THE ESSENTIALS

THE ESSENTIALS

You can’t just open an online store and expect customers to flock to it. Find out if your niche market is one that you can reach through a website. How? Does your niche market have an identifiable need for your web offering? Do they have the wherewithal to pay for it? Is the niche group sizeable, i.e., will it provide enough business to produce the income you need? If the answers are yes, you have found a good niche. Now dig deep within that niche to understand the consumer behaviors that drive it.

Every e-commerce operator should assume that his or her customers are sophisticated shoppers who demand prompt delivery of a product that is exactly as portrayed on their website. The most common mistake made by inexperienced web operators is to fail to be responsive to their customers’ order processing and fulfillment needs. But those services are the very underpinnings of all successful e-commerce ventures — neglect those areas and you have a business catastrophe.

To help in the follow-through, you and your customers must be able to track the status of each purchase. Most new e-commerce businesses, however, fail to integrate this necessary backend support.

Another “must” is to make certain that your customers know that your web-based business will not only deliver a value online that cannot be found offline, but that it is just as responsive with customer service issues as the most well-regarded offline business.

By keeping customer service and product fulfillment as an immediate priority you can build a valuable relationship with your customer. In doing so, you earn that customer’s loyalty. That helps to stem the natural flow of attrition as customers who pursue the lowest price find that the trade-off is a void in the cut-rate business’s customer service department.

Another common problem for new e-commerce businesses is misinterpreting the power of the Web. Yes, a website with the right infrastructure can economically automate transactions. However, the real power of the Web is its role as a relationship-building magnet — through its ability to provide numerous opportunities for interactivity. If you are careless with automated processes — this very real advantage will vanish.

Use your website to provide not only useful and interesting information about your products/services, but also about your entire niche market. The group that makes up a niche market always yearns for more information. They will return time and again to your website if they are appealed to on the basis of their special interests — detailed articles and content-rich advertising specifically targeted to them.

The dot-com bust of 2000 was a failure of business plans; the concept itself has not failed. And while numerous news articles over the last few years detail how various websites lost sales and customer confidence due to inadequate prelaunch planning, there have also been many successes, especially in the small business arena.

WHY GO TO THE WEB?

The Web opens up a whole new market for goods and services. It creates opportunity for a multifaceted arena that offers new efficiencies for sales, marketing, customer service, shipment tracking, inventory monitoring, and many other aspects of the total business model.

Choice has always been the Holy Grail for consumers. Today’s consumers have a wide variety of commerce choices: traditional businesses, mega discount stores, catalogs or direct market mail, and the Web. The Web, taken as a whole, is a powerful medium where consumers browse, research, compare, and then buy online or, after doing their “window shopping” online, make the purchase at a brick-and-mortar business. Businesses that keep in mind the consumers’ desire for choice, and integrate into their website the appropriate means for customer interactions, will succeed.

This being said, the Web will not open vast new markets for every business. However, it can extend a significant degree of power to businesses that recognize how to leverage the efficiencies of this new arena. A good example is 3Com (www.3com.com) which, through its website:

  • Offers products and services to a global audience.
  • Provides many different technical support features online.
  • Offers software downloads including drivers, updates and fixes, which prior to the website would have been mailed to the customer.
  • Offers an online store.
  • Provides an educational center with online courses.

In short, 3Com’s business and customer base didn’t change — the Web changed the way 3Com services its market — it did not create a new market. Still, overall, 3Com’s business is enhanced by its web presence.

Big companies with plenty of technical expertise and buckets of money have always been able to build their own e-commerce systems, complete with a secure server, a high-speed Internet connection, and custom software. Luckily, costly e-commerce barriers are rapidly tumbling allowing any business to have a credible web presence. What was once expensive and difficult is quickly becoming affordable and easy to use.

Look Before You Leap

Established businesses shouldn’t jump rashly onto the e-commerce bandwagon. They must first institute a well thought out plan upon which to build their e-commerce business model. If you neglect this important step, you risk losing your already established identity, your good reputation, and your customers. Two examples of not looking before leaping are the widely reported Toysrus.com 1999 holiday shopping season fiasco and the KbKids’ website problems. According to survey conducted by Robertson Stephens, a leader in Equity Research, Investment Banking and Sales & Trading, in early 2000, 44% of the shoppers surveyed stated that due to their unhappy experiences with KBKids.com, it was unlikely that they would shop on the online toy retailer again. Perhaps if these retailers had scaled down their initial online effort as Bloomingdales.com did, their website and reputation would have fared better.

Both websites have learned from their mistakes. KBkids.com completely redesigned its web operation. But before creating the new website the KBkids.com designers, web producers, and writers conducted surveys and usability studies, participated in conference calls and held one-on-one meetings with KBkids.com shoppers. The result is a new sleek, innovative website with many customer-friendly features along with the functionality and back-office features needed to keep customers happy.

Toysrus.com took another tack — partnering with the etailing giant, Amazon.com. The two companies entered into a ten-year deal that draws on each company’s core strengths. Amazon.com fulfills orders, handles customer service, and uses its expertise in front-end site design to build a powerful customer-support environment. Toysrus.com and parent company Toys ‘R’ Us identifies, purchases, and manages inventory, using its clout to get the hottest toy lineup. Revenues are split, and risks are shared.

The Challenge

Creating a business model for e-commerce starts with the following basic challenge: Can you define your company? Next, can you state your goals for the company? Finally, — within the aforementioned context — can you state what role e-commerce can play in helping your company maintain or change its identity?

Table 1: As this table indicates, online sales are growing steadily
along with the total number of Internet users (148,811,000 in August 2003 to 150,045,000 users in September 2003).
Source: com-Score Media Metrix.
The Top 10 Website Categories as of September 2003
Category Unique Visitors as of August 2003 Unique Visitors as of September 2003 % Change
Retail-Food 8,324,000 9,732,000 16.9%
Weather 38,100,000 41,757,000 9.6%
Sports 48,169,000 52,633,000 9.3%
Retail-Flowers/Gifts/Greetings 23,576,000 25,373,000 7.6%
Entertainment-TV 44,085,000 47,154,000 7.0%
Hobbies-Lifestyles-Food 22,959,000 24,322,000 5.9%
Hobbies/Lifestyles-Home 26,384,000 27,909,000 5.8%
Online Trading 10,739,000 11,256,000 4.8%
Entertainment-Music 62,210,000 65,116,000 4.7%