One obstacle for most companies is customer service. The large number of customers who are willing to support online purchasing makes it abundantly clear that there's pent-up frustration with traditional retail outlets. As long as e-commerce sites don' make too many missteps, they can keep their advantage, but initial reports from last Christmas show that some sites were unable to make good on their promises. When you walk into a store and buy something, at least you have it instantly. You don't have to worry about whether it'll arrive in time for someone's birthday. Of course, when you buy an item like a book online, you have to worry about three additional factors: stock, shipping turnaround, and the shipper.

    If an e-commerce site doesn't have its front-end ordering system tied directly to its inventory tracking, step one can turn into a black hole. If you shop a site like http://www.insight.com, you know exactly how many of each item is available and when out-of-stock items are expected. Some online merchants tell you when you can expect your products to go out. If a site says something like "order by 8 PM and get it next day," it's a sign that they get it. One feature we'd like to see implemented on sites is "tracking by return email." After you make an order, a site should email you the shipper's tracking number so you can investigate any delays yourself, without resorting to calling customer service.

    Once e-commerce is well-established, we also think that many sites will experience shakeouts. Right now, a few vendors are the top names in their fields. Take, for example, Amazon.com. They're the place to go for books online. And they lead the market for one reason: they were big first. However, the next several years will produce several dangerous new threats to companies like this. First, the traditional big names are all joining the market. If you want to be a successful bookstore, you need to stock a lot of books, have a nice coffee bar, and so on. If you want to be a successful on-line book vendor, on the other hand, you just need an ISBN list, low prices, and a distributor. And you had better have everything in stock because other vendors are just a click away. If you don't have an item, shoppers will go elsewhere and stay there until that merchant doesn't have something they want.

    In the near future, even the most attractive front end might not be a selling point, as online robots become more popular. You'll be able to go to a consolidation site, tell it that you want a copy of, say, the Oxford English Dictionary, and in a few seconds be presented a list of vendors in decreasing price order. The fact that you're Amazon doesn't matter anymore if people see you're selling the OED for $3000 when http://www.booksamillion.com/ has it for $696. In essence, online vendors could quickly become just another commodity, like hard drives or PC speakers. Companies that design their sites to block shopping robots simply won't appear on the results list. These robots are not that hard to write—we put together our own in Visual Basic in a couple of hours. (It's available for download from our Web site.)

    The final threat is the awareness of well-established brand names. Not to pick on Amazon, but the premiere online brand name means less to shoppers who are used to going to their local Barnes & Noble, especially when both companies' sites use the same distributor and offer identical products. Add to that other big name companies like Wal-Mart, who now has a site (http://www.wal-mart.com) offering the same books at the same discount, but who charges a flat $3 for shipping no matter how many books you order. What seemed like a compelling story four paragraphs ago suddenly sounds like just another upstart that needs to fight against better-known, better-equipped brand names.

    The key to the success of all the high-flying Internet companies around today will be how well they can adapt to the threat of the Wal-Marts over the next few years. If they can figure out a way to offer value without permanently destroying their profitability, perhaps they'll come out on top. Otherwise, it could be a long few years ahead for employees and stockholders alike.