Article Excerpt:
TWST: Would you start by describing the space that you cover?Mr. Gristina: I cover the consumer Internet, which I view as a broad grouping of companies that can be one-to-one purchases or subscription models. It's pretty much any model where the revenue is flowing from the consumer to the company.
TWST: What are you including in the consumer Internet space at this
point?
Mr. Gristina: The companies that I cover are NutriSystem (NTRI),
Overstock.com (OSTK), NetFlix (NFLX) and PetMed (PETS). We recently
launched drugstore.com (DSCM), and on the subscription side, we have
INVESTools (IEDU), and we still cover TheStreet.com (TSCM), which is in
large part an ad-based model, but it still has considerable consumer
subscription revenue. So it's mostly Internet retailers, but there are
some media models as well.
TWST: What's going on in the space? Is it still a growth business?
Mr. Gristina: Absolutely. I think we are experiencing a renaissance in
Internet retailing. Early on, you had interesting models that were well
funded, with a lot of IPO and secondary money raises or venture capital
backing, and they targeted the obvious categories that would be served
well online ' consumer electronics or BMV (books, music, and video),
where you are dealing with a standard stock keeping unit. There were
commodity SKUs, and these companies would try to serve a broad group of
verticals with the understanding that the consumer only wanted to give
their credit card maybe once or twice to any particular merchant online.
So it made sense to have a mall approach, where you offered all the
things they might be buying online, and by getting that initial wallet
share, you probably get more wallet share. In the last two or three
years, you've seen a lot of companies pop up, solely serving one
vertical, and they are doing that with a layer of expertise and user
experience, and they are putting the mass merchants to shame. One
example is a company called Zappos.com, and all they sell are shoes, and
they have really ironed out the details in terms of shipping and return
policies and visually shopping for numerous kinds of shoes. When I talk
about a renaissance occurring, I think it's happening in these
verticals. There are ways to better serve the verticals, but they
require depth, not breadth. From the consumer side, they are a lot less
reluctant to give out their credit card to more than one merchant. So
the fear of credit card fraud has diminished and I think that it doesn't
necessarily pay to have that mass merchant approach online.
Tickers included in this excerpt: DSCM, IEDU, NFLX, NTRI, OSTK, PETS, TSCM, WMT, YHOO
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