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But Kaplan acknowledges that E-retailing is still very young. "While clicks-and-mortar is a wonderful concept, it hasn't gained terrific traction yet," he says. The initial "cheaper prices" E-commerce mantra is illogical and a marketing ploy that ultimately sank enterprises that couldn't survive on razor-thin profit margins, Kaplan says. It's his company's brand strength, as well as its strong customer service and expanding product lines, that are responsible for Egghead.com's successful reinvention, he says.

According to Neilsen/NetRating research, which tracks online consumer activity, Egghead.com was the most popular site of computer and software resellers between November and December. It reported 5.9 million unique visits during last year's holiday season, the Internet's busiest buying season. Buoyed by increasing traffic, and in response to customer needs, Egghead.com launched an office-products section to compete with office powerhouses OfficeMax.com and Staples.com. Its online shelves hold more than 70,000 products.

But brand doesn't mean much if customer service is weak, and, more important, if brick-and-mortar companies' sites don't integrate all the customer channels, says Harry Wolhandler, VP of research at ActivMedia Research. "In the long run, we're all going to be shopping online,'' Wolhandler says. "The ultimate goal for retailers is a loyal customer. That's the reason for Amazon's success-it caters to customers."

Gaining such customer loyalty has long been a focus for Charles Schwab & Co. The brokerage wasn't the first online and it hasn't been the cheapest-facts it wears as badges of honor-but it has proved that a strong customer focus can work wonders on the Web. "We've been working for 15 years on how to interact with our customers on a 24-by-7 relationship," says Vincent Phillips, senior VP for active investor technology at Schwab.

One recent example of Schwab's deliberate approach to rolling out technologies is its move two weeks ago to start offering wireless services. While many online brokerages have been offering wireless trading for several months, Schwab responds that it's not a matter of being first, it's a matter of delivering stable, usable technologies. "It's not about throwing features into the marketplace, it's about integrating these features into our channels to best serve the customer,'' says Bob Sofman, Schwab's senior VP of wireless investing.

The surviving dot-coms understand this all too well. For one pure-play toy retailer, customer satisfaction and repeat business translate into providing a highly personalized shopping experience. SmarterKids.com Inc. focuses on helping parents understand a child's learning abilities and purchase the appropriate toys and software. The site profiles every product it sells according to 228 potential attributes, including age range, skill area, ease of use, teacher reviews, and learning and entertainment value. When parents enter profiles about a child's interests and learning style, the site suggests a set of product matches.

SmarterKids.com realized that spending hundreds of thousands of dollars in marketing for strong brand recognition wouldn't amount to much if customers didn't come back. And, obviously, it would take quite an effort to put the brand ahead of the likes of KB Kids and Toys "R" Us, and even dot-coms like Amazon.com. What it could do was make it clear that SmarterKids.com was more than just a toy site. "What we're doing with our personalized shopping experience can only be done on the Web, and no one else is doing it," says Al Noyes, executive VP of sales and marketing at SmarterKids.com.

Noyes predicts that this year, SmarterKids.com will rise above the noise, adding that public awareness of the site is 43%, according to the NPD Group, a market research company. By comparison, the NPD awareness number for Amazon.com is 94%. "The big challenge facing brick-and-mortar companies and dot-coms is customer retention. Research shows us that our returning buyers spend 60% more than first-time buyers," Noyes says, adding that 40% of SmarterKids.com shoppers are repeat customers.

In a report on the online retail market earlier this year, Forrester Research projected that there will be quite a few more crash and burns, naming CDNow, Buy.com, PetPlace.com, and ToyTime.com as strong failure possibilities. Yet Forrester is still bullish on

E-retailing, noting that more than 11 million American households will make their first online purchases this year.

Regardless of whether dot-coms continue crumbling in the shakeout, one thing is clear: Brick-and-mortar retailers have grabbed back some significant E-commerce turf-and most of them just woke up in the past 18 months. Pure-play dot-coms had better take cover.

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