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www.ecommerce-guide.com/news/trends/article.php/719161
By Amy Newman March 20, 2001 With many Internet heavyweights still struggling for profitability, it's natural to wonder if there is a place on the Web for a small business not flush with venture capital funding or a seemingly unlimited marketing budget. One would probably even assume that a small, strictly Web-based venture like SCS Collectibles would be floundering in such an environment. In fact, the four-person e-business has not had an unprofitable month in the five years it has existed. It was certainly an asset that founder Howard Greenspan has a background in direct marketing and a strong interest in collectibles, not to mention an entrepreneurial bend. He took the skills he learned from several years of marketing collectibles at the Danbury Mint and applied them, along with his fiscally conservative nature, to launch SCS Collectibles. SCS Collectibles is funded purely with Greenspan's personal investment. This has certainly made it easier for Greenspan to bear in mind that "if 90 percent of brick and mortar businesses fail, why should it be any surprise that that the success rate for e-businesses is the same?" Key to following this credo for Greenspan has been viewing SCS
Collectibles as simply a direct response venture using a medium other than mail. Bypassing the high costs associated with direct mail has enabled him to reach an infinite number of potential customers at a fraction of the cost.
Three sites currently comprise SCS Collectibles: Poke Corner, a Pokemon gaming site; Gaming Etc., a magic site; and Harry Potterville. Each site has its own look and feel in an attempt to reach different user groups and thus build a community unique to that subject.
In his past five years in the trenches, Greenspan developed a collection of best practices and theories for small business that work best for him and his business. His ideas fall into three categories: marketing, the sale, and fulfillment. Some of his ideas seem like common sense, some are inherent to how direct mail and the Internet operate, and some are concepts he came up with through trial and error.
Marketing: It's All About Yahoo! Throwing lots of money into marketing just to have it result in more traffic is not an option for Greenspan. He requires all marketing costs lead directly into a sale. "I don't care about traffic, I care about orders, but I need the traffic to get the orders," Greenspan said. He is also careful that costs associated with the sale itself never exceed the profits that the sale is supposed to bring in. Greenspan is a big fan of pay-per-click search engines (particularly GoTo.com, since it bills on a per-click basis), but he believes in using them wisely. For example, before paying to have certain terms indexed, he first makes sure that the terms he'll be paying for are terms for which potential customers are actually looking. He then figures out the how much he's making on a given transaction and what the conversion rate is. This ensures he will not spend more getting customers to his site than the profits that the additional traffic will generate. If a search engine cannot provide Greenspan with detailed information about how users are getting to his sites, he will not pay them as much as one that does. While GoTo is the ideal search engine, it doesn't give Greenspan the critical mass he needs. Yahoo! is the search engine he finds his customers turning to most. Therefore, getting listed as close to the top of a given Yahoo! category is key for him. If Greenspan can't get his search terms close to the top, he generally bypasses the companies that offer bulk submissions and instead directly contacts the top sites listed under each term to find out their policies for accepting advertising. Presumably, these sites are high in traffic and have customers similar to the ones he is hoping to gain. While content is important, it's not the lifeblood of an e-commerce site, and according to Greenspan should be viewed as part of the marketing process of converting a user to a customer. While Greenspan agrees that it's important to offer users something besides a store, he does not see the content contributing directly to the bottom line. Therefore, most of the content on SCS Collectibles' sites is self-written or leveraged, with permission, from other sites. All content on each sites links to related items for sale on that site. The Sale: Keeping It Credible To prove their credibility, merchants should be prepared to offer a sales process that runs smoothly and offers good customer service. Accepting credit cards is important, as this has become the accepted way of doing business on the Internet. Many customers will be reluctant to follow through with their purchase if a credit card option is not available. Greenspan notes that of the 30 percent to 40 percent of customers who place an order and say they will pay by check, only 30 percent or 40 percent of those actually send checks. Prominently placing a phone number for customers to call with questions is also important, as is being a member of the Better Business Bureau. Greenspan also has the company's return policy prominently displayed on the site. These are things an e-business has control over. What it doesn't have control over is credibility on the customer end. As great as disputed charges are for customers, they can be deadly for the Internet merchant, since he or she has to ultimately eat the cost. At one point, Greenspan's Pokemon site was resolving as many as ten disputed charges a month. In order to minimize these charges, Greenspan emphasizes the importance of a merchant knowing its typical customer's buying habits. Key pieces of information include:
As a further security measure, Greenspan confirms all international orders and those over $100. He also insists on manually running all credit cards. Fulfillment: Making the Most of Just in Time Greenspan test markets new items by purchasing a few units at retail and seeing how well they sell. For example, in the first several months that Harry Potter merchandise was available, he did not sell a single book, even though he was offering them for sale from the site. Greenspan had none on hand, but if there had been demand for them, the first few would have been picked up at a local bookstore while he contacted suppliers to see who would offer him the best deal. SCS' four employees handle fulfillment. Greenspan constantly crunches the numbers to figure out labor costs on a per-order basis and has allocated expenditures to determine how much time should be spent on the fulfillment end of each site. Most of the other resources Greenspan uses for fulfillment are free (e.g. FedEx pick up and boxes from the post office). He usually doesn't make money on shipping once all fulfillment costs have been factored in. Conclusion Amy Newman, Managing Editor, ServerWatch: - http://serverwatch.internet.com, Web Server Compare: - http://webcompare.internet.com. |
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