CEO's Start-Up Toolkit: E-commerce
Becoming an E-business is cheaper and easier than it used to be -- if you've got the time to do it yourself
There was nothing "dot-com" about Dr. Beex Birdkakes. When Jeff Clemmer bought the Skippack, Pa., specialty-bird-food business in 1995, he began taking orders from loyal customers around the country on a toll-free phone line. In 1998 customers suggested he sell his Birdkakes online. Until then Clemmer had used his computer primarily for making labels and storing files, and he had yet to experience the World Wide Web. But he flipped open the phone book and found a Web developer. The programmers at AB Internet, in nearby West Norriton, created a clean-looking custom Web page that accepts credit-card orders. The project took two months and cost $800. Clemmer is comfortable with the way AB Internet walked him through every step of the process. And though his modest site isn't going to be the next Amazon.com, "it's exactly what I wanted," he says.
Experiences like Jeff Clemmer's are about to go the way of the dodo bird. As easy and inexpensive as Dr. Beex's site was to create, setting up E-commerce has gotten even faster and cheaper, at least in terms of up-front costs. Last fall, about a year after Dr. Beex went online, dozens of dot-coms flocked to the Web offering E-commerce services that were either free or cost a few hundred bucks. Companies like Freemerchant.com, Bigstep.com, eCongo.com, and others are giving small businesses the ability to register their own domain name, create a site, list an unlimited number of catalog items, and -- most important -- sell their goods and services securely.
Analysts say free or cheap online E-commerce services will grab a major chunk of the small-business market. For one thing, many consultants are unwilling to take on jobs as small as Clemmer's Dr. Beex site. And the new services provide more flexibility -- and offer more help in setting up and marketing the site -- than your typical shrink-wrapped E-commerce software does. "Small businesses have little time, little money, and little technical expertise," says Jack Staff, chief economist for IntelliQuest's Zona Research, in Redwood City, Calif. "Clearly, these services are a chief value-add for small businesses."
Just one caveat: "free" E-commerce bears an eerie resemblance to that other mythical beast, the free lunch. Take the case of John Watts, who with partner Doug Puls founded Coast to Coast, an online harmonica store in Ellicott City, Md. Their Web site was basically a company brochure at first. Some of the company's customers wanted to shop electronically but worried about putting their credit-card numbers online.
Despite the growing popularity of the Web, 72% of small businesses don't yet sell goods and services online. With the new "almost free" e-commerce tools, you can join the 28% of companies that do.
So last December, Watts signed up with service provider Freemerchant and created a secure page for collecting credit-card numbers on the company's existing site. Watts processed the transactions off-line with the dirt-world merchant account he already had. Coast to Coast's sales rose from $3,500 in December 1999 to $11,000 in February, and Watts didn't have to pay Freemerchant a dime. In fact, Freemerchant, which proudly claims to have no billing department, makes money when its customers avail themselves of optional services offered by its business partners, including an online bank, an office-supply store, and an E-mail newsletter service.
Look a little closer at Coast to Coast, however, and hidden costs emerge. Watts has spent about 40 hours entering product information and tweaking the site with extra Java-script programming to give it the look he wanted. Because Freemerchant does not yet offer a search function for perusing sales data, Watts also has to scroll through page after page of sales records when he's looking for a particular invoice. Watts says he doesn't mind. "What I'm getting from Freemerchant seems perfectly adequate for what I need it to do," he says. But he does plan to let Freemerchant know what it could be doing better. "I've got a whole list of suggestions," he says, including more flexible design options and a search function for the back-office side.
Many entrepreneurs need more guidance than Watts did. Watts at least had a Web site before he became an E-merchant. According to a report from online business researcher eMarketer, only 28% of small businesses currently sell goods and services online. Until recently, the founders of Treadmill Doctor were among the uninitiated. In late 1998 brothers and fitness enthusiasts Clark and Jon Stevenson started the Memphis-based treadmill-repair shop, which took in revenues of $120,000 in 1999. The brothers thought a Web site that posted answers to frequently asked questions about treadmills would free them from the phones and give customers the information they sought, plus it would give the company a new sales channel for the treadmill lubricant the founders had invented.
