After The Bubble Burst
The decade of the Nineties left us with a rough economic impression which reflected consequences brought on by the newest technological phenomenon that was to change much of our lives financially, especially in terms of commerce. This was represented by what came to be known as the dot-com or Internet bubble. This phenomenon was the result of the rapid rise of tech companies which seemed to offer a great deal of promise to investors. When many of these hot properties failed to deliver on their potential, they went bust along with their investments.
Chain Store Guide’s Discount Stores & Specialty Retailers database, features many retailers which began largely as a result of new technologies which were developed just prior to or during this decade. Some are dot-coms while others incorporate traditional store locations to sell distinct, tech-based products not previously available. These companies have succeeded through offering the public state of the art products, services and conveniences allowed by progress in electronics and communications.
Amazon.com began operations mid-decade, essentially building a reputation as a new-fangled retailer of books. A plethora of radio commercials branded the company as a giant discount retailer without the hint of an actual store or even a traditional, book-style paper catalog. It wasn’t long before the company was promoting like themed products such as music CDs and movies on pre-recorded video tapes and DVDs.
GameStop was started up the same year from the roots of a small software retailer in Texas. The company was a pioneer in the retailing of video games and remains a power to this day despite the looming threat from online game sites. Just over a decade after its founding, GameStop acquired its chief rival EB Games (originally known as Electronics Boutique), which was created out of the establishment of a company which primarily sold calculators and digital watches before expanding into computers and related products including software. The company’s enormous success in selling video games led to its focus on this new market, while abandoning its less successful consumer electronics products.
Netflix began operations in 1997 with a vision of essentially offering monthly subscriptions to customers of movies to be mailed in the form of DVDs. Brick and Mortar-based Blockbuster was slow to see the competitive challenge and even slower to react to it. Meanwhile Netflix had become the fastest-growing customer of the United States Postal Service.
Two years ago the perceived future growth of online streaming prompted Netflix management to split the company in two, offering separate brands and subscriptions based on mailed DVDs and streamed videos. This proved to be a fiasco and as a result Netflix lost 800,000 US subscribers in the third quarter of 2011 and more subscriber losses were expected. The price of the company’s stock quickly sank and many observers saw doom for Netflix, perhaps another .com casualty.
Management quickly sent out apologies and proceeded to restructure the company in line with its original policies. Currently its place is assured as a giant in online video streaming, with Amazon in eager pursuit.
Overstock.com was created with the idea an Amazon type of retailer offering virtually any type of product on a grand scale, based on the platform of a now not so traditional odd-lot/closeout retailer. Unlike Amazon.com the company name said it all. Created just a few years after Amazon, no one now needed instructions as to what the .com meant or how to visit and purchase from the site. Thus, even advertising costs could be kept to a minimum for the fledgling company.
While Netflix and GameStop succeeded through offering new types of products and services, essentially Amazon and Overstock were pioneers in starting a traditional type of retailer on a distinctly new platform: the Internet. They ushered in a new, convenient way of shopping and found they could expand offerings without the restraints of the selling space of traditional retailers. They also enjoyed the freedom from costs typically associated with retail real estate. More than simply purchasing or renting store space, they were free from planning locations, determining demographics, dealing with zoning restrictions and competitive neighbors.
Amazon currently is not only one of the most admired retailers on the planet; it is also one of the most feared by competitors from almost all avenues of retailing. Amazon continues to create new age solutions to market challenges, such as sharply reducing already efficient delivery times to same day and offering cutting edge services such as video streaming from a growing, comprehensive catalog including its own original productions.
Had Netflix failed a couple of years ago, which some ‘experts’ were anticipating, this would not have qualified as a .com failure. Such a calamity simply would have been the result of marketing and public relations errors which resulted in a rebellion of near catastrophic proportions. Fortunately for the company’s sake, Netflix management was able to mount what was essentially an apology campaign, frankly admitting management’s errors while correcting and strengthening its commercial platform. This ultimately included producing Emmy Award winning series, which subscribers could view in a matter of hours, at their convenience on DVD, rather than meeting a traditional network’s prime time, commercial ridden schedule.
Each of these companies has faced and met significant challenges during their relatively short existences. Most are discussed above. Overstock.com tried to change its marvelous self-descriptive name and brand to O.co. About the only remnant of that effort is the signage on the old Oakland Coliseum. As with Overstock’s brethren featured in this article, stumbles have been just that, as these powerhouse retailers continue to shine on and lead their respective retail categories.