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American Morning
Doing Business on the Internet
Aired July 10, 2001 - 10:45 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BRIAN NELSON, CNN CORRESPONDENT: And those of you may remember yesterday's news that Webvan, the online grocery store that has been operating around the country for the past year, year and a half, has failed, disappointing thousands of its customers.
Well, while some e-commerce sites have failed others are doing very well. And our next guest has some insight on why this is happening. She is Linda Himelstein, a reporter for "Business Week," and she joins us live from San Francisco.
Ms. Himelstein, thank you for being with us.
LINDA HIMELSTEIN, "BUSINESS WEEK": Good morning.
NELSON: Well, let's start with Webvan. Let's get your take on that. Why did the grocery store chain, online, that was so loved by thousands of its customers, tank?
HIMELSTEIN: Well, it's a sad story. I mean Webvan was born during the Internet frenzy when virtually anything goes and Internet stocks were going crazy. So the company was able to grow really fast and spent a lot of money really fast, and that's when it did. And at this point, now that the stock market has basically tanked and Internet stocks are out of favor, we're looking at a company that was so far into the hole, so much in debt that it just couldn't recover.
NELSON: But what does it say about online shopping, and that's where we want to go, in the direction of this interview? What does, is this the canary in the mine shaft on online shopping or is it your belief that online shopping is doing very well now and going to grow?
HIMELSTEIN: Well, I think we're in a period of transition. We're seeing a lot of companies that were not strong, that had spent too much money, that didn't have good business models go away. But we're also seeing a lot of companies, Amazon.com, for example, trying to get its expenses under control, trying to expand its consumer base. And here, I mean Amazon is a company that's expected to make more than $3 billion this year. So it's hard to say that's going away any time soon.
Plus, projections are that consumers will spend $65 billion this year online.
NELSON: But it still... HIMELSTEIN: That's something to look at.
NELSON: But it still pales in comparison with bricks and mortar shopping. There's no question of that. So it may be doing, some Internet sites may be doing very well, but others are failing, and the whole industry seems to be in a period of stagnation.
HIMELSTEIN: Well, like I said, I think it's a period of transition. I mean there's a lot of the bricks and mortar retailers that are doing very well online, the cataloguers, for instance, Land's End, L.L. Bean, Williams-Sonoma.
I mean, they're looking at this as a great opportunity, trying to sell more and more things online and they're doing quite well. You look at the airline industry, they're selling tickets online. People are going to buy their tickets online and the airlines are going to encourage them to do it because they save so much money, and that's not going away anytime soon.
So I think what we're going to be seeing is a lot of hybrid models, you know, companies that will incorporate the Internet into their businesses but also utilize their bricks and mortar and their stores.
NELSON: Let me ask you, what do you feel is the biggest danger for online shopping over the next five years and what may be its saving grace?
HIMELSTEIN: Well, there are a couple of things. The danger is just not getting enough people to want to do it. I mean that's been the problem. That was the problem for Webvan, just couldn't get people to say I'm not going to go to the grocery store anymore, instead I'm going to buy my peaches online. So that's a real danger, if people don't have the confidence to go online. But I think one of the things that could make things a lot better is if broadband comes on a lot stronger and makes the shopping experience more interesting, faster, shows you better pictures, a lot of high quality. I mean that's what people really want. They don't want to be frustrated sitting there waiting for their modems to dial up and...
NELSON: Is that ever true.
HIMELSTEIN: ... and, you know.
NELSON: So you agree that that whole experience at home, the initiation of that process of shopping online has to be revolutionized? There has to be something that's there online all the time without having to dial up. Do you agree?
HIMELSTEIN: I think that would help an awful lot.
NELSON: All right. And now let me see, do, there's a new survey out from the Markle Foundation I wanted to ask you about, the Internet, according to many people, is more for them a library than it is a shopping mall. Again, we're going back to the future of online shopping. People are looking at the Internet as a library, that is, a resource center.
HIMELSTEIN: I think...
NELSON: And they're also concerned about their financial records and their privacy online. These are two big warning signals for anyone wanting to build a future on online shopping.
HIMELSTEIN: Well, that's really true. What people tend to do right now is they'll go online, they'll get lots of information, whether they're buying a car or clothes or whatever, electronics, and then they'll go out and buy it in the stores. I mean that seems to be the real pervading way of shopping right now online.
So, you know, there's got to be some time in the future where people are going to say OK, I'll get my information online and then I'll make my purchase online. But that is a real danger. And obviously the privacy concerns and security concerns have been out there for a long time and they have not gone away. A lot of the companies have addressed them in certain ways, you know, making promises that your information will never be given to anybody else again. But people still tend to not be convinced, or at least not enough people are convinced.
NELSON: We should also keep in mind that Webvan was not doing very well in San Francisco, the highest of high tech communities in our country.
So listen, thank you for taking the time to talk to us this morning, Linda Himelstein, a reporter for "Business Week." She joins us from San Francisco. Appreciate your being here.
HIMELSTEIN: Thanks.
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