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Remove the 'R' From Retailing And You've Just Opened A Second Location

By Mike Asmus

Yes, that would be etailing. Derived from retailing and email, the moniker denotes the pursuit of commerce using the Internet. Perhaps one of the earliest, and still today highest profile etailers is Amazon.com. This West Coast business went online in 1995 selling books and now sells books and a whole lot more from their website.

When the company was in start-up mode six years ago, Amazon representatives liked to boast how little overhead they had - the original promise of etailing being low, or no inventory.

Etailers were supposed to sell goods directly to consumer without the need for expensive warehouses and inventory that saddled traditional retail stores. Yet as Amazon and it's soon to be many imitators realized, the strategy was flawed. To fulfill orders in a timely fashion, Amazon did indeed need warehouses and inventory after all. By the end of last year, after building eight very non-virtual distribution centers across the U.S., Amazon had over $366 million in fixed assets and an inventory valued at $174 million.

Amazon was forging what it thought to be entirely new ground and found only portions of the model, specifically the customer interface, to be new.

Some accounts show that more than 400 "substantial" dot-coms have shut down since January 2000, and nearly half of those were e-commerce companies. (Etoys, anyone?) Still, etailing has proven to be an effective commerce model and continues to grow in popularity. It's estimated that online sales rose some 40 percent in 2001 from a year ago, to over $50 billion in 2001. Ninety three percent of consumers surveyed in a recent study said they have researched products online, and 85 percent of those that have researched have purchased a product online.

Why Not You, Too?

"All retailers should have an Internet strategy as part of their business's marketing plan," said Barbara Long president of E-savvy Communications. "The Web has advantages other mediums simply don't have.

It's a four-color brochure, a Yellow Page ad, a direct mail piece and a part of your sales team all rolled into one."

Long, whose Jefferson City-based company specializes in web marketing and communications, noted that Internet-based applications can project your message, image, products, services, hours and sales pitch to interested customers 24 hours a day. She said etailing also enables the taking of an order, checking of inventory and confirmation of shipping at an extremely low cost.

As with everything in business, Long said planning plays a key role in the success of etailing.

"Prospective etailers need to think about where their company is going to be in one, two, five or 10 years and how the Web fits into that vision," Long said. "They need to determine how the Web will support the growth of their business activities such as sales, general information, cross-promotion, etc, and establish measurable objectives for the site."

Long cited the need for etailers to assess the content they plan to put on the site in the same way they evaluate the products and services they provide. How will it meet the customers' needs and encourage a positive shopping experience? Long noted the value in researching online sales techniques that best suit an existing business and products.

"Etailers must also assess their own ability to respond to e-mails, answer questions, fill online orders, keep the site current and manage customer databases to generate e-mail coupons and newsletters," Long said. "Retailers need to make sure they have the infrastructure in place to provide the online customer with the same quality experience as the in-store shopper."

Once the road map of goals, content, services and content is established, Long said the information gathered should serve as a web solution that grows and expands with the business.

"Every retailer can afford a web presence," she said. "A small business can launch a basic site for under $1,000."

Naturally, the more involved and complex the online business needs, the higher the cost.

Another option is to look at a web hosting, or portal site. Portals can be national in scope, such as Yahoo, or regional, such as UncleWebster.com (Note: The Premier Marketing Group, which publishes the JCBT, is the mid-Missouri franchisee of UncleWebster.) Whatever the path chosen, you pay as you go.

"It's important to keep in mind that a website is not a one-time expense," Long said. "The initial web budget should include site development, hosting and plug-in fees, software and annual domain registration. There also should be an annual budget for ongoing fees, additional service enhancement, new content development, technology and maintenance."

Long said that by planning for growth and expansion, a website can become and integral part of a brick-and-mortar retailer's marketing and sales mix.

"Of course, having a website does not guarantee success," Long cautioned. "It's important for merchants to cross-promote their website in all other advertising vehicles."

Long said an etailer's literal and virtual address should be on business cards, letterhead, invoices, receipts, coupons and all print, television radio advertising.

"Good website search engine placement is essential," Long said. "Retailers should discuss this early in the design process with their web developer."

Long said that even on the Internet, the best advertising is word of mouth.

"Treat the Web as an extension of your business with the same image, brand and quality, and word about your customers" positive online experience will spread," she said.

Ready, Set Click

Amazon.com's brush with reality is their hard earned lessen and a helpful business model template for those who have followed. (Amazon is in fact still in school: the enormous cash outlay to fund the distribution, warehousing and on-hand inventory is a key reason that Amazon, despite $2.7 billion in revenue last year, has yet to turn a profit.) Now that others have worked through many of the pitfalls in online commerce, the waters are quite a bit safer for those contemplating taking the etailing plunge.