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Merrill Lynch Warns: Get Online Or Perish

By Chet Dembeck ECT News Network
May 20, 1999 12:00 AM PT

The No. 1 investment banker in the U.S. said companies that continue to ignore e-commerce could become extinct as dinosaurs.

Merrill Lynch Warns: Get Online Or Perish

In a 150-page recently-released special report, New York-based Merrill Lynch gave examples of how e-commerce is revolutionizing the way business is being done in a variety of industries, from banking to telecommunication.

"It has already altered, and in many cases continues to significantly change, traditional business philosophies across the broad spectrum of industries, commerce and finance," said Rosemary T. Berkery director of Global Securities Research and Economics.

The report added that only those companies that attain market size and share online will survive. It points to the growth of Internet banking, brokerages and publishers as a direct threat to their brick-and-mortar counterparts. It also warns that traditional real estate sales are feeling the pressure from Internet competition, as are major big box retailers:

"The Internet tends to cannibalize retail sales away from store-based retailers," the study concluded.

This spiral will drive more than 40 million U.S. households to shop online by 2003, producing $108 billion (US$) revenues, according to a new study from Forrester Research, Inc. The report predicts that online retail sales will account for 6% of U.S. consumer retail spending in the United States by 2003. This compares with 1998 when nearly 9 million US households shopped online for travel services and retail goods other than automobiles, generating $7.8 billion in on-line sales.

Wal-Mart Slow To Move

Yet, the No. 1 retailer in the world Wal-Mart Stores, Inc. seems to be reluctant to forge ahead into cyberspace. Even though it has a Web site, analysts say it hasn't contributed to its sales -- which ran up to $138 billion last year. While Internet commerce explodes around it -- for some reason -- the Bentonville, Arizona retailer is content to keep its Web site free of bells and whistles. This is something that could end up hurting Wal-Mart, according to Merrill Lynch 's study.

Meanwhile, the only surprise in Merrill Lynch's conclusions, analysts say, is that it took so long for the financial giant to recognize what has been obvious to e-commerce pioneers for the last couple of years. But they also warn that the report only outlines the symptoms of a much more dramatic and fundamental change taking place in the world's economy spurred on by the marriage of commerce and the Internet.

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