E-tailers Meet Holiday Grinch

Think back to law school. or, if you didn't go to law school, at least conjure the memory of Professor Kingsfield in "The Paper Chase."

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Think back to law school. or, if you didnt go to law school, at least conjure the memory of Professor Kingsfield in "The Paper Chase." In the movie and TV series, he enjoined new students to look left and right around the classroom, warning them that one of the persons sitting next to them would not be around to graduate. Jeff Bezos, welcome to law school.

This holiday seasons crop of consumer retail Web sites should be experiencing the same sense of dread that Kingsfields students felt, anxiety resulting from the knowledge that, no matter how hard they try, many will still fail.

Amazon.com has been trying—some would argue not hard enough—the past few years to bring its overhead down and its earnings up into the black, and every year we hear that the e-tail bellwether is just one more big fourth quarter away from profitability. For Amazon and many others, they may be one more fourth quarter away from bankruptcy, regardless of how well they perform this season.

This year, there are more potholes than ever for merchants on the Infobahn. And unlike previous seasons, site performance, price and product selection arent major issues. Rather, its the nature of their businesses and how they conduct them. For example, the Federal Trade Commission last month issued thinly veiled warnings to 100 major e-tailers to get their acts together in terms of false promises for product fulfillment and customer service.

Customers themselves are getting wiser, too. They are getting more experienced at choosing which sites to visit and which ones to stay away from. In many cases, the sites that are winning out are brick-and-mortar stores that have made a successful transition to click-and-mortar. For instance, Kmarts online arm, BlueLight.com, in its first holiday season reported a strong opening week, as sales doubled Thanksgiving week from the previous week, even as it coped with performance problems related to the traffic spike.

To counter, Amazon has resorted to doing mass catalog mailings and has also beefed up its gift services center with detailed information about shipping.

The pendulum swing toward click-and-mortar companies and the strong stand of the FTC are both indicators of increasing maturity in the e-commerce market. Customers expect more and are entitled to expect more. The novelty of online purchases has worn off.

As John Houseman (who played Kingsfield) might have said in one of his later TV commercials, "E-tailers will have to make money the old-fashioned way—theyll have to earn it." Starting this holiday season.