An example of an E-Commerce Failure and Its Causes

During the late 1990s and early into the year 2000, we witnessed the launch, rapid rise and sudden fall of a relatively new industry…e-commerce. With the widespread use of the Internet, exciting business to consumer (B2C) e-tail opportunities emerged. Sites began selling online directly to consumers, everything from books, to pet supplies, to clothing. This created a frenzy of companies trying to get online, to stake their claim, and to get a piece of the action.
However, have some of the businesses succeed and fail due to a number of different and complex factors. Such as pets.com, boo.com, streamline.com, garden.com and eToys.com as examples of the hundreds of dot com businesses that failed.

Each was a pure-play Internet business, existing only online with no bricks and mortar presence. These e commerce failures all occurred on a large scale, with the businesses burning through hundreds of millions of dollars in just a few years.

A common theory about dot com companies is that they were all being run by a bunch of “twenty-something’s” with no previous management experience. Example of eToy.com will failure in e-commerce because of the founder of eToys previously worked for the Walt Disney Corporation, but had no experience with the retail toy industry.

Generally management experience is considered to be one of the most important contributing factors to success or failure. Without previous experience, a business is more likely to fail. In the case of these online retailers, even though there was a wide range of experience among the leaders, it may have been the lack of specific industry knowledge that contributed to the failure.

Another cause of failure is competition environment. The eToy.com was competing with companies such as Toys R’ Us that had not only an online presence, but also the perceived stable infrastructure of bricks and mortar. EToys.com strategy to offer more diverse products conflicted with the strong “toy store” branding they had created.The price wars and high customer acquisition costs also caused problems for this e-tailer.

Some cause that eToy.com fail because of customer service and poor demand forecasting. For example, in the case for the 1999 Christmas season, it decided to use a third party, Fingerhut, to fulfill orders. EToys.com described the outcome as a disaster. Seeing the disappointment on a child's face only once was enough for a parent to never buy from that company again. This electronic orders increased, particularly during the peak holiday season, eToys was unable to meet its delivery requirements due to its limited logistics capability and poor demand forecasting, and make eToy.com unsuccessful in e- commerce. However the sites did offer toll free lines for customer services and attempted to have representatives in place for consumer contact, but this was not enought to create a feeling of trust and services.