An example of e-commerce failure and its cause

Nowadays, there are so many companies expanding their business in the e-commerce world. This may because the companies want to struggle to meet the demand of the customers. And this can explain why there are so many retail worlds want to struggle so much in the e-commerce world. However, converting a once retail only company into an e-commerce giant is no an easy task and it sure does not happen over night like most of these companies would like to believe.


There are some of the problems that the big companies neglect when their jump into the e-commerce arena. This type of company may neglect some of the common factors that may cause the failure in e-commerce such as the shipping product takes man power and it tends to slow the process down simply by the sheer volume of orders the mail service industry receives in that short period of time. There may have some e-commerce’s companies know how to get the job done and they may incorporate an entire delivery division to handle these orders. While not all the companies have the enough capital to invest in such a large expansion, frankly, if they are going into the e-commerce industry, they cannot afford not to put in that investment.


In real world, there are some examples of the failure in e-commerce such as eToys.com. EToys.com launched in 1997 and closed in March 2001. The company raised $166 million in a May 1999 IPO, but in the course of 16 months, its stock went from a high of $84 per share in October 1999 to a low of just 9 cents per share in February 2001. It much likes Pets.com.


In an effort to avoid the shipping missteps of 1999, eToys spent a lot to build two enormous warehouses to handle inventory and delivery. But Christmas sales for the year 2000 season totaled $120 million, which is just half of the company’s projections. Since the company was run out of money and other funding options exhausted, eToys filed for bankruptcy in March 2001.


The reason behind eToys’s failure are similar to those of others failed brethren. eToys has spent too much on advertisement, marketing, and technology and battled a host of competitors. An immediate need for a large infrastructure and plenty of cash to support an untested business model lead to eToys spending outweighed of the company’s income, and investors quickly jumped ship. But after being owned for a period by KayBee Toys, it’s now back for a second run.