July 11, 2000
The Discount Days are Over
E-commerce companies must make a profit or die trying
Internet discount-mania is coming to an end. That's right, it's time to say goodbye to below-cost merchandise, incredible coupons and free extras like shipping and gift wrap.
When technology stocks dove in May, the powers-that-be began pulling the plug on unprofitable e-commerce companies. Low stock prices and rising concerns about the future of e-commerce scared off many investors, sending some e-commerce ventures to the dot-com graveyard and forcing serious lay-offs at many notable Internet companies. Even Amazon.com faced criticism in this new world where profit finally matters it's time for companies to make money or shut down. In other words, products must be sold, not given away.
E-tailers like Ashford.com say they are curbing their discounting, which means independent jewelers may finally be able to compete online without losing money. The amount of discounting still going on is a mystery because what companies say they are going to do, in many cases, they haven't done yet. Ashford told The Wall Street Journal over a month ago it was no longer sending its whole customer base large-discount coupons; instead, it would send coupons to customers sitting on the fence about a purchase. Despite what Ashford said, there are still coupons for as much as $50 off a $100 purchase being sent to prospective customers. Online discounting is slowing down though, and this is what a few major online jewelers are doing:
While the discounts haven't gone away completely, they are noticeably on their way out. Companies just can't afford to give products away anymore. As the reality of e-commerce sets in, there is one lesson e-commerce companies have learned: If you give people something for free, they will take it. However, that doesn't mean they will become a customer. Good customers will pay reasonable prices for merchandise and won't expect to get something for nothing. These are the customers you want, and because of the decline of deep-discounting, these are the customers you will get.
- Ashford still offers free shipping, but most of its merchandise is at regular price. It has a large summer clearance section with discounts of 20% and some special weekly sales. Also, Ashford appears to be sending out fewer discount coupons via e-mail or at least not sending them to its lower-end shoppers. However, it is still bundling coupons with packages shipped from companies like Amazon.com.
- Blue Nile offers free shipping, but none of its merchandise is marked as discounted.
- Mondera also offers free shipping, but none of its merchandise is marked as discounted.
- Yahoo! Shopping features jewelry from a variety of retailers, but nothing is noted as on sale. Users can comparison shop, but the prices don't usually vary by more than $20.
- World of Watches hasn't budged from its "up to 60% off" slogan, but most of the products are really 20% to 40% off the list price.
- by Julia M. Duncan