According to Datamonitor, 78 percent of all online shopping carts are abandoned before checkout. How can this be? Growth itself can take its toll — increased traffic to an unprepared Web site can actually kick some shoppers off the system, effectively throwing them out of the store. Online shopping still is a first-time experience for many Web users, and confusion and fears about security can keep that mouse from clicking on the buy button. People get distracted — the home team scores a touchdown or the kids start fighting, and by the time the shopper gets back to the computer there's an email waiting from cousin Joe with a list of dirty knock-knock jokes. And then there's the legendary dearth of customer service — you'd have a better chance of getting a tee-time with Tiger Woods than receiving a timely response to product-related questions via email.

The bottom line: not even the Internet can change the fact that retailing is a margin game, and a competition-killing synergy of profitable supply, service and execution has yet to fully emerge online. Still, it's not all doom and gloom.

The good news is that legions of spendthrift consumers continue to march toward the Web as a rapidly growing alternative to shopping malls and mail-order catalogs. Everyone agrees that this year's online holiday sales should be up by more than 50% over last year. Forrester Research, Jupiter Communications, and Gartner Group all offer estimates of between US$10 billion and US$11.6 billion. Last year's sales were US$7 billion.

The downside is that the market for Internet-related stocks reserved its very worst spankings for B2C players across the board. For some, the car barely got out of the shed. In a record for dot-com demise that will hopefully not soon be challenged, the well-funded Kibu.com (business model: sell crap to teenage girls) went out of business just 46 days after its Web site launched. This despite more than US$22 million in funding and the guidance of Netscape co-founder Jim Clark.

Most distressing is the state of Amazon.com (AMZN:NASDAQ), the undisputed B2C leader. Its market cap cut in half, the company's cash flow is being suffocated by higher-than-anticipated debt payments. Several of its e-commerce partners have gone south: Living.com collapsed, Gear.com is teetering near the brink and Drugstore.com's stock price is barely 10% of its 52-week high. Making matters worse, over the past few months several top-line execs have left the mighty Amazon for greener pastures and better stock options. Amazon.com's wish list may be too long for Santa this year.

The word from the reigning "man of the year" remains pedal-to-the-metal expansion — sell more products in more markets. The game plan from Mount Bezos is to partner with anyone who will take them on and roll out more international Amazon.com Web presences (a French language Amazon launched last month). The market's response to date has been iffy, with much debate going toward how much of a bonus Amazon.com should be awarded for its 23 million customers and first-mover status.

But hypergrowth has a way of becoming less hyper over time. Amazon.com must fund its growth with profits, not promise, and will most likely need a strategic partner to achieve profitability before 2002. The playing field is becoming more level.

Traditional retailers are actually making progress with their clicks-and-mortar strategies, and this just may be the year that their online performance finally begins to catch up with in-store numbers. Wal-Mart, K-Mart, and other e-tailers are working intently to ensure that their Web sites are prepared for the holiday crush. Wal-Mart actually shut down its site for a few weeks to fine-tune things for the holiday shopping season. Christmas 2000 will be the debut of the new Wal-Mart.com team (the company last year spun off its Internet activities as a separate division), based in Menlo Park, CA and headed by the former CEO of Banana Republic and ex-head of Gap's Internet unit. Earlier this year, Wal-Mart.com acquired the technology assets of HomeWarehouse.com, an online home improvement store. Along with Wal-Mart, Bluelight, K-Mart and EstÈe Lauder's gloss.com have all temporarily closed their Web sites to make upgrades in preparation for increased fourth-quarter shopping activity.

Though going offline to re-engineer means lost business, it could end up paying big dividends. During the holiday shopping season of 1999, e-commerce Web sites and fulfillment centers were overwhelmed by the crush of Web shoppers. Of course, this is a good problem to have, but only if these same players bulk up to avoid similar problems this year. Most research estimates that about one third of this year's holiday shoppers will be first-time buyers, and that the average customer acquisition cost is now running approximately US$175. Depending on the purchase, it could take as many as three visits for some e-tailers to break even on a customer.

All of which points to the absolute necessity of a happy shopping experience. At this point, that means rapid and intuitive payment screens, email response within two hours, instant messaging access to customer service representatives, and working site search functions. Amazon.com has been relatively successful at most of these tasks, but with so many new users still coming online, traditional retailers will have a distinct advantage in reaching those consumers via multiple channels. Joe Six-pack won't be able to get in and out of a Wal-Mart or Target store this holiday season without being nailed by the company's Web address at least 27 times. And that's a lot cheaper and more effective than putting your firm's edgy sock puppet mascot on television six times a day. Execution will mark the difference in how far traditional retailers have come... as well as deciding how much share Amazon.com will lose.

If traditional retailers do take a bigger piece of the pie this Christmas, the big question will be whether the Internet sector is still a sector at all. If this is the year we learn that you don't have to be an Internet company to succeed on the Internet, then what will that do to Internet companies?

It's one thing to leverage your brand, inventory, footprint and distribution capability to deploy an online channel alongside your catalog- and store-based channels. But it's an entirely different matter to do on the Internet what can't be done in stores, or in print and broadcast media. Call it the halftime of the Internet revolution, and watch the elite Internet companies — those that have truly done something unique, and done it profitably — receive the highest bounce once the holiday shopping season is over and done with.

Who are the elite? My short list includes America Online (AOL:NYSE) for being the first online media/shopping entity to challenge the traditional media companies; Yahoo! (YHOO:NASDAQ) as the first broker of "creatorless" content and "merchantless" commerce; and eBay (EBAY:NASDAQ), the first purely Internet-enabled business model to achieve profitability. All three are profitable and all three stand to gain from the weeding out of Internet startups and the entry of traditional companies with strap-on Internet strategies.

Though still pricey, eBay's stock is down at the moment, despite a strong record of execution. Many eBay watchers are still holding their breath as the company enters three new markets (Germany, U.K. and France). Through it all, however, eBay has consistently managed to deliver 30+% operating margins. With a 50% jump in online holiday revenues and no significant threat from the traditional retail or media world, watch eBay flourish as the bottom line swells and the auctions continue to rip.

One of the mysteries of online media is that so many people complain about banner advertising being costly and ineffective, yet expenditures for online advertising campaigns keep increasing. The truth is that inventory for banner advertising across the Web continues to outpace the number of eyeballs — with the exception of two mega-destinations that somehow continue to attract more and more eyeballs. Yahoo! and AOL dominate the online ratings, consistently running neck and neck in unique visitors, page views, session length, at-home and at-work usage, and just about every other category. Both properties remain the prime players in online advertising, and swollen holiday traffic will more than offset the highly publicized demise of so many dot-com pretenders (and their marketing budgets). Despite the tools that traditional retailers have at their disposal to promote their Web site offerings (in-store signage and merchandising, receipts, uniforms, existing print and circular advertising, etc.), they will still need to attract the eyeballs that are already online. And the most efficient way to do that is through AOL and Yahoo!.Again, the rash of failed dot-coms means marginally less competition, which should result in a bigger piece of the content and commerce pies for both of them — potentially even bigger than the projected 50% bounce through the holidays.

Despite all the hoopla last year about the year 2000, we all know that the new millennium really begins in 2001. There won't be a lot of fanfare, given the hype from last year. But Internet retailing and media will mark a more legitimate entry into the mainstream with this holiday season. After all of the noise made by trendy new dot-com names that popped up last year, the majority of "online" businesses that we will hear about this year will follow corporate brands that are familiar to us. We will spend more money with these companies, receive better service, and, for the most part, not think twice about it. How quickly the revolutionary becomes ordinary.