E-Commerce to Be Profitable in the Distant Future

E-commerce Web sites enjoyed a bountiful holiday season,
and while its future looks bright, a new study predicts the industry will
not reach profitability during the next 12-18 months.

According to the Giga Information
, only 5 percent of online ventures will turn a profit in the next
year. There will be benefits, however, as customer service improves and
costs decrease.

“Electronic commerce will play an increasing role in business, but even the
best-known startups aren’t profitable yet and only a few Fortune 100
companies have profitable Internet commerce operations,” said senior
electronic commerce analyst Erica Rugullies.

Until mainstream brand names enter the e-commerce sector seriously, the
industry as a whole will not make money, she said. Rugullies also said
companies should focus their e-commerce efforts on goals other than revenue

“Early adopters of electronic commerce have an opportunity to build an
infrastructure that dramatically reduces the costs of doing business while
improving relationships with customers and suppliers,” she said. “This will
be to their advantage over the long run.”

E-commerce should not be discredited, however. The recent holiday shopping
boom is a precursor to future success, the study said. There is money to be
made through e-commerce.

For example, America Online estimated that
visitors spent approximately $1.2 billion via its shopping channel during
November and December. The mega-Web site also approximated 1.25 million
members made their first online purchases this holiday season on its

“It’s clear that this past holiday shopping season marks a turning
point–when shopping online really
became a key part of consumers’ shopping patterns,” said Bob Pittman, AOL’s
president and COO.

“But now that they’ve tried it and experienced all its benefits, we expect
they’ll come back and
shop again throughout the year.”

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