yourself from monthly rent payments and dealing face-to-face with grumpy customers--and you've also positioned your business to sell globally. That's how it seems when you listen to the stories of Pom Express, Zebrick's travel agency, Egghead.com and so many more. But can you count on it happening for you?

"The decision to dot.com has to be made on a case-by-case basis. There's no one formula that will work for all businesses, all the time," warns Barbara Reilly, research director with Gartner-Group, an information technology consulting firm. What's more, adds Reilly, "there once was a lot of naivete about how easy it is for a business to succeed on the Web. It isn't easy, but many businesses discover that the hard way."

Sure, there are overnight successes on the Internet, but for every dot.com that thrives, there are more that flop, says Mark Layton, 40-year-old president and CEO of Plano, Texas-based PSSweb Inc., a leading distributor of computer supplies, and author and publisher of .coms or .bombs. . . strategies for profit in e-business, which analyzes the difficulties of mounting an effective e-commerce site. "Many dot.coms will become dot.bombs--they'll fail," says Layton. "Just putting up a Web site gets you nothing. You have to take steps to build that business.

"Online or offline, you need a sustainable business model," adds Layton. "If you don't have that, you don't have a business."

When the Web was less cluttered a few years ago, virtually any site could attract attention simply because there weren't as many sites competing for it. But the dot.com space has spawned innumerable stores, which has triggered an economic Darwinism where the weak simply die--or get no meaningful traffic. "No one will know you're on the Web unless you tell them and motivate them to visit," says Layton. "Succeeding online has become very difficult."

BEST OF BOTH WORLDS

Having second thoughts about burning the lease on your storefront and going strictly virtual? Know that there's another approach to the Internet, one that isn't all-or-nothing.