E-MarketingMBA

Course 1 E-commerce

Several myths,one reality

Jacques Nantel Ph.D

May 2003

The e-sky is falling!(Amazon.com)

Amazon

• Market Cap. (before split)

– June 1999 323,000,000 shares @ 110$– June 2002 375,000,000 shares @ 15,34$– May 2003 391,719,000 shares @ 29$

– 1999 35,5 billions– 2002 5,6 billions– 2003 11,0 billions

Shareholders’ expectations

• Assuming a P.E. Ratio of 10

• This would have meant, in 1999 profits of 3,5 billions $

• This would mean, for 2002 profits of 560 millions $

• This would mean for this year profits of 1,10 billions $

Oups………….

• The total US market for books is 60 billions $, for potential profits of 2,5 billions $

1998 1999 2000 2001 2002Sales 610 1640 2761 3122 3932Profits -124 -720 -1411 -567 -149

Amazon.com(millions $)

Good and bad news(millions $)

-2000

-1000

0

1000

2000

3000

4000

1998 1999 2000 2001 2002

Sales

Profits

Yet….

• There are more consumers surfing

• Who stay longer on the net

• And who buy more and more

Prévisions en 1996 vs actuel(marché USA, en millions $))

Année Prévisions Ventes

2000 12,090 $ 27,885$

2001 17,307$ 36,916$

2002 45,540$

U.S. department of Commerce Feb. 2003

In brief, a growing market but one has to understand the real

opportunities • Internet will not be the revolution that

some had predicted

• It will not be a fade

• For most retailers it will be a necessary evil

• Building a new distribution network does not create any new demand

• There are not two types of consumers one virtual the other one tangible

• forget the first mover’s advantage

• Technology is important but brand equity and bricks are key

Some dying myths