Net retailers' days may be numbered, according to a recent report by the Los Angeles Times. It reported that the amount of venture capital funding going to e-tail businesses has plummeted to about one-fourth of what it was six to eight months ago.

As companies continue to suffer deeper losses with little hope of turning a profit soon, some e-commerce experts and venture capitalists are beginning to question whether costly promotions and business-building in the name of building Web traffic was worth the hit to profits.

As a result, industry experts believe that many e-tailers will soon run out of capital and throw in the towel. "Many of those that do not will be snapped up by Web conglomerates such as Microsoft, Yahoo! or America Online, which have the financial muscle and cross-selling ability to create a profitable Web merchant," it reported.

The last statement hinted at the importance of building a large online community, or more commonly known as a web portal, to support e-retailing in the long run.

Both Yahoo! and America Online started out as an information portal providing value-added information and resources to millions of users who flock to their sites every month. Online shopping was offered at a later stage to capitalize on their ability to reach out to a large group of online citizens.

The logic is simple. People want to belong to a community, and commerce will flourish in places where a community settles in, regardless of whether these places exist in cyberspace or in the real world. So, contrary to the business models adopted by most e-tail businesses, we should first focus our effort on developing an online community before taking the plunge into e-tailing.

An ideal community or web portal should cater to a particular lifestyle or appeal to a specific age or social group. We can offer free services, information, games and entertainment as well as an avenue for members to participate in the community's events and social activities. The list can change all the time, as long as it achieves our main objective of getting members to return to our site regularly.

E-commerce should only be introduced when we meet two conditions:

1. First, we succeed in attracting a regular flow of traffic to our web site.



2. Second, our web site has evolved into an effective medium for reaching out to a specific target audience, and many advertisers are keen to tap this market.

There are several advantages in taking this approach:

• We can start small without incurring a sizeable amount of investment in human resources, inventories and logistics support.



• We can use our advertising revenue to help finance our e-tail operations.



• We can market our products to an existing market without having to rely on aggressive advertising and promotion to bring in the traffic.

An online community dedicated to a specific target audience can play a very important role in arousing its members' awareness and interest in specific products and services. These highly qualified prospects will then be more receptive to seek information about related products and make purchases subsequently.

Most people refrain from shopping and will consciously avoid visiting a shop unless they have unlimited money to spend. They buy on impulse when something catches their fancy unintentionally. If this observation is correct, then a sole e-tail business is less appealing than an online community with an e-tail operations.

As you can see, the development of a vibrant online community is a very important prelude to the success of e-tailing. It is no wonder then that large corporations are now spending millions of dollars to develop huge portal web sites. These mega-portals offer almost everything under the sun to appeal to every possible Internet user in cyberspace.

Nevertheless, there are still plenty of rooms for niche players despite the onslaught of the mega-portals. We can specialize in a specific market niche and fine-tune our information, services and product offerings to serve our target audience better. In other words, size does not matter if you have the right strategy and business model in place.

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