There are many failure examples of e-commerce. One of the example is eToys. eToys was overextending with development of market share before they considered profits. eToys’ business model did not utilize the specific advantages the Internet offered and ultimately ran up a debt that was huge in amount. Furthermore, eToys believed the popular philosophy of the time that Internet companies were not susceptible to traditional business metrics of profit and loss that they could devote every resource towards “getting big fast”.
eToys had taken a series of risks and made some unsuited decisions in terms of capital resources and the amount of debt that would be able to make good on in the future. The company rushed to expand and shout about themselves at every opportunity. Huge and expensive advertising campaigns and expansion were the core activities of company to be the first visible company in the market. For example, eToys decided to enter the new market of baby-oriented products in 1999 and acquired BabyCenter, Inc., a web-based community offering baby products and information content for parents. It required the integration of distribution and customer service operations and required funds that eToys had to take out of its borrowings. It does not make logical sense that eToys was still trying to improve its website and distribution system and still trying to promote its brand name and build market awareness although eToys was still operating at a loss at this time.
In February 1999, eToys immensely increased the inventory, logistics, costly brand promotion, and establishment of international facilities with the purpose of expanding business into European market with the inception of etoys.co.uk and purchase of a subsidiary in the Netherlands, as well as added service to Canada.
eToys had taken a series of risks and made some unsuited decisions in terms of capital resources and the amount of debt that would be able to make good on in the future. The company rushed to expand and shout about themselves at every opportunity. Huge and expensive advertising campaigns and expansion were the core activities of company to be the first visible company in the market. For example, eToys decided to enter the new market of baby-oriented products in 1999 and acquired BabyCenter, Inc., a web-based community offering baby products and information content for parents. It required the integration of distribution and customer service operations and required funds that eToys had to take out of its borrowings. It does not make logical sense that eToys was still trying to improve its website and distribution system and still trying to promote its brand name and build market awareness although eToys was still operating at a loss at this time.
In February 1999, eToys immensely increased the inventory, logistics, costly brand promotion, and establishment of international facilities with the purpose of expanding business into European market with the inception of etoys.co.uk and purchase of a subsidiary in the Netherlands, as well as added service to Canada.
Another mistake that eToys made which lead to its failure is that they failed to realize the highly seasonal and fluctuating nature of demand in their industry and how this would affect their rate of growth. In overestimating their demand, they failed to account for the fact that to get lots of people buying online, it would take time because it required a systems innovation in the way people thought about their lifestyles and modes of business. The fact is that “more people today are buying online, but most aren’t,” and eToys’ success was predicated on the fact that eventually holiday shoppers would go online instead of going to the stores but it never happened quick enough to keep up with their costs.
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