So the Stevensons built a site from a template available on Bigstep.com. "In terms of programming, you need no experience -- absolutely none," says Clark Stevenson. The brothers pay $14.95 a month plus 20¢ per transaction for a merchant account through Bigstep business partner Cardservice International Inc. Like Freemerchant, Bigstep doesn't place banner ads on customers' sites, which Clark Stevenson appreciates. He also likes being able to update the site whenever he has the time; many traditional hosting services limit how often a site can be changed.
But once again, hidden costs can emerge, in this case on the marketing front. The brothers quickly found that their site wasn't getting much business from people using Web search engines. So they spent $1,000 to register the site with three different services, ensuring that potential customers who enter treadmill-related keywords will encounter their site.
At this early stage, says Zona Research's Jack Staff, E-commerce service providers are concentrating on attracting a solid customer base of small businesses, the Internet-commerce mother lode. Next the providers plan to roll out additional premium services, like more aggressive search-engine indexing and custom banner ads. Meanwhile, any business, from a treadmill tinkerer to a music maker, can go ahead and add that e to its commerce.
Best of Breed
Even in a category as new as E-commerce service providers, the cream has already started to rise to the top. Researchers at Cahners In-Stat Group, in San Jose, Calif., recently evaluated and ranked 15 of the new providers. "The small-business market used to be a neglected segment," says industry analyst Leslie Shattuck, who coauthored the report. "Now small businesses are beginning to see wide-open opportunities for getting on the Net. With all these companies trying to serve them, they don't have to step out into a black hole." Here are In-Stat Group's top nine companies that provide mass-customization services. The evaluators based their ranking on the quality of each company's site setup, back-office-management capabilities, variety of marketing services, and value-added services.
Source: eBusiness service provider ranking:
Small Business Q1 2000, Cahners In-Stat Group
Don't get carried away with elaborate fantasies of free E-commerce. "The bottom line is, you're going to pay for it one way or the other," says Ken Burke, CEO of Multimedia Live, a Web-development company in Petaluma, Calif., that serves big-name clients like eBay and General Motors. Burke has conducted hundreds of E-commerce seminars for small businesses. He suggests that companies ask the following important questions before signing up with a service provider -- "free" or otherwise.
- Do you have toll-free, 24-hour tech support?
- Can I register my own domain name?
- Can I take my domain name with me when I move on?
- Will you register my site with multiple search engines?
- Will you put banner ads on my site?
- Will I have any control over those banner ads?
- How many templates do you have?
- How often can I make changes to my site?
- Is there a limit to how big the site can be?
- Do you collect transaction fees? What's your cut?
- Will you charge me additional fees if I add more items to my catalog?
- Will credit-card orders be secure on my site?
- How will I retrieve orders?
- Do you handle tax and shipping?
- Do you handle order fulfillment?
In journalism school I took a course called "Multimedia Publishing," in which I learned clunky programs for building Web sites. That was three years ago, and since then my father-in-law, Jim Maxwell, has been asking me to build a site for his heavy-construction business, Hub Foundation Co., in Harvard, Mass. Various distractions (such as attempting to make a living as a journalist) forced me to keep putting him off. Creating a Web site would take too long, I told him. It would probably be ugly, and I wouldn't know how to mount it on the "real" Web, as opposed to a university server. Then I heard about Homestead.com.
Getting over the guilt: Inc. writer turned Web designer finally comes through on her promise.
I tuned my browser to Homestead's very flexible design page, typed in some text, dragged and dropped some clip art, and in five minutes Hub Foundation had a working home on the Web. For a few more hours that evening at Jim's home computer, we fine-tuned it. On it contractors can read about Hub's projects and fill out forms to request bids for future work. They can E-mail Jim for more information. I even pasted on a hit counter, which Jim had always wanted.
The Homestead site editor takes a couple minutes to download, and saving changes to a page takes a while. But when I E-mailed Homestead about a linking problem I was having, a tech-support person responded with a solution within half a day.
Although many sites don't charge more than the standard $70 to register a domain name for two years, Homestead charged Jim $139.95 for the name www.hubfoundation.com. Homestead also collects a transaction fee from merchants selling products. CEO Justin Kitch says the company, which hosts personal sites as well, plans to offer more services, like E-mail marketing, to small businesses in the future. Right now the important thing is that Jim finally has a site to work with. And I feel no Hub-related guilt for the first time in years. --Jill Hecht Maxwell
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