Small Businesses E-Commerce Strategies for the Year 2000

I believe a guerrilla attitude is in order as we move into the new millennium. Small businesses, much better than their larger competitors, have the ability to change quickly and take advantage of trends, strengths, and weaknesses. Here are some recommendations I am making for the early months of the coming year. (Why don't you share some other winning strategies with readers via "E-Mail to the Editor" sent to mailto:rfwilson@wilsonweb.com) Some of these strategies I'll be developing future issues of Web Commerce Today. For now, I'll just be sketching the outlines.

1. Find a Niche and Fill It with Excellence

This is one of my main themes. Large companies may have the financial muscle to compete for entire business sectors, such as sporting goods, but to succeed, small businesses must look for niche markets (such as http://www.justballs.com, that focuses only on sports balls), and then fill them with great excellence. By their very nature, the large sector sites are generalists. Small business entrepreneurs can be specialists in their narrow field, and offer much more information, a more focused chat or e-mail discussion community, more personal customer service, and prices almost as competitive as their bigger brothers.

Note the word "excellence." Your website must not just be in a niche, but that niche must be filled with excellent content. If you just offer an average or above average environment, you're ripe for a small business competitor to take customers away from you. You must build rapidly towards such excellence that it will be very difficult for a competitor to match the breadth you offer within your narrow niche. Look at your larger competitors, and watch for gaps in service, in products, in information. Find the weaknesses, and then exploit them to your advantage.

2. Compete on Quality, Service, and Friendliness -- Not Price

While small businesses don't having the buying power to offer the very lowest prices, I'm not convinced that many of your customers care. Yes, you must be sensitive to prices, but you need to charge enough to stay in business over the long term, compared to the desperate short term philosophy of companies that have seemingly bottomless funding. Price is just one shopping element in what your customers are looking for. If you can't offer the absolute lowest price, here's where you must shine: quality, selection, service, and convenience. Niche markets attract individuals who appreciate goods of better quality and variety than typical mass-market offerings. Make sure that your customer service actually delivers what small companies can do best -- be personal, be quick, and make sure you communicate that tried and true philosophy that the customer is always right, even when he's wrong. Big companies communicate their corporate presence, you can communicate personality and friendliness that is extremely attractive, since shoppers prefer to purchase from real people rather than faceless order forms or cold corporations.

3. Create an Inviting Atmosphere in Your Store

The key to success is getting customers to return, since you've already paid the cost of customer acquisition for existing customers. Future sales from these existing customers start to make you money. But you need to work hard to make sure customers want to return. Are you selling only one or two products? Expand to other related, high quality products. Develop an ambience that is a joy to visit. In the physical world, Barnes and Noble's in-store coffee house, overstuffed chairs, and study tables transform the store it into an enjoyable destination spot, rather than merely a shopping stop. Do the same for your own site.

You'll need to work with a graphic designer who can move you beyond the faceless, standard website look to something unique, inviting, and memorable. A very high-traffic site that I use employs blue and orange as their main site colors. How ugly! What have retailers learned about color and purchasing? How do you apply that to your site? Offer a variety of activities, not just shopping. Provide information, question and answer, chat, e-mail discussion, or a bulletin board, links to key sites, online games that relate to your field, jokes, etc. -- several elements beyond the ho-hum product displays. Make your site a fun place to visit, even if you have to hire an artist or marketing specialist to brainstorm with you. Building an inviting atmosphere within your store is an important part of filling your niche with excellence. Then find excuses to invite people back using the e-mail list you're developed from visitors.

4. Capture E-Mail Addresses and Contact Shoppers

You ARE developing this list I hope! This strategy is a no brainer, but I'm amazed at the number of merchants who don't understand the importance of capturing e-mail addresses, even from window-shoppers. Offer something free in exchange for their e-mail address -- free information, a free $10 off coupon, something! The list you develop is like gold. Don't sell it or rent it to others, or you'll lose your customers' trust. Instead use this valuable list to keep in touch, provide information, make your shoppers aware of new products, offers, and bargains. This is probably the single most important marketing technique you can establish, and it grows in value the longer you do it.

5. Set Up an Online Store in Conjunction with Your Local Bricks-and-Mortar Store

If you already have a small retail business, I strongly recommend that you set up an online store in conjunction with it. Don't necessarily sell all your products online. Concentrate on the area that you can leverage to greatest advantage on the Web, i.e., an unfilled niche. Focus! Sure, an online business uses a mail order distribution system that you'll probably need to learn from scratch and master. But you do have your inventory on hand, which means you can offer superior shipping time and customer service, giving you an advantage over merchants using a drop-ship model. You don't need to capture an entire niche. With the huge online market that exists, if you can capture even a small slice, it will contribute to your business's bottom line. Online store set-up prices will typically cost you several thousand dollars, which you'll probably be able to recoup rather quickly if you make this a priority.

