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INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | | DECEMBER 12, 2000 COMPANY CLOSEUP By Jeanette Brown Can 800.com Bring Back Its Blue-Ribbon Days? As the threat from brick-and-mortar rivals grows more ominous, the upstart electronics e-tailer has tumbled off the chart in a survey of online customer satisfaction
But Drew insists that 800.com, based in Portland, Ore., is ready and that sales are on track to reach $60 million in 2000. Part of the reason: the three-year-old company spent $6 million this year to make its Web site more ser-friendly. FAST TRACK. Software upgrades have improved searches and chopped 10 seconds off the time it takes for pages to appear. Now they pop up almost instantly -- not a second too soon in the demanding online world. Other improvements allow shoppers to compare 62 product categories by price and specifications, and to track their purchase from the moment the check-out button is hit until the items are delivered. "We are more than confident that we'll hit our targets for the quarter," says Drew. But the investment hasn't helped 800.com hold on to first place in online customer service. A recent Forrester Research survey shows that because of low consumer input, the site has fallen out of the rankings. That's a change from its blue-ribbon days in July, when it beat perenially top-ranked Amazon.com. There's more bad news this time: Archrival Best Buy has jumped to third place after just six months online. It's a tough blow to 800.com, which set out from the get-go to provide stellar customer service as well as brand-name products from the likes of Sony, Toshiba, Panasonic, and others. "We wanted to immediately communicate that we are accessible and available," says Drew, explaining the company's choice of name. The only problem with that is that the name 800.com says nothing about what the e-tailer actually sells. Drew, however, sees that as an advantage. "One of the beauties of 800.com is that we can extend the products that we focus on easily and without trouble," he says. THE "FRECKLE" FACTOR. That's assuming the company gets that far. 800.com still has to prove itself as an e-tailer of electronics before branching into other areas. And the situation looks grim, analysts say. The question is not how the upstart can best position itself against the big boys in a $100 billion market, but whether it can be done at all. "800.com is really just a freckle," says David Strasser, an analyst with Salomon Smith Barney. "Service-wise they are as good as it gets. I just don't think anyone can stand alone as a dot-com seller of consumer electronics." Strasser is skeptical that selling consumer electronics online can turn a profit -- even for a Best Buy or Circuit City. Bah humbug, responds Drew. The company offers a far more extensive selection than rival brick-and-mortars -- either online or off. 800.com features 2,000 items, vs. an average of 850 in a typical store. And the site is featured on leading portals such as Yahoo!, AOL, and MSN, whereas its competitors have deals with just one. "That will certainly drive traffic to their site," says Robert Labatt, research director at Gartner Group, a tech consulting firm. Investors remain bullish. About a dozen of them, including Paul Allen's Vulcan Ventures, have pumped in $101 million since Drew and a group of consumer-electronics veterans created the company. "This has been far and away the best season ever for 800.com," says Craig Berkman, a managing member of CB Capital, a venture-capital fund in Portland. "Last week they sold 6,000 DVD players. When they were first starting out, they sold 16 in a week, and we wondered what we had gotten ourselves into. Not now." PICK A PARTNER? Based on sales to date, 800.com will pull in $25 million during the fourth quarter, up from $13.7 million for the same period last year, says Drew. That won't make the company profitable anytime soon, but the CEO expects cash flow to turn positive within three quarters. The company is also reaching out to the offline world in a bid to establish alliances that will encourage cross-selling. Its first link is with EBWorld, an online site run by Electronics Boutique, which sells computer games online and through 628 stores in the U.S., Canada, Korea, and Australia. "Now that we have our infrastructure and fulfillment done, we can turn toward partnering with larger companies, both on and offline," says Drew. One big alliance would be enough, analysts say. "The reality for 800.com is the same as any other pure-play retailer: It's a tough go," says Gartner's Labatt. His advice? "Investigate a brick-and-mortar partner."  Jeanette Brown covers e-business for Business Week in New York  | | |
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