Internet retailers should consider opening real world stores to market their
products and attract customers, a venture capitalist said in a recent Bloomberg Forum
interview.
Arno Penzias, a venture capitalist with New Enterprise Associates,
acknowledged the efficiencies of the Internet, but said those advantages are
generally offset by other challenges unique to online businesses. Relatively
unknown Internet merchants must spend heavily on marketing and developing
their sites while facing stiff price competition.
“It will be more and more of a mistake to trash bricks-and-mortar and say
that Internet-only retailers have some kind of sustainable economic
advantage,” said Penzias, former chief scientist with Lucent Technologies
Inc. “Just sticking to raw e-commerce in the long run is likely to lead to
very, very low margins because this really is about consumer empowerment.”
Penzias, who won the Nobel Prize for physics in 1978, points to Charles
Schwab Corp., the largest discount and online brokerage firm, as a company
that has successfully integrated its online and traditional operations.
“When Charles Schwab opens a store in an area, their Internet business in
that area goes up,” Penzias said. “The successful business will be somebody
who can offer a multiplicity of channels to serve the entire market.”