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E-Commerce—2001 a survival of fittest challenge for dot-coms

E-Commerce: New Economy Must Learn Lessons, Strategies From the Old Economy

It’s Darwin meets dot-com.

Survival of the fittest will operate in the crowded e-commerce field during 2001.

Darren Hardy, president of La Jolla-based Retired.com, Inc., says this year will separate the men from the boys. Building customer loyalty will be key, he said.

Internet shopping has lost its novelty, said Bill Strauss, CEO of Proflowers.com in San Diego, who noted an Internet-based company must now offer better value, lower prices or a better-quality product to keep customers.

Attorney Martin Nichols, head of the business and technology group at Brobeck, Pfleger & Harrison LLP in San Diego, said he believes doing one’s homework will help e-commerce firms survive. Companies that have studied customer acquisition costs, focused on target markets and stick to long-range business plans may just make it, he said.

Kevin Carroll, executive director for the San Diego Council of the trade group AeA, said San Diego did not see the remarkable growth in dot-com businesses seen in the late 1990s, and likely will not see an associated shrinkage now. AeA was formerly known as the American Electronics Association.

A random sampling of local companies participating in e-commerce and related fields predicts big things in 2001. They include:

– Proflowers.com, an online floral service founded in 1998. The company is fine-tuning its business fundamentals and should grow revenues by 80-90 percent over the previous year when its fiscal year closes June 30, said CEO Bill Strauss.

– Kintera, Inc., which in a sense stands e-retailing on its head by providing nonprofit organizations an infrastructure for raising funds over the Internet. Nonprofits are “late adopters” of Web-based services, noted CEO Harry Gruber (whose last company, InterVu, was sold to Akamai Technologies in February). Gruber is looking for tenfold growth in 2001, though he admits it’s from a base built up since September. He declined to give dollar amounts.

– Cayenta, Inc., a subsidiary of Titan Corp., which provides online infrastructure for retailers, as well as governments, utilities and other organizations. The unit should experience 40 percent growth this year, said Gene W. Ray, Titan’s chairman, president and CEO. Officials declined to project Cayenta’s revenue amounts, citing their plan to go public.

– Retired.com, a Web portal with information, Web site links and advertising targeted for the 55-and-older set. Hardy said he expects to become profitable in five months, serving a demographic with wealth and an increasing interest in computers. The site launched in November and should gross $20 million in 2001, he said.

Only four e-commerce companies responded to the 11th Annual San Diego Business Journal/Deloitte & Touche Economic Outlook Survey. Three of those said they expected growth of 10 percent or greater this year.

Since the number of respondents was so small, the foursome’s answers do not give a statistically accurate measure of the San Diego e-commerce scene.

A statistically sounder number of survey participants , 205 executives in all of San Diego’s business sectors out of the 207 surveyed , noted they feel the effects of e-commerce.

Some 79 percent of that group said the increase in e-commerce has had at least a minor impact on their companies, and 17 percent called that impact significant.

The number is slipping.

In 2000, 81 percent of survey respondents reported e-commerce had at least a minor impact on their businesses, and 27 percent called that impact significant. 2000 was the first year the question went on the survey.

In the 2001 survey, the sector reporting the most impact from e-commerce was financial institutions. Some 90 percent said they had been affected in at least a minor way by e-commerce and 32 percent said the effect was significant. Nineteen financial institutions responded to the survey.

A tightening economy may force companies to find ways to cut their expenses by outsourcing services, like Web services. That may bring people to Cayenta’s door, said Gregory Smith, chief technical officer for the Web infrastructure provider.

Cayenta plans to increase its 500 employees by 40 percent in 2001, said Ray.

Strauss at Proflowers.com said he was planning to hold employment at 110 during 2001, saying the business has grown rapidly, processes are in place and his staff is capable.

As it serves online fund-raisers, Kintera should expand its staff of 42 to about 60 or 70, said Gruber.

Retired.com should add a dozen employees to its staff of eight full-timers, whose work is now supplemented by part-timers and outsourced specialists, Hardy said.

Executives interviewed for this article said they have found talented people in San Diego.

The local talent pool is much greater than it was in the early 1990s, said Proflowers’ Strauss, referring to the era when he came to town to work for ChipSoft.

Recruiting employees has been easier in the last three months, Kintera’s Gruber said, because the downturn in the economy has made talented people available.

The scene is changing yet again, as the University of California system gears up to build the California Institute for Telecommunications and Information Technology at UCSD.

Gruber mulled the number of talented people the university-wide program will bring.

“It’s awesome,” he said.


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