Shakeout Seen in E-Commerce Players

CAMBRIDGE, Mass. — Most Internet retailers will go out of business by the end of next year because of funding problems and competitive pressures, Forrester Research Inc., an electronic-commerce research company, said Tuesday.

Companies that sell only online face a greater threat of extinction compared with traditional retailers that open stores on the Web, Forrester said in a report based on interviews with 50 Internet retail companies. Online sites of catalog companies have a better chance of survival during the shakeout.

“I think there are probably not going to be more than three leaders in each online retail category,” Forrester senior analyst Joe Sawyer said. “If anything, the competitive landscape is getting fiercer.”

CDNow Inc., Pets.com Inc., Mothernature.com Inc. and Buy.com Inc. are among companies that Sawyer said will have little chance of becoming category leaders.

Internet firms that do survive will build a loyal customer base of 5 million or more users, control their own warehouses and handle their own orders, Sawyer said.