Partnerships Between Online Companies and Brick-and-Mortar Companies Can Benefit Both

CIO — When Elliot Klein conceived his version of the dotcom dream, to create a lost-and-found service for laptop and handheld computer users, he believed he was filling an important market niche. And to his credit,

Klein knew he needed some big-time help.

Returnme.com?which was inspired by Klein’s losing his address book in a New York City taxi in 1998?would need capabilities such as shipping, reverse logistics and customer support. Rather than seek the capital to build all of those capabilities from scratch, the entrepreneur sought out partners that could make it happen. He formed marketing and development relationships with handheld makers Palm and Handspring to make his company’s "eTagit" retrieval service available to device buyers. And Klein struck a key deal with FedEx: Returnme.com would use FedEx’s established NetReturn delivery network to ship found articles back to customers.

After the dotcom shakeout, companies are relying on traditional business practices and focusing on actions directly tied to customer value. Executing successful partnerships represents one of those core competencies. The staying power of Returnme.com, a Web Business 50 award winner for its innovative service, is attributable in large part to its partnerships with players like FedEx that help it serve customers. Other Web Business 50 winners highlighted in this article?Lands’ End, Drugstore.com and Bid4Assets?created partnerships that support their business models while improving customer service and contributing to growth.

Partnerships are not a new strategy, but the development of the Internet created a potential for connectivity that didn’t exist before. The Web has also spawned new kinds of partnerships, such as industry consortia and online exchanges. During the dotcom boom, companies partnered constantly and often in shark-like feeding frenzies in an effort to stay competitive. In a 1999 study of deals among dotcoms and bricks-and-clicks companies, McKinsey & Co. found announcements for 13,000 e-commerce alliances. Then, partnerships were a way for companies to generate press releases and (attempt to) boost their stock prices, says David Ernst, a principal at McKinsey & Co. in Washington, D.C., and coauthor of a report titled "A Future for E-Alliances." Partnerships were great to talk about, but talking and successfully executing are two different things. "It used to be that you could get great buzz by announcing a partnership, and companies looking to do an IPO were advised to partner with a major portal, an IT platform provider and a major e-commerce site," he says. "Now companies have to focus on partnerships that create value."

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