This article by Stuart L. Adams, Jr. appeared in the 

Louisville Computer News

January 2001

Help Shoppers Get the Goods

by Stuart Adams

By the time you read this, the Christmas 2000 shopping rush will be just a memory. You may still be busy trying to clean up the shredded wrapping paper or trying to find a receipt so you can return a gift that was not too well received. If you're an "e-tailer," however, you may be pouring over spreadsheets and web "hit" statistics to try to determine just what happened to you, for better or worse, with your e-commerce initiative.

The days are long gone, when banks would lend money to any business which had a "dotcom" after its name. Likewise, so (probably) is the silliness of having multi-million dollar TV advertisements run by dotcoms during the Super Bowl, which certainly looked different from other commercials, but left the viewer unsure of either the message being conveyed or the identity of the sponsor. These days, the only thing that counts is results in the bottom line. Duh! It's the money after all.

Early in my legal career, I learned a "rule of thumb" concerning the purchase of shopping centers. The rule, simply stated, was that new shopping centers were grossly over priced and not a good investment. Typically the builder had gone overboard on something and often got in financial trouble. This was often due to their efforts to make up their cost overruns by jacking up the rent, in hopes the tenants would "help them out" unknowingly.

Original shopping center developers typically found out, however, that tenants have brains, and simply would lease elsewhere. Like retail, this was driven by value for the dollar. After the center owners eventually succumbed to continuing negative cash flow from construction loans and no rental payments to make it up, they would often have to seek the protection of the bankruptcy courts. This would sometimes happen more than once, since the first successor was often a bank trying to make up on its defaulted mortgage, so the rule of thumb was that you didn't buy a shopping center until it had bankrupted at least twice. That way you got rid of all the creditors and got a pretty good price. You could then charge reasonable or better rent, and get your center filled fairly quickly. You improved your competitive position by waiting out the less fortunate and snapping up their assets for a "song."

The same may be true in the e-commerce world. There was not enough talent around to satisfy the demand of the start-ups in the gold rush environment of the early e-commerce days. My IT placement friends and clients have sung the blues for a couple of years, simply because they couldn't find enough talent in the U. S. to fill the job postings. Now, however, the hardier e-companies seem to have just enough postings for the placement firms to fill with those who have recently gotten a pink slip from their failed dotcom. Likewise, many new companies are springing up in order to capitalize on the surplus of used computers, office equipment and consumer products left in the wake of failed dotcoms.

This economic Darwinism, the survival of the fittest, is the basis for another couple of truisms. Whenever there is a void, something will move in to fill it. Even in a crowded marketplace, there is always room for a superior merchant. Put another way by Barry Golson, Editor in Chief of Yahoo! Internet Life:

...one silver lining to this year's dot-com shakeout is that a lot of lame sites have been put out of their misery, and many of the online purveyors that remain are scrambling to live up to the expectations of consumers and investors alike.

...Cybershoppers are growing increasingly sophisticated when it comes to this new marketplace, and they want merchants to apply the technology in ways that make sense, not to just wow them. If an e-tail shop loads fast, has a thoughtful selection, is easy to navigate, provides real-time chat with knowledgeable reps, delivers promptly, and handles returns and glitches with dispatch, consumers start demanding that of every site, whether it's a bargain-basement outlet or a luxury department store. Only then do the bells and whistles become important - for offering stunning graphics and audio, or customizing a spree so that a site resembles a boutique where the clerks remember your size and favorite color.

One of the goals of this book is to help you keep from being one of the dinosaurs, which has left its bones to bleach in the sun, having failed to adapt to a changing environment. Many think there is evidence that a great cataclysm caused the earth to cool so rapidly that dinosaurs could not adapt. Surely you don't think the mercurial growth of the dotcoms has no resemblance to this turn of events, looking at the rapid cooling of interest in e-commerce startups. I think there is a lesson to be learned. Not unlike paleontologists, we are still searching for clues to what has happened. Our cycle of change, of course, is still in progress. making it more difficult to analyze.

One thing the dinosaurs didn't have, which we do, is a bevy of statisticians. It seems every twist and turn of e-commerce is recorded and analyzed by several major research companies. That's a good thing, if you're trying to figure out how you are doing or how you might do. Let's look at some of the apparent lessons to be learned so far.

The major overview on this was stated pretty succinctly by Angelo Donofrio in his article, Creating a Customer Friendly Website, in the November/December 2000 issue of Beyond Computing:

An attractive website will only get you so far. What users really want is a customer-friendly site that provides the information they need quickly, easily in a readily digestible form, and in a format that is inviting and enjoyable.

