Most Internet retailers will go out of business by the end of next year because of funding problems and competitive pressures, said Forrester Research Inc., an electronic-commerce research company. Companies that sell only on line face a greater threat of extinction compared to traditional retailers that open stores on the Web, Forrester said in a report based on interviews with 50 Internet retail companies. Online sites of catalog companies have a better chance of survival during the shakeout.
Some Internet companies face cash problems as they try to build themselves and win customers.
The Web site had trouble fulfilling orders during last year's holiday season. Some Internet retailers with good technology and strong management teams may be taken over, he said. By this fall, Internet retailers selling books, software, flowers and other commodity items will start to consolidate because of slowing growth rates, Forrester said. Some of the companies selling pet supplies, toys and consumer electronics will fail before the year-end holiday sales season begins, the research firm said. Those Internet companies that survive will build a loyal customer base of five million or more users, control their own warehouses and handle orders as well as consider selling through catalogs and physical stores, Sawyer said.