Contents
1. Click-and-Mortar Companies
2. Home Depot Plays Godfather

1. Click-and-Mortar Companies... David Pottruck, co-CEO of Charles Schwab, first used the phrase "clicks and mortar" (as reported in the August 2-9, 1999 Industry Standard) to describe businesses that "combine the power of the Internet with the ability to operate effectively in the offline world." ... Powerful concept, and similar to Kevin Werbach's "hybrid company" articulated at PikeNet 99... As the Industry Standard reports, clicks-and-mortar companies will be those that do everything well: "They'll offer great products at low prices, friendly Web sites, beautiful retail spaces, flawless delivery and so forth." ... In short, business continues to become even more competitive. Welcome to the online world.

So it shouldn't be any surprise that Circuit City and Ethan Allen are taking aggressive steps to combine their bricks and mortar with online operations. According to INSIDE 1to1, a weekly newsletter of Peppers and Rogers Group, of July 29, 1999, "Circuit City has taken the revolutionary step of integrating all of its 550 brick-and-mortar outlets completely with its Web site. Now, not only can you order your computer or TV from home, you can also pick it up at the nearest store -- bypassing shipping and delivery costs to boot!" ... So maybe Amazon.com won't find it quite so easy to get into the electronics business.

Ethan Allen is aiming to launch its online sales feature in late September. According to Farooq Kathwari, Chairman and CEO, Ethan Allen will address the concerns of its independent licensees with 310 brick-and-mortar stores by cutting them into the Internet revenue. The July 29, 1999, Wall Street Journal reported that "Mr. Kathwari told store owners that any store providing delivery and service for an item sold over the Web will get 25% of the sales price. When an item is shipped directly to the consumer from an Ethan Allen factory, the store owner in that consumer's territory will get 10% of the price." ... Sounds interesting. Watch out for the BDCs (Big Dot Coms)!

2. Home Depot Plays Godfather... Oh-oh. Maybe the BDCs have a stealth competitor in the shadows -- their vendors. What if these vendors decide to go online themselves? Then you're not just talking about saving shipping charges, but the retail markup, which is a whole lot bigger... That's the position that Home Depot might find itself in according to the current Fortune (August 16, 1999). Here's the list of potential online vendors that could threaten Home Depot: Ames, Black & Decker, GE, Owens Corning, Rubbermaid, Scotts, Toro and Whirlpool. Most of them are mum about specific online plans. But that hasn't stopped Home Depot from playing the heavy, at least according to Fortune, which obtained the following "Dear Vendor" letter: "It is important for you to be aware of Home Depot's current position on its vendors competing with the company via e-commerce direct to consumer distribution. We think it is short-sighted for vendors to ignore the added value that our retail stores contribute to the sales of our products..." So exactly where ARE you going to buy that next Weed Whacker?

--Peter