E-commerce Firms Rethink Business Plans After Stock Market Shakeout

As the aftermath of the Internet stock quakes continues to reverberate, area e-commerce firms are rethinking their business plans, trimming budgets, and staffs, and loading management teams with seasoned professionals. Companies that were once focused on growth and expanding their user base are now prioritizing quick profitability and attracting funding, which has grown increasingly elusive since the high-tech heebie-jeebies.

Machinetools.com Inc., a Chicago-based online metal machinery marketplace, is one such company that has made significant changes to its business model. After spending a minimum of $200,000 a year attending trade shows, the company now spends around $80,000, saving $120,000 annually. Additionally, they have started charging users for access to their site, which has helped to reduce their burn rate. CEO Darren Green attributes the change in business strategy to the recent stock market shakeout, saying, "We don't have the luxury anymore of growing this thing and burning through cash."

Other companies are also making significant changes to their business plans. Zipm.com Inc., an online provider of direct-mail services, has cut spending on marketing, including trade shows and trade advertising by two-thirds. This change, among others, is expected to move the company's profitability date to the first quarter of 2001, a year earlier than expected.

Key Takeaways:

Machinetools.com Inc. has reduced its trade show expenses from $200,000 to $80,000 per year, saving $120,000 annually.
Zipm.com Inc. has cut spending on marketing, including trade shows and trade advertising, by two-thirds.
Errand Solutions LLC has abandoned its plans to be a Web-based service and instead focuses on offering a human touch to its errand-running services.
Participate.com Inc. has delayed its initial public offering (IPO) and is instead focusing on other financing options.
Most dot.com firms are moving away from business-to-consumer (b-to-c) models toward business-to-business (b-to-b) models.
Funding for business-to-consumer firms is down 50% from the first quarter of this year, while business-to-business funding has dropped only 25%.
Beautyjungle.com cut about 40 people from its staff, or about 60% of its workforce, at the end of October, resulting in a savings of $1.2 million in operating costs per year.
The global investing in e-commerce firms hit $11.7 billion in the second quarter of this year, up from $10.8 billion in the first quarter.

Statistics:

Machinetools.com Inc. reduced its trade show expenses by 60% ($120,000 annually).
Zipm.com Inc. cut spending on marketing by two-thirds (no exact figure provided).
Beautyjungle.com cut 40 people from its staff, or about 60% of its workforce.
The savings from Beautyjungle.com's staff cuts is estimated to be $1.2 million per year.
Funding for business-to-consumer firms is down 50% from the first quarter of this year.
Funding for business-to-business firms is down 25% from the first quarter of this year.
Global investing in e-commerce firms hit $11.7 billion in the second quarter of this year.

Sources:

Machinetools.com Inc. - no source provided
Zipm.com Inc. - no source provided
Errand Solutions LLC - no source provided
Participate.com Inc. - no source provided
Beautyjungle.com - "It was definitely easier to raise money in 1999 than 2000," - Ken Gaebler, former chief operating officer
Capital eVentures LLC - "It's just a very difficult environment for e-commerce companies." - Andrew Bluhm, principal
Andersen Consulting LLC - research on funding for business-to-consumer and business-to-business firms
Greenberg Traurig LLC - "It would be a rare dot.com that isn't publicly or privately cutting back right now." - Keith Shapiro, co-chairman of the bankruptcy and reorganization practice
Chicago Tribune - volume 23, publication number 49, word count 1170 words.