Awarded the
“Rodinstar” Post
of the week!!
There was an interesting article on cnet about companies that made the loudest noise, and fell the hardest, during the Dot Com Bubble. A few of them are:
Webvan
In a mere 18 months, it raised $375 million in an IPO, expanded from the San Francisco Bay Area to eight U.S. cities, and built a gigantic infrastructure from the ground up (including a $1 billion order for a group of high-tech warehouses). Webvan came to be worth $1.2 billion (or $30 per share at its peak), and it touted a 26-city expansion plan. But considering that the grocery business has razor-thin margins to begin with, it was never able to attract enough customers to justify its spending spree. The company closed in July 2001, putting 2,000 out of work and leaving San Francisco’s new ballpark with a Webvan cup holder at every seat.
Kozmo.com
Kozmo.com was cool and convenient. You could order a wide variety of products, from movies to snack food, and get them delivered to your door for free within an hour. It was the perfect antidote to a rainy night, but Kozmo learned too late that its primary attraction of free delivery was also its undoing. After expanding to seven cities, it was clear that it cost too much to deliver a DVD and a pack of gum. Kozmo eventually initiated a $10 minimum charge, but that didn’t stop it from closing in March 2001 and laying off 1,100 employees. Though it never had an IPO (one was planned), Kozmo raised about $280 million and even secured a $150 million promotion deal with Starbucks
Razor thin margins, growth-focus, not-profitable-at-net-level, huge potential – does this ring a bell? These are words that link the e-com news stories of today with the failed Dot Com Companies of the 2000s.
“Hardly a fraction of the people of India are using the Internet today. We are just scratching the surface,” says the twinkle-eyed, dreamy entrepreneur of today.
But does it justify the lack of fundamentals in a business? We all are chasing the big golden hen that is India and its 1billion people, waiting for the golden eggs to fall in our hands. To chase the hen, we have created huge and hungry monsters, and unleashed them on the poor hen. We feed them with money, because we all want our monster to race ahead of the others. But what happens when it catches the hen, tears it apart, and turns around to look back at you. No more hen – no more golden eggs. How do you now feed the monsters you have created?
Who are these monsters? These are the companies without fundamentals. When Warren Buffet invested in Yum Brands (KFC, Taco Bell, Pizza Hut) he saw a cash-making machine; a company not affected by depression; good margins; positive cash-flow; steadily growing demand; a company whose future is not affected by the whims of the stock market. Yum was a company with fundamentals. Our monsters don’t have fundamentals.
We have created huge companies, but can we manage them? The internet is full of stories about companies who couldn’t deliver what they promised. XYZ-kart is too busy chasing their x-crore target – they don’t give a shit about your Rs 100.
Some personal anecdotes:
- I placed 5 orders with TastyKhana (local restaurant, free deliver) in the past 2 months. 4 orders were cancelled because the ‘restaurant-wala-bolta-hai-aapka-ghar-duur-hai’ or ‘restaurant-wala-bolta-hai-minimum-300-ka-order-chahiye’. For the fifth one, I was asked to pay more than what their online price told me I had to pay. “We can’t do anything,” the customer support said, “They revised the menu and didn’t inform us.”
On the other hand, take Domino’s. I have placed over 20 orders with them in the past 6 months. No problem with any order. And every single order delivered within 30 minutes. These people know their business. - Having recently moved to a pre-paid connection, I tried FreeCharge. The transaction failed twice. I wasn’t worried. “Where will the money go? It’ll come right back into the bank account”. Well, it didn’t. Apparently, they give us a text box to enter the recharge amount, and when we enter a number, they cancel our transaction, keep the money in an online wallet, and say, oops … that recharge amount is not supported. I can’t take my money back from the wallet – I have to spend it on their site. I say, Why not use a dropdown box dipsh*t, and tell me the valid amounts, like the official Vodafone recharge portal?
I think I’ll stick to Vodafone recharge. You can keep your goibibo coupons. They’re dime a dozen anyways. - I loved ordering from Flipkart. The service is good, and delivery fast. Unfortunately, 3 out of the last 4 electronics I ordered from them had to be replaced because they were faulty. Good service can’t compensate for this.
All these companies we are building – can we even manage them? Everyone wants an e-commerce pet for themselves. I am becoming a more cautious using my card on the net. I don’t think you can handle the money.