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Even Amazon.com was not immune to role-reversal last week, when embarrassing leaks from its internal website showed the e-commerce poster child taking a harsh, Wal-Mart-like stand against a nascent move to unionize some of its warehouse workers--would-be dotcom millionaires now turned wage slaves. Last year, with employee stock options booming, Jeff Bezos looked like Kris Kringle; this year the market turned him into the Grinch. To keep top execs tethered, Bezos has had to put cash on the table, not paper.
Not that Amazon.com which clocked a record 54 million visits in November, needs to worry about underperforming. Much more vulnerable is Buy.com the second largest pure-play e-tailer, which last week topped a Goldman Sachs list of the most cash-hungry dotcoms, ahead of Cyberian Outpost and Drugstore.com Buy.com CEO Greg Hawkins, who has spent more than a year overcoming the reckless price-cutting legacy of founder Scott Blum, is in a somber wait-and-see mode: "Last week didn't disappoint us, but we didn't walk out saying, 'Yee-hah, this is going to be a great Christmas!'"
To make it as merry as possible, Hawkins has followed what is becoming the classic cost-cutting model for pure-plays: fewer of those annoying TV ads and more online marketing, focused tightly on your base (in Buy.com's case, 18-to-49-year-old college-educated men earning $80,000 a year). For dotcoms on a budget, it makes more sense to reel in previous customers than to waste time attracting new converts. "We'll never make enough money on the first transaction," says Mike Lannon of Boston-based Send.com which has slashed what it spends acquiring a customer 95% since last year. "Last year was the land grab. This year we have to live off the land."
Which means things like customer service and prompt delivery have suddenly become a whole lot more important. The nightmare before last Christmas, the plague of site outages and delivery snafus that caused mass customer outrage, left plenty of sadder, wiser veterans in its wake. "It was chaos," recalls Kenny Kurtzman, CEO of luxury site Ashford.com based in Houston. "I had to take phone orders myself right up to Christmas Eve. We had the whole company down in shipping because we didn't know what to expect."
Kurtzman may not know what to expect this season either, but he has been contingency planning since March. If anything, he's overcompensated by promising free next-day delivery, a year's free insurance on big-ticket items and a bunch of roses if the package doesn't make it on time (out of 20,000 orders in the past three weeks, he had to send flowers 25 times). It seems to be working. Ashford's all-important repeat-customer rate has gone from 18% last year to 33%. That's how pure-plays have to build a trustworthy name for themselves--lots of grind and the florists on speed-dial.