Dot.com staffing woes bode well for bricks-and-mortar - Brief Article

Unemployment is down, way down. In fact, the national unemployment rate, currently at 3.9%, hasn't been this low in 30 years. Great news for the economy--even better news for consumer confidence. But as many retailers head into the most important season of the year--when staffing needs can swell by as much as 20%-it's terrible news. In fact, finding good holiday employees to fill in during the holiday crunch is a nightmare. You could even say 'Tis the Nightmare before Christmas!

Fortunately for you bricks-and-mortar folks, this dream ends on a high note. In the last few months, the unemployment rate in the dot.com world has shot through the roof--a phenomenon that should make the immediate pool of qualified retail employees among the best in recent history. And by qualified I mean Internet savvy; HTML-literate and accustomed to working long hours--all of the traits that have come to be associated with the typical nose-to-the-grindstone dot.com associate.

Even better, the companies relinquishing these employees are no slouches themselves. True, they've fallen on tough times. But in their heyday, they were the pioneers of Internet retailing, knee-deep in investment capital and stroked by Wall Street.

* Fogdog.com (eliminating 125 jobs): This sporting goods e-tailer, which launched a $60 million IPO in December 1999, has been a success story in a channel of e-commerce known for its cut-throat competition. Its accomplishments include: a year over-year increase of 750% for holiday orders in 1999; a 200% spike in 1999's fourth quarter revenue; a semi-exclusive marketing deal with Nike (in exchange for 12% ownership in the company); and numerous accolades from Internet consulting firms such as Gomez Advisors and Media Metrix, which identified Fogdog's site traffic as being more than double the combined total of Global Sports Network. Ironically, it is Global Sports, a leading operator of such e-commerce sporting goods businesses as The Sports Authority, MC Sports and Oshman's, that recently purchased Fogdog for roughly $40 million.

* Stamps.com (eliminating 240 jobs): This privately-held company has stayed very much in the public eye. It has penned marketing deals with America Online, Microsoft and Office Depot; it has pulled in investments from new media powerhouses like Intel; and it started fiscal 2000 with a first quarter revenue increase of 470%. Despite these achievements, the company reported that the "competitive [on-line] environment" demands a more efficient business model, and therefore cut its workforce by more than 40%.

* Drugstore.com (eliminating 60 jobs): After a successful IPO in July 1999, Drugstore.com, the leading on-line retail pharmacy, raised more than $62 million through private placement of common stock. Shortly thereafter, its share price took off, rising more than 300% in six months. Other highlights include strategic relationships with Amazon.com, Rite Aid and General Nutrition Companies (GNC), and the acquisition in February 2000 of Beauty.com a leading on-line retailer of prestige beauty products.

Drugstore.com's cuts come on the heels of several rounds of layoffs at struggling on-line pharmacies, including PlanetRx.com and More.com. At PlanetRx.com, 50 positions were eliminated last month, the rough equivalent to 20% of its workforce. The layoffs came just two months after PlanetRx cut 70 positions in a previous attempt to reduce expenditures. More.com announced earlier in the month that it would cut its staff by more than 30% in an effort to "reduce costs and accelerate its passage to profitability." In June, it cut its staff by about 20%.

The rash of staff slashing in the dot.com world is not limited to one category or channel. In October, Internet companies eliminated 5,677 jobs, an increase of 18% over the layoffs in September, according to a report by outplacement firm Challenger, Gray & Christmas.

While all of this is an ominous sign for Internet retailers, it stands as an example of how one channel's demise is another's good fortune. For the thousands of bricks-and-mortar companies struggling with staffing issues over the last few years in what has come to be known as the dot.com brain drain, the tides are turning in what could be the beginning of a new talent surge for retail.

COPYRIGHT 2000 Lebhar-Friedman, Inc.
COPYRIGHT 2000 Gale Group