If you're looking for an easy way to get the high points of e-commerce analysis, visit the e-tailing group, (www.e-tailing.com) an e-commerce consulting firm for online merchants. Their site contains summaries of the research efforts of many organizations, as well as helpful articles on a number of related subjects. Quoting several studies, the e-tailing group reports the biggest problems e-tailers had during the 1999 holiday season were:

1. Out-of-stock merchandise

2. Late (or no) delivery

3. Poor Website performance and navigation

4. Outrageous or disguised shipping rates

Citing another study, the e-tailing group reports:

I don't know of too many businesses which wouldn't like 35% more sales from their existing marketing efforts. The numbers above don't necessarily mean you have to spend more to get more. In fact, all you have to do is spend wisely. Probably much of the money spent by e-tailers was spent on "glitz" that was either ineffective, or worse.

Immersant is an Internet consulting and development firm which tries to measure and test what makes a web site customer-friendly. As their website (www.immersant.com) states:

When potential customers visit your Web site, the quality of their online experience will determine whether or not they do business with you. And if they cannot easily accomplish what they want to do on your site, they may revert to calling your service center instead. But they may also take their business elsewhere.

Immersant tests the effectiveness and ease of use of sites with hands-on tests, monitoring the reactions of focus group users as they navigate their way around existing sites on which the company is doing research, as well as prototype sites. They also use other methods, such as user surveys and strategic site log analysis. According to Don Hameluck, a senior consultant at Immersant, the following are some guidelines useful in creating a customer-friendly website:

The dotcom shakeout will not just impact retailers, according to Audrey Manring in an article on business-to-business exchanges, written for the November 20th edition of Information Week (www.informationweek.com). She reports that most analysts predict a major E-marketplace shakeout within the next six months, which could eliminate 75% of the existing online E-marketplaces in all sectors. According to Manring:

The anticipated shakeout will clear the field of players with flimsy business models and an overriding interest in the public-relations value of announcements, making room for ventures committed to creating sustainable value for participants and revenue for the E-marketplace itself. Most analysts agree that a handful of E-marketplaces for each vertical market will survive or emerge.

The E-marketplace concept is the basic B-to-B model. By using any one of a variety of software packages and some elbow grease, almost anyone can create such a virtual business-to-business forum. If done properly, this marketplace allows multiple business vendors and suppliers to more efficiently interface with multiple business purchasers online in a structured environment. This should simplify the ordering process for the purchaser, while reducing staffing and ordering costs for both sides. The market should also facilitate payments, order tracking and restocking.

The key, of course, to a successful B-to-B marketplace is being able to induce the right mix of buyers and sellers to join. In order to do this, the integration process must be relatively easy and cost efficient. Many buyers and sellers are involved in multiple markets, testing which one is most productive for their needs. Economic Darwinism is again in play. Standout E-marketplace operators in this arena are constantly searching for value added offerings to keep their marketplace more "sticky" than the competition's.

Some of these E-marketplace operations, such as Covisint in the automotive industry for instance, are responsible for collaborative product design in real time. Others are working on collaborative product scheduling, supply-chain management, and other logistics improvements. All of these efforts are designed to give both side long-term benefits, such as increased sales, new customers, reduced operating costs, decreased delivery time for new products, and a more efficient method of comparison shopping. The bottom line, of course, is that this becomes a major tool to keep up with or beat the competition.

According to InformationWeek (www.informationweek.com) the E-marketplace will account for 60% of online B-to-B transactions by 2004. This is up from approximately 5% in 2000, and is estimated to be worth $1.3 trillion. As business speeds up, the reduced search and ordering time these E-marketplace operations can provide, will become mandatory for large companies, according to InformationWeek. Automation of the process, it is predicted, will eliminate human error, reduce personnel expenses and facilitate reordering and restocking. This again provides a competitive advantage on both sides of the transaction.

The lesson to be learned, once again, is survival of the fittest. In the e-commerce shakeout, you must be the best in at least some area, or you are likely to relive the lessons of the dinosaurs. If you are a customer, shop around. There may be a better price, faster and cheaper deliver, or better customer service offered by another e-tailer. Get the best value for your purchase. Shopping search engines and E-marketplaces are making this easier every day.

If you are a vendor, identify your customers (without unwarranted privacy invasion) and listen to them. Give them what they want in an easy, intuitive and attractively efficient manner. Do what you promise and make it easy for them to search, learn more, track their orders, and comparison shop through your web site to become part of your community of happy customers. If for no other reason, do it so you will not be giving out pink slips to your employees this time next year. If you don't thoughtfully strive to be the best, be assured a competitor will soon be breathing down your neck. They may just replace you in the E-volutionary (sorry about that) chain of life if you have not learned your lessons.

2001 by Stuart Adams. This is the 9th installment in the Author's online book. Your comments and input would be appreciated in helping the Author make this an "organic book," which will continue to grow and adapt to change, just as any business itself must do. E-mail your comments and suggestions to the author at biz-law@juristechnology.com.