How many Web sites does it take to sell a lipstick? Or a sack of dog food? Or a new baby present?

Answer: Many fewer than are currently selling all this stuff.

The e-tailing sector used to be all about product categories. The game went something like this: Identify product X as something not already sold online, buy the domain name productx.com, wave that in front of some investors, and sit back to count your manna.

No longer. Now there's barely a consumer good out there without a corresponding Web site or two, or 10. Many product categories are crowded with pure-play e-tailers, and the bricks-and-mortar companies -- armed with strong brands -- are just now getting into the act. While there are certainly new e-commerce companies started every day, investors are getting a lot pickier about which ones to throw money at, which makes it hard for unprofitable companies to keep chugging. "The market is ripe for consolidation, especially since Wall Street has soured on the consumer retail play," says Ken Cassar, an analyst with

Jupiter Communications

.

Leaves Are Falling

Which categories are ripest? Analysts mention pet supplies (including the recent dud IPO

Pets.com

(IPET)

as well as

Petopia.com

and

PetsMart.com

), beauty (which includes

sephora.com

,

beautyjungle.com

,

eve.com

and

gloss.com

, to name a few) and gifts (including

gifts.com

,

della.com

and

redenvelope.com

). "The 'G' in my Rolodex is filled with these people," says Cassar. Baby stuff, jewelry and luxury goods sites are also a dime a dozen.

What do we talk about when we talk about consolidation? Several things, say analysts and investors.

First, there's the simple merger or buyout. We've already seen plenty of this.

Egghead.com

(EGGS)

and

Onsale

have merged.

Preview Travel

(PTVL)

and

Travelocity

are now one. And

drugstore.com

(DSCM)

bought

beauty.com

in January. And when e-tailers get cheap enough, bricks-and-mortar companies can also get in the game, too (witness

Columbia House's

proposed buyout of

CDnow

(CDNW)

). More mergers and buyouts are likely coming in the crowded categories.

But

PaineWebber

analyst Sara Farley notes that not all mergers are equal, and suggests that investors get wise to that, too. When two second-tier players tie the knot simply to try to gain enough mass to compete with the top companies, that can smack more of desperation than of strategy. Egghead.com's shares are down about 56% since its July merger announcement, for example.

Better things come to those who bring clearly defined advantages to the table, such Preview Travel's customer friendliness and Travelocity's tech. Preview's shares are up 133% since it announced its merger plans in October. "They consolidated because they work well as a team," says Farley.

Losing's No Fun

And not everyone's going to merge. A business without big customer databases or other appeal isn't likely to get much interest. "Some of the pure plays don't have much cash on hand, and given their operating business, they can only last a couple of more quarters," says Darren Chervitz, senior analyst with the

Jacob Internet Fund

. "We could see some of the weaker ones run into trouble." As of November 1999,

Cyberian Outpost

(COOL)

had about $27 million in cash and short-term investments, according to its most recent 10-Q, giving it about three quarters of operating cash at its current cash burn rate of $8.6 million per quarter.

ValueAmerica

(VUSA)

has just over 18 months of money at its current burn rate of about $19 million per quarter.

There's yet another option: tinkering with the business model or target market. An online pet retailer may decide to retrench as an urban dog play, says Cassar. One can only hope.

No one is saying that e-tailing is over. But with the bricks-and-mortars catching up and the capital markets looking hostile, consolidation may offer some relief.