Companies that sell goods and services over the Internet are responsible for almost 5,400 lost jobs since December 1999, according to a report from Chicago, Illinois-based employment company Challenger, Gray & Christmas, Inc.
According to the survey, 1,263 of the jobs were lost from a total of 17 dot-coms during June. The jobs lost since December come from 59 companies, one-third of which have ceased operations.
Figures aside, chief executive John Challenger believes there is no reason for panic in the e-commerce industry. “Dot-coms are merely taking the next evolutionary step where the companies that do not produce are sorted out,” he said. “It seems as if this sector may have reached this stage faster than any other in recent memory.”
Consolidation, Not Failure
A number of industry analysts have predicted a significant shakeout among Internet retailers and content sites, calling the development a need for consolidation, rather than a signal of impending doom.
Challenger’s survival of the fittest scenario is consistent with findings by industry trade group Shop.org, which projects $61 billion (US$) in e-commerce revenues this year, compared with $33.1 billion in 1999. With the U.S. economy booming and the national unemployment rate hovering around four percent, the group sees the string of job losses in e-commerce-related businesses as natural attrition.
Nevertheless, even high profile companies are not immune to the necessity to trim the fat from the budget.
Within just the past few weeks, such companies as Boo.com, Reel.com, Drkoop.com and Petstore.com have all become victims of the rapid growth of the Internet economy and its unexpected pitfalls. While Boo.com and Reel.com have paid the ultimate price by shutting down, others have thus far weathered the storm.
Drkoop.com, for example, laid off 35 percent of its workforce earlier this year, causing some analysts to declare the site dead on arrival. Just last week, however, the company secured $1.5 million in new financing.
For its part, Petstore.com’s assets were acquired by rival Pets.com earlier this month.
Sorting Out E-Commerce
Unlike layoffs in the 1980s and 1990s among offline workers, Stephen Levy of the Palo Alto, California-based Center for Continuing Study of the California Economy believes the recent cuts are a natural part of the market “sorting out which companies have the better products or services.”
Added Levy, “In any major niche, if you get several companies trying to do the same thing, not all will succeed.”
Meanwhile, as e-tailers account for the recent rash of job losses, employment in the business-to-business (B2B) sector appears to be gaining strength, further suggesting that the layoffs are not symptomatic of industry-wide failures.
Wednesday, IBM announced plans to hire 1,000 new workers to develop and market software products that help businesses operate online. The new hires are part of Big Blue’s plans to spend an additional $1 billion to boost sales of products that run online commerce, wireless operations, manage Web site content and personalize Web sites for users.