6. Analyze the Breakeven Points in Your Business

If you haven't done so already, take time at year's end to analyze the breakeven points in your business. How much can you afford to discount prices and still make an adequate profit. Even though you shouldn't compete on price alone, your prices need to feel to your customers like they're in the right ballpark. Use the year's end to budget increased marketing for your online store. Then you'll have some money allocated as you find cost-effective marketing strategies that are working for you.

7. Focus on Affiliate Program Excellence

Since it's getting difficult to find affiliates that really have an interest in featuring your store, you'll need to work much harder to attract and retain the best affiliates. Don't worry about the hundreds of no-traffic sites that are trying vainly to cash in on the affiliate model. Determine the sites that would be your best business feeders, and contact them individually by e-mail and then telephone. Look at your affiliate commission and payment models. How do they compare with your competition? Offer the highest commission you can. Sending a small thank-you gift at year's end is a way of building loyalty. It's the little things that will make you stand out from the hundreds of affiliate programs out there. Appoint one of your staff members to focus on this area. It's really worth the energy, since the customer acquisition cost for customers who come through a pay-per-sale affiliate route is substantially lower than from any other form of advertising except perhaps your in-house newsletter.

8. Budget for Both Online and Offline Marketing

As you are budgeting for marketing costs, look closely at offline options. While most small businesses won't profit from mass market ads on TV, ads in niche trade and consumer publications can be an effective way to boost online sales. Experiment with classified ads both online and off. Read again Jay Conrad Levinson's Guerrilla Marketing and try some of the techniques he's honed to a fine art.

9. Develop Paid Partnership and Barter Alliances

Small businesses can gain a lot of leverage through both paid and barter alliances with complementary sites. Look for websites and newsletters a similar size to your own, and work out advertising trades. Sites that attract the kind of people you've found make good customers are best. You may need to pay for exposure on a portal site as one of their featured stores -- or is there a way to trade for some of those slots? How about trading small buttons (88 x 31 pixels) or small ads (100 x 100 or 120 x 60) with a complementary site on high traffic areas -- they join your affiliate program and you join theirs. There's no net cost, but a mutual advantage. No-payment trades are widely used. The only way small sites can compete with the big boys is to work together in win-win alliances.

10. Consider Alternatives to Venture Capital Funding

I understand that the opportunity to start a national business is a tremendous lure. But obtaining the money to do so often requires giving away a substantial share of independence, profits, and staying power. Your business plan may require venture capital, but why don't you consider a lower-cost alternative to a niche market. You'll be able to remain in the game longer if you don't have to make constant payments to your backers that drain the business of profits that need to be funneled back into business building. Even though venture capital funded businesses are all the rage, it's not the only pathway to success on the Web.

11. Design for Multiple Streams of Revenue

Many business plans fail because they rely upon a single revenue source. Seek to diversify the income streams. Don't expect too much from banner ad revenue at a time when costs are dropping and will drop even further. By all means, sell banner advertising if your site traffic warrants it, but don't "bet the farm" on banner ads. Seek to develop revenue from e-commerce product sales, ongoing services such as publication subscriptions or site monitoring, and referral (affiliate) income. When circulation warrants it, why don't you offer advertising in your e-mail newsletter, perhaps in partnership with a manufacturer's program. Don't box yourself into one source of income if you can help it.

12. Integrate Fulfillment Software into Your Business

Too many shopping cart systems leave out an order fulfillment component. But if you have to piece together a system by hand requiring re-keying, you lost the time-saving advantage of online sales and introduce errors into your orders. I think the "next big thing" in small business e-commerce systems is integrating an entire package, including purchasing, inventory and drop-shipping management, online sales, credit card processing, order fulfillment, customer service tracking, etc. These packages exist at the enterprise level, but I'm watching for the day they'll be available for small businesses. DydaComp's Mail Order Manager comes the closest, but I don't think they've quite arrived yet. I plan to review a couple systems early next year. Please let me know of systems or components that are working for you.

13. Lower Shipping Costs

In the face of studies that show high shipping costs as a major factor in leaving shopping carts half-filled in the aisles of online stores, an important strategy is to provide a variety shipping options. I recommend offering shipping via the postal service for a low cost alternative, and both ground and next/second day air for those who need products faster. Don't force people to leave the order because your lowest shipping price is too high. If you need to "subsidize" the stated shipping price, do it, so long as the sales price is still attractive.