Corrections or additions?
This article was prepared for the August 8, 2001 edition of U.S. 1
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E-Commerce Lives
Contrarians take note, the Internet as a business
bazaar
is flatter than a deflated balloon. The currently disparaged way of
shopping, however, still offers the convenience of midnight browsing
for last-minute birthday presents and the possibility of building
lots of extra features in the purchasing experience. Where else can
you find an extensive roster of book reviews right next to the volume
you are thinking of purchasing? How else can you compare digital
camera
prices from dozens of stores in seconds?
For those willing to go against the tide and offer their wares or
services online, there is a new, step-by-step how-to. It is “The
E-Business Book” by Dayle M. Smith, published by
Bloomberg
Press, and available both online and in bricks-and-mortar stores
for $19.95.
Subtitled “Reasons for Developing a Real E-Business for Real
People,”
Smith’s book gives the following advice for steering your business
more and more toward the Internet:
The Internet offers a huge potential audience for yourserviceor product. Internet users now number more than 60 million aroundthe world, a number expected to more than double by the end of 2002.What print, radio, billboard, or television promotion approach couldserve up such numbers of potential customers?But there’s a rub — will some of this vast number turn out tobe your customers? According to research by the Gartner Group, fewerthan 1 percent of worldwide Internet users turn out to be consumers,in the sense that they consume anything beyond information by meansof the Internet. Nor should you base your business plan on a likelynumber of “hits” (visits to your website) as a percentageof total Web traffic. The total number of site visits, reportsSuperStats.com,is skewed significantly by the multi-millions of hits each week tothe 100,000 or so porn sites now on the Internet.That vast number of hits must be discounted in any sane estimate ofbusiness hits on the Web. The same must be said for the average amountof time a person browses on the Web, which was widely quoted for1999-2000as 63 minutes per session. When visits to porn sites are subtractedfrom that average, by some expert estimates it drops by almost half.You should also revise downward the total spending on the Web if youwant to subtract the hundreds of millions of dollars spent on themodern-day version of peep shows.No other medium except face-to-face selling allows the userto “click through” to initiate a purchase or othertransaction.The best magazine or newspaper ad misses the opportunity to translatea reader’s interest or approval into a “buy” decision. Directmarketing letters also fail in this regard. There’s no button to pushfor direct connection to the company or merchant. Television and radiosuffer from a similar disconnect, although interactive TV promisesto improve this situation significantly if and when it appears inmost households. Although direct telephone marketing potentiallyallowsthe message receiver to say “yes” in the form of an immediateorder, the almost universal consumer response to this marketingchannelis “Why the hell are you calling me at my home-and at dinnertime!”By contrast, a company’s own Web page and its advertising on otherwebsites contain almost instantaneous access to product or serviceinformation. The “yes” decision on the part of thecybershopperis always just a click away. Not that such clicks come inexpensively.When Borders established its website in 1998 to compete withAmazon.comand barnesandnoble.com, the popular bookseller spent $5 million (andan estimated $20 million in 1999) in large part for click-throughadvertising placed on such Internet portals as Yahoo!.Barriers to entry are remarkably low, at least at thefront-endor Web-visible part of the business. In 1997 Web developmentservicesnecessary to get a smallish company up and running on the Internetwere generally quoted in the $3,000 to $5,000 range. By 1998 thatestimate had dropped to $2,000 to $2,500. By late 1999, most businessmagazines guesstimated an investment of $500 to $2,000 for a passablyattractive and useful website. And by 2000, the cost had dropped tozero, as more than 2,000 Web hosting services offered free help forwebsite construction. (Perhaps in the near future website developerswill outbid one another to pay clients for programming services!)Free? It’s true, and from more than one vendor. Among the newest kidson this most inexpensive of blocks is (Bigstep.com). Backed by suchfirms as Sun Microsystems, the Washington Post, and Newsweek, thisinnovative service is designed to get small companies up and runningon the Web quickly and for free. The nitty-gritty of the Bigstep.comexperience is that after registering, Bigstep lets you create andmaintain a site for free, rather than at a monthly rate of up to the$250 that some site-hosting services charge small businesses. If youwish to register a unique Web address or establish merchant creditcard services, Bigstep says it passes the associated fees ontocustomersat cost, with no markup. And best of all, you’ll have risked nothingbut your spare time to join the E-business party. (The Bigstepbusinessmodel relies on sponsorships and fees for optional services forrevenue.)Assistance with more complicated business sites, especially thoseinvolving database management, is hardly free. But front-end websitedevelopment, whether simple or elaborate, is often misconceived asthe major and most important element of business creation. Thereinlies the biggest problem with many dotcom businesses: nothing standsbehind the website. The much touted “virtual” businesses ofthe Internet quickly find that they rely on someone’s (their own ora partner’s) quite physical bricks-and-mortar reality to fulfillcustomers’orders. In short, the backshop operation is at least as importantas the snazzy website for a profitable E-business.The future of the Internet is much brighter for businessstart-ups and entrepreneurial investment than current track recordssuggest. As we have seen, the Internet has posed at least as manyfinancial problems as profits for many companies. The allure of whatthis network of commerce may become, however, remains undeniable.In sheer size of audience, it is still in its infancy. Much of theindustrialized world has not yet come aboard. Kevin Kelly of Wiredmagazine puts this rising population of users in a memorable way:”The Internet is actually being underhyped. Of all the people[who will be] online in 10 years, only a 10th are online today.”Measured in dollars, the total marketplace represented on the Internetis also expanding robustly. Retail transactions were estimated torise to $40 billion by 2002, up from $8 billion in 1999.Sotheby’s forged a win-win Web strategy by including smallbusinesses. Like many smaller antiques and collectibles sellers,Linda Dawson foresaw little good for her 23-year-old family businesswhen the giant auctioneer Sotheby’s came onto the Internet. Auctionsites on eBay, Yahoo!, and elsewhere had already exposed Dawson’sclients to a wide range of antiques at prices far below those shetypically charged. It was not uncommon for an instore customer todelay closing a transaction, Dawson says, until he or she “hadchecked out comparable prices on the Internet.”She saw, correctly, that the future of her business lay in comingup with a strategy to not only accommodate the Internet but also takeadvantage of it. “We have to do this to survive,” Dawson toldher employees.At the same time, Sotheby’s was revising its own Internet strategy.The common wisdom in the antiques business is that selling is theeasy part — it’s finding the good items to sell that requireshard work and contacts. Sotheby’s wisely realized that the greaterits auction inventory, the larger the Internet audience it couldexpectto attract. And in a variation of the chicken-and-egg analogy, thelarger the audience clicking onto Sotheby’s site, the more sellerswould be convinced to place items for auction at Sotheby’s.The auctioneer’s strategy was clever. Instead of fighting itscompetitors,Sotheby’s opened its website, sothebys.com, to thousands of smallerdealers and auction houses. This big tent approach gave Sotheby’swhat it wanted — an exponentially larger inventory to attractclient interest. At the same time, member companies such as Dawson’santiques firm got what they wanted — a huge client baseconsideringtheir items for sale.The plan succeeded beyond the expectations of Sotheby’s and thoseof members like Dawson. By its first Web auction under the newstrategy,Sotheby’s had enrolled 4,660 member companies and expanded its auctioninventory to 5,000 lots per week, a fivefold increase from previousinventory levels. At the same time, members were discovering a wholenew channel for their businesses. Dawson estimates that E-businessaccounted for 25 percent of her sales in mid-2000 and that by January,2001, that figure had risen to 50 percent.A current quick-read business book is entitled Who Moved My Cheese?It describes how the future has a nasty habit of moving the”cheese”away from all of us in one way or another. Linda Dawson lookedunflinchinglyat where her cheese was headed and, through her E-business strategy,followed it courageously and creatively.Previous StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
