Dot-Com Customers Get Short Shrift: PWC

The majority of Internet start-ups focus more on forming strategic partnerships than they do on fulfilling orders, according to PricewaterhouseCoopers (PWC) Hong Kong.

Philip Moody, director of the Management Consulting Services group at PWC, drew parallels between Asian dot-coms and a survey of 400 European companies, which targeted both traditional "bricks and mortar" firms and dot-coms to identify their key criteria for dot-com success, Moody said.

"Many of the traditional players thought that the dot-coms would initially (have) five years in the horizon before they need to turn in the profit, but we've seen a fundamental shift in the Asian market," Moody said. "The dot-coms really don't have that luxury anymore."

According to Moody, pressure to turn a profit has driven many dot-coms to change their business model altogether.

"In the local market we've seen a lot of dot-coms coming to us saying it's no longer the e-business strategy or strategic advice that they require, it's a business plan," he said. "And the main purpose of that business plan is to demonstrate to their investors how they are going to make money in the next six to 12 months, not longer than that."

However, Moody said the fundamental problem with local start-ups is that they ignore traditional business principals at the expense of short-term gain.

"What (dot-coms) talk about is a change in their business model or in the focus of their business (if they can't reap quick profits), he said. "And trying to implement that in a six-to-12-month time frame is fairly impossible, if not unrealistic."

Moody said that in their haste to gain positioning, dot-coms cut corners and fell short on customer fulfillment, which is important to long-term success.

"Fulfillment is critical to success because it's very closely linked to customer service," Moody said. "Customers will certainly try something once online, but if they don't receive the goods, or if it's not fulfilled within the time frame, and if they are disappointed or let down, they are unlikely to come back."

Moody highlighted the disparity between the operational style of some dot-coms and the realities of good business sense.

"The dot-coms seem to put much more weight around the entrepreneurial, opportunistic management style, alliances and partnerships, whereas traditional players looking at dot-coms tend to suggest fulfillment and the more solid business foundations ... to satisfy customer demand," Moody said.

According to Moody, the shortsighted nature of local dot-coms, more so than European startups, can be attributed to the volatility in the Asian marketplace. "Asia tends to be more cyclical in nature and the investment focus tends to be short term," he said.

The survey went on to point out similarities between European firms and Asian companies, in particular that burn rate increases for B2C (business-to-consumer) models. Moody said that the "basis of predictions around the failure rate for B2B (business-to-business) and B2C marketplace, confirms what's happening in Asia."

"A much higher burn rate for B2C is predicted," Moody explained. "Seventy percent of all dot-coms are expected to struggle or fail and generally move to the B2B marketplace in the hope there are more achievable and sustainable revenue streams."

As such, traditional companies are best placed for long-term e-business success, despite lacking some of the dynamics characteristics of dot-coms, Moody said.

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