Wal-Mart's Online Video Failure: Yet Another Lesson...

One e-commerce refrain we’ve heard since 1995 is that once the established real-world brands get their act together, the online pure-plays will be toast. We’re still waiting.

Why couldn’t Barnesandnoble.com put Amazon out of business? Why can’t BlockBuster, Wal-Mart, et al, put Netflix out of business? Why can’t the networks put YouTube out of business? Why can’t any number of online music start-ups put Apple out of business?

Some of the many reasons:

  • Online is a different business. Understanding half of the skills and competencies required–namely, procurement–doesn’t cut it.
  • Early-mover advantage is critical: online stores open their doors to the entire world all at once.
  • The advantages of an established brand aren’t minimal, but they’re also not enough.
  • Channel conflict: No matter how savvy and powerful you are, your first priority as an established offline business is to protect your core business–and your attempts to do so almost always make your online business fall short
  • Start-up vs Fortune 500 culture. 

Over the past few years, some Fortune 500 companies (including Wal-Mart) have been able to overcome these challenges and build respectable sideline web businesses. The online businesses will always be sidelines, however, and they have not yet threatened the pure-play leaders. 

If anyone ever threatens Netflix in movie rentals, or YouTube in online video, it will likely be another pure-play without a legacy business to protect (and, for the most part, this includes Hulu, which even in its independence is still hamstrung by channel conflict).

Screenshot from Engadget

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