Earlier this year Jungle.com was swinging confidently through the virtual trees expecting an immensely successful flotation on the stock market. But the leading UK e-tailer, like many other dot.coms, was suddenly brought down to earth with a painful bump when hordes of investors began to frantically dump over-valued technology stocks.
Seeking extra cash and a concrete strategy for the future, Jungle.com linked up in September with the UK-based catalogue retail group, Great Universal Stores. To take control of Jungle, GUS agreed to pay £37m.
This move has been seen as evidence that traditional bricks and mortar companies are now striking back. As dot.coms have tumbled in price, they are swooping down and trying to snap up some virtual bargains. Their aim is to gain quick entry into the online economy, with an established brand and the technology, without having to take on the risk of launching their own start up operations.
"A year ago everyone was saying the new economy is here and the old economy is dead. Now everyone is saying dot coms are dead and the dinosaurs have won. Both of these are overstatements and the truth is somewhere in between," says Andersen's UK head of e-strategy, Andrew Mendoza, who expects to see plenty more corporates closing in to acquire dot.coms.
For his part, Jungle.com's chief executive and founder, Steve Bennett still feels some disappointment that his company failed to cut it as a stand-alone web e-tailer.
'If you roll out five years from now when you will have higher internet penetration, then you will find it easier to be a stand alone online business. Today it makes much more sense to be part of a group," he says.
Being a part of GUS has relieved a lot of the pressure that Bennett was under. The deal has meant that Jungle.com's marketing and customer acquisition costs have now been considerably reduced. GUS own Argos and it is able to use its purchasing power to introduce more electrical goods to Jungle's site. The company also promotes Jungle's services through its stores.
Faced with potential rich pickings from the dot.com world, it can be difficult for bricks and mortar companies to know the exact value of what they are buying. Often the main knowledge about an e- business is stored in the heads of a few of the dot.com directors and predatory corporates have to be careful to hold onto those key staff when they start plotting their mergers and acquisitions.
Kingfisher, which owns Comet, B&Q and Woolworths, has set up a dedicated unit to invest in dot.coms. Launching the e-Kingfisher service, chief executive Geoffrey Mulcahy pointed out that sales of more than £11bn in Kingfisher's market sectors in Germany, France and the UK will have moved online by 2004. He wants Kingfisher to "grasp e-commerce and develop value and service-driven direct channels to customers which respond effectively to their changing needs".
Already Kingfisher has invested in the natural health and body care site, Think Natural.com, on the grounds that it complements Superdrug's high street offering.
"They offer us a brand which is in a space we're not in and they offer us online expertise," explains chief executive of e-Kingfisher Ventures, Stephen O'Brien. "I don't think if you're a bricks and mortar retailer you're going to automatically succeed in the online world. We have to make the right alliances and move quickly into the right space."
He adds that B&Q has invested in Improveline.com which recommends DIY professionals to help people carry out their home improvements. But does he think bricks and mortar companies and dot.coms are entirely compatible?
"There are slight differences in culture," admits O'Brien. "The dot.com start-ups are usually very lean and have very few people and they are used to cutting through things more quickly." He thinks a number of pure internet retailers will succeed on their own but, generally, he feels bricks and mortar and dot.com partnerships can strengthen both parties - especially when it comes to finance.
"In recent times, financial advisers have been much happier when someone like us has been alongside a dot.com," he says.
The fact that corporates are making their presence felt is largely a symptom of the fact that the internet market is still immature. Steve Bennett acknowledges that bricks and mortar companies have a part to play in the market's development but in the long term he believes stand alone web e-tailers will change the face of shopping.
"When you buy a CD online it is a much better experience than going to HMV or Virgin," he argues. "It's cheaper and you can listen to every track."
The ability of the internet to cut costs also convinces him that the new medium will transform old business models. He points out that traditional catalogue companies can now send out one-to-one personalised emails taking account of a customer's previous shopping preferences which is much cheaper than shipping out hefty publications.
Just recently LastMinute.com impressed web sceptics in the City when it announced the appointment of Allan Leighton as non-executive chairman. His bricks and mortar credentials are impeccable. Until recently he was chief executive of Wal-Mart Europe and before that he was group chief executive of the Asda Group.
Martha Lane Fox, Lastminute's co-founder, argues that there is little difference between e-tailers and traditional bricks and mortar retailers. "We just happen to deliver through the internet. There are obviously some differences but at the same time the same challenges face us all. The focus is on delivering services and value to our customers."
Needless to say there is likely to be more of a dot.com shake up over the coming months. But in spite of the headline-grabbing failures, the fact remains that bricks and mortar companies and their top executives are now actively seeking out and integrating themselves with a few select dot.coms which suggests that e-business is slowly shaping up to become a real business of the future.
