Excite, FleetBoston Enter Crowded Field

SAN FRANCISCO (07/12/2000) - Two more heavyweights are jumping into the crowded ring of companies fighting to help small businesses build cyber-storefronts.

But for them, it may be a case of too little, too late.

In separate announcements, broadband service provider Excite@Home Inc. and FleetBoston Financial Corp., the nation's eighth-largest bank-holding company, announced Tuesday that they are launching new services targeting small and medium-sized businesses.

Excite@Home, which already offers a service to build Web stores for a fee, unveiled a new offering called Freetailer that enables merchants to create a bare-bones virtual store at no charge.

FleetBoston is teaming up with New York-based Internet Tradeline to offer its 400,000 small and medium-sized merchants the ability to build online stores at fees ranging from US$24.95 per month, with a $150 setup fee, to $169 per month, with a $1,000 setup fee.

They'll be competing against nearly two dozen other companies already courting small businesses online. Building Web sites for small merchants is the sole business of some of those rivals, such as Freemerchant.com and OhGolly.com.

Other larger companies, such as Federal Express Corp., Staples Inc. and now FleetBoston, are jumping on the bandwagon with hopes of differentiating themselves among competitors in their core industries.

With only about one-quarter of small merchants currently online, the players say there is plenty of business to go around. But some observers see holes in that theory.

"You're definitely going to see some of them failing," says Robert Labatt, research director of Internet retail, business-model strategy and marketing for Gartner Group Inc. , a research firm in Stamford, Conn. After all, Labatt asks, "Does the shoe store in your neighborhood deserve to be online?"

For those who do "deserve" to have a virtual store, choosing between the growing number of Web site builders is only becoming more difficult. A bare-bones, no-cost service like Freetailer, which is becoming a more popular model, might be good for small merchants that want to test the waters first and later add more amenities to their site, says Leslie Shattuck, an industry analyst with Cahners In-Stat Group in Scottsdale, Ariz., and co-author of the company's quarterly report that ranks small-business Web service providers.

"You really need to assess your business model and figure out what things you'll need to make your business grow."

Internet Tradeline CEO Linda McCutcheon says her company emphasizes giving merchants' storefronts as wide an audience as possible, and will actually build the site for the customer after a face-to-face meeting with a member of its sales force, if necessary. It has built sites for 2,000 merchants - a small number compared with competitors such as early entrant Freemerchant, which just celebrated its 100,000th merchant - primarily through its partnerships with more than 100 newspapers, which offer the service to advertisers.

Excite@Home, for its part, is counting on its brand name and the lure of its shopping service to set it apart, says Dan Odette, VP of marketing for Excite Business Applications. "We have the ability to bring a lot of traffic to a merchant's Web site," says Odette, noting that competitors Yahoo Inc. and Amazon charge for similar services.

But Labatt notes that the Freetailer's free service does not include credit card processing - a key element of any virtual store. Instead, the service is available as an upgrade for $19.95 per month plus per-transaction fees. "The reality is that the free service is just a teaser," he says. "It's kind of like, 'I'll give you a car, but I won't give you the engine.'"Equally significant, he adds, is the fact that neither Freetailer nor Internet Tradeline offer companies the ability to integrate their Web sites with back-end inventory systems, an essential component of online retailing. "Both of these services are two to three years out of date when it comes to the type of technology they're offering," Labatt says. "It's a really good step, but it's not the whole solution."

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