Editor's Note

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Editor's Note

By by Joe Skorupa - 07/01/2004

Siliconosis, the Latin name for dot-com fever, struck hard in the late 1990s. Pockets of Northern California, Texas and New York City were devastated. Symptoms included delusions of easy wealth, hallucinations that economic truths were obsolete and fantasies that everyone was a Luddite except for a small set of VC-fueled true believers.

But the plague soon passed and the real-world made a comeback. Dot-com survivors, however, still bear scars and strange sensitivities that occasionally flare up like the return of malaria.

I felt a slight twinge the other day when I read highlights of a study by Shop.org/Forrester. It reported that online sales in the United States jumped 51 percent to $114 billion in 2003. The data indicates that Web sales now represent 5.4 percent of all retail sales. More significantly, margins are rising to the point where online retailing among traditional retailers is up from negative 16 percent in 2002 to positive 15 percent last year. In other words, online retailing is actually profitable. (For more on this report visit www.shop.org.)

Surviving the epidemic, however, taught me to be skeptical about dot-com announcements. Forrester, as I recall was right up there with the true believers during the plague years. And Shop.org, of course, is a dot-com organization that has an all-ships-will-rise philosophy.

But even if the numbers are a bit off and even if they include travel and music downloads, which are different models than traditional retailing, the trend is still clear - online sales are growing at a rate too fast to ignore. Retailers cannot say that online sales are unprofitable or represent little more revenue to the enterprise than a single store in the chain.

Savvy retailers now use profits from the online sector to drive investment in other IT initiatives. And, more importantly, some retailers I've spoken to recently have developed strategies that drive online customers into stores and the metrics are impressive.

Today's online landscape is far different from the fever dreams of the poor souls stricken by siliconosis around the turn of the century. But the dreamers weren't wrong about everything. They were just naive about how fast and easy it would be to achieve disruptive transformation.