In fact, many mail order companies survived the Christmas 1999 crunch intact despite increased ordering over the Internet. Online retailers still need to determine where they need to build warehouses and where they are better off working through third-party logistics providers. If a mapping of customer locations shows a concentration of business from New York, it makes sense to construct a facility there, but an outside partner may be needed to effectively serve Boise, Idaho. Europe presents a special challenge for Web businesses because the logistics of shipping to over 30 different countries, each with its own regulatory system, are much more complicated. Fortunately, European logistics companies and national postal systems have developed sophisticated capabilities, and they may make better partners than their U.S. counterparts.
Returns remain a challenge for most online retailers, both domestically and internationally.
Now that Web merchants have achieved critical mass, they need to prove that they can be profitable over the long haul. Profitability will come from mastering the back end of the business. The winning companies will be those that learn how to handle small packages and large quantities quickly and cost effectively while providing the level of service quality their customers expect. Eric Kintz is head of the US e-commerce and telecommunications practice of Roland Berger, based in New York. He has deep expertise in globalization strategies for Internet companies and in helping traditional companies transform themselves to adapt to the e-world.