Getting real about virtual commerce.

In its first generation, electronic commerce has been a landgrab. Space on the Internet was claimed by whoever got there first with enough resources to create a credible business. It took speed, a willingness to experiment, and a lot of cybersavvy. Companies that had performed brilliantly in traditional settings seemed hopelessly flat-footed on the Web. And despite their astronomical valuations, the new e-commerce stars have appeared to be just as confused. Many have yet to make a profit, and no one has any idea when they will. Now, the authors contend, we are entering the second generation of e-commerce, and it will be shaped more by strategy than by experimentation. The key players--branded-goods suppliers, physical retailers, electronic retailers, and pure navigators--will shift their attention from claiming territory to defending or capturing it. They will be forced to focus on strategies to achieve competitive advantage. Success will go to the businesses that get closest to consumers, the ones that help customers navigate their way through the Web. Indeed, the authors argue, navigation is the battlefield on which competitive advantage will be won or lost. There are three dimensions of navigation: Reach is about access and connection. Affiliation is about whose interests the business represents. And richness is the depth of the information that a business gives to or collects about its customers. Navigators and e-retailers have the natural advantage in reach and affiliation, while traditional product suppliers and retailers have the edge in richness. The authors offer practical advice to each player on competing in the second generation of e-commerce.