Top Scoops

Book Reviews | Gordon Campbell | Scoop News | Wellington Scoop | Community Scoop | Search

 

Howard's End: How Not To Run A Dot.com

Job losses in the U.S. are escalating to the point where in the last five months, more than one million jobs have disappeared - the biggest decline since 1980. And it shows no sign of slowing down with June layoffs nine times the number of June last year. But Kiwis are far smarter. True! Maree Howard writes.

You simply won't believe how one major online company went belly-up in the U.S. yesterday, but more of that later.

With last Friday's disappointing jobs report, the U.S. unemployment trend has taken centre stage on Wall Street. Most labour market indicators such as help-wanted ads, unemployment claims, layoff announcements and employment have weakened significantly.

The hard hit manufacturing sector has shed jobs for 12 months in a row, and the once stalwart service sector had the smallest increase in the second quarter - the worst since 1970.

And over the last 15 months, hundreds of the NASDAQ's least fit issues failed to survive. In June alone, 82 companies were delisted and others are laying off tens of thousands of workers.

The latest casualty is Webvan, the once high-flying online grocer and Internet icon who had raised a staggering $1billion to build a grocery delivery company. The stock that once traded as high as $34 is now worthless.

Never heard of Webvan? Right, but its delisting into bankruptcy is a salutary lesson for the proponents of e-commerce and the knowledge economy of what can happen big time, if you don't get it right.

Next to Amazon.com, no other dot.com company served as such a bright, shining illustration of how even some of the biggest names in the information economy, the most well-informed, best educated, and smartest people, can easily hit a brick wall.

Founded in 1996, Webvan lured some of the smartest brains in the knowledge economy, its board was filled with some of the most revered names, its money came from Silicon Valley venture capital powerhouses and its shares were touted by Wall Street's best-known investment banks as better than books, videos and music.

But rather than starting small in one or two cities, it had big ambitions.

It opened in 26 markets within three years. Each distribution centre would be 18 times the size of a typical supermarket and would cost $35 million. Almost 10 kilometres of conveyor belts would bring products to the packers and at each site refrigerated vans fitted with sophisticated global satellite positioning systems would allow each warehouse to serve around a 100 kilometre radius.

Webvan's expenses were huge and that seems to have been their major downfall - along with no actual physical bricks and mortar stores as backup which meant poor sales overall.

But for the boom on Wall Street, Webvan might have been just another idea. But in the late 1990's, theory triumphed over experience and there was enough capital sloshing around almost any idea. Dot.coms thought they needed to move fast enough to get ahead of the competition.

Besides, money was being pumped at them so fast that they had to do something with it. In the lush green fields of the dot.com era, even three-legged cows could survive.

On its first day of trading, Webvan sped immediately into the fast lane and became worth $8.7 billion -an amount equal to nearly 1% of U.S. GDP.

What? An $8.7 billion business would have to earn around $500 million a year in order to give investors a decent return on their money.

It didn't happen. U.S. investors have now stopped worrying about a return ON their capital and have become anxious about a return OF their capital.

New Zealand has online grocers as well. But ours are far more sensible and smarter in being part of an already existing bricks and mortar grocery chain and they keep their costs down by using courier's to deliver the groceries rather than their own, expensive to operate, truck fleet.

We can teach the yanks a thing or two. It's no wonder young kiwi's are being head hunted and are so well thought of overseas. They've got the can-do spirit with a huge measure of down-home number 8 fencing wire common sense.

So why is the U.S. dollar so high? Simply because other currencies and countries are now starting to do so badly that international investors see the U.S. as the best of a bad lot.

There are lessons here for our exporters and e-commerce gurus - Let's be careful out there.


© Scoop Media

 
 
 
Top Scoops Headlines

 

Ian Powell: Rescuing Simpson From Simpson

(Originally published at The Democracy Project ) Will the health reforms proposed for the Labour Government make the system better or worse? Health commentator Ian Powell (formerly the Executive Director of the Association of Salaried Medical ... More>>

Missions To Mars: Mapping, Probing And Plundering The Red Planet

In the first month of 2020, Forbes was all excitement about fresh opportunities for plunder and conquest. Titled “2020: The Year We Will Conquer Mars”, the contribution by astrophysicist Paul M. Sutter was less interested in the physics than the conquest. ... More>>

Richard S. Ehrlich: Coup Leader Grabs Absolute Power At Dawn

BANGKOK, Thailand -- By seizing power, Myanmar's new coup leader Commander-in-Chief Senior General Min Aung Hlaing has protected his murky financial investments and the military's domination, but some of his incoming international ... More>>

Jennifer S. Hunt: Trump Evades Conviction Again As Republicans Opt For Self-Preservation

By Jennifer S. Hunt Lecturer in Security Studies, Australian National University Twice-impeached former US President Donald Trump has evaded conviction once more. On the fourth day of the impeachment trial, the Senate verdict is in . Voting guilty: ... More>>

Binoy Kampmark: Let The Investigation Begin: The International Criminal Court, Israel And The Palestinian Territories

International tribunals tend to be praised, in principle, by those they avoid investigating. Once interest shifts to those parties, such bodies become the subject of accusations: bias, politicisation, crude arbitrariness. The United States, whose legal and political ... More>>

The Conversation: How To Cut Emissions From Transport: Ban Fossil Fuel Cars, Electrify Transport And Get People Walking And Cycling

By Robert McLachlan Professor in Applied Mathematics, Massey University The Climate Change Commission’s draft advice on how to decarbonise New Zealand’s economy is refreshing, particularly as it calls on the government to start phasing out fossil ... More>>

 
 
 
 
 
 
 
 
 
  • PublicAddress
  • Pundit
  • Kiwiblog