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This article was prepared for the August 8, 2001 edition of U.S. 1
Newspaper. All rights reserved.
Contrarians take note, the Internet as a business
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
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
Press, and available both online and in bricks-and-mortar stores
Subtitled "Reasons for Developing a Real E-Business for Real
Smith’s book gives the following advice for steering your business
more and more toward the Internet:
or product. Internet users now number more than 60 million around
the world, a number expected to more than double by the end of 2002.
What print, radio, billboard, or television promotion approach could
serve up such numbers of potential customers?
But there’s a rub — will some of this vast number turn out to
be your customers? According to research by the Gartner Group, fewer
than 1 percent of worldwide Internet users turn out to be consumers,
in the sense that they consume anything beyond information by means
of the Internet. Nor should you base your business plan on a likely
number of "hits" (visits to your website) as a percentage
of total Web traffic. The total number of site visits, reports
is skewed significantly by the multi-millions of hits each week to
the 100,000 or so porn sites now on the Internet.
That vast number of hits must be discounted in any sane estimate of
business hits on the Web. The same must be said for the average amount
of time a person browses on the Web, which was widely quoted for
as 63 minutes per session. When visits to porn sites are subtracted
from that average, by some expert estimates it drops by almost half.
You should also revise downward the total spending on the Web if you
want to subtract the hundreds of millions of dollars spent on the
modern-day version of peep shows.
to "click through" to initiate a purchase or other
The best magazine or newspaper ad misses the opportunity to translate
a reader’s interest or approval into a "buy" decision. Direct
marketing letters also fail in this regard. There’s no button to push
for direct connection to the company or merchant. Television and radio
suffer from a similar disconnect, although interactive TV promises
to improve this situation significantly if and when it appears in
most households. Although direct telephone marketing potentially
the message receiver to say "yes" in the form of an immediate
order, the almost universal consumer response to this marketing
is "Why the hell are you calling me at my home-and at dinner
By contrast, a company’s own Web page and its advertising on other
websites contain almost instantaneous access to product or service
information. The "yes" decision on the part of the
is always just a click away. Not that such clicks come inexpensively.
When Borders established its website in 1998 to compete with
and barnesandnoble.com, the popular bookseller spent $5 million (and
an estimated $20 million in 1999) in large part for click-through
advertising placed on such Internet portals as Yahoo!.
or Web-visible part of the business. In 1997 Web development
necessary to get a smallish company up and running on the Internet
were generally quoted in the $3,000 to $5,000 range. By 1998 that
estimate had dropped to $2,000 to $2,500. By late 1999, most business
magazines guesstimated an investment of $500 to $2,000 for a passably
attractive and useful website. And by 2000, the cost had dropped to
zero, as more than 2,000 Web hosting services offered free help for
website construction. (Perhaps in the near future website developers
will outbid one another to pay clients for programming services!)
Free? It’s true, and from more than one vendor. Among the newest kids
on this most inexpensive of blocks is (Bigstep.com). Backed by such
firms as Sun Microsystems, the Washington Post, and Newsweek, this
innovative service is designed to get small companies up and running
on the Web quickly and for free. The nitty-gritty of the Bigstep.com
experience is that after registering, Bigstep lets you create and
maintain a site for free, rather than at a monthly rate of up to the
$250 that some site-hosting services charge small businesses. If you
wish to register a unique Web address or establish merchant credit
card services, Bigstep says it passes the associated fees onto
at cost, with no markup. And best of all, you’ll have risked nothing
but your spare time to join the E-business party. (The Bigstep
model relies on sponsorships and fees for optional services for
Assistance with more complicated business sites, especially those
involving database management, is hardly free. But front-end website
development, whether simple or elaborate, is often misconceived as
the major and most important element of business creation. Therein
lies the biggest problem with many dotcom businesses: nothing stands
behind the website. The much touted "virtual" businesses of
the Internet quickly find that they rely on someone’s (their own or
a partner’s) quite physical bricks-and-mortar reality to fulfill
orders. In short, the backshop operation is at least as important
as the snazzy website for a profitable E-business.
start-ups and entrepreneurial investment than current track records
suggest. As we have seen, the Internet has posed at least as many
financial problems as profits for many companies. The allure of what
this network of commerce may become, however, remains undeniable.
In sheer size of audience, it is still in its infancy. Much of the
industrialized world has not yet come aboard. Kevin Kelly of Wired
magazine 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 Internet
is also expanding robustly. Retail transactions were estimated to
rise to $40 billion by 2002, up from $8 billion in 1999.
businesses. Like many smaller antiques and collectibles sellers,
Linda Dawson foresaw little good for her 23-year-old family business
when the giant auctioneer Sotheby’s came onto the Internet. Auction
sites on eBay, Yahoo!, and elsewhere had already exposed Dawson’s
clients to a wide range of antiques at prices far below those she
typically charged. It was not uncommon for an instore customer to
delay closing a transaction, Dawson says, until he or she "had
checked out comparable prices on the Internet."
She saw, correctly, that the future of her business lay in coming
up with a strategy to not only accommodate the Internet but also take
advantage of it. "We have to do this to survive," Dawson told
At the same time, Sotheby’s was revising its own Internet strategy.
The common wisdom in the antiques business is that selling is the
easy part — it’s finding the good items to sell that requires
hard work and contacts. Sotheby’s wisely realized that the greater
its auction inventory, the larger the Internet audience it could
to attract. And in a variation of the chicken-and-egg analogy, the
larger the audience clicking onto Sotheby’s site, the more sellers
would be convinced to place items for auction at Sotheby’s.
The auctioneer’s strategy was clever. Instead of fighting its
Sotheby’s opened its website, sothebys.com, to thousands of smaller
dealers and auction houses. This big tent approach gave Sotheby’s
what it wanted — an exponentially larger inventory to attract
client interest. At the same time, member companies such as Dawson’s
antiques firm got what they wanted — a huge client base
their items for sale.
The plan succeeded beyond the expectations of Sotheby’s and those
of members like Dawson. By its first Web auction under the new
Sotheby’s had enrolled 4,660 member companies and expanded its auction
inventory to 5,000 lots per week, a fivefold increase from previous
inventory levels. At the same time, members were discovering a whole
new channel for their businesses. Dawson estimates that E-business
accounted 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
away from all of us in one way or another. Linda Dawson looked
at where her cheese was headed and, through her E-business strategy,
followed it courageously and creatively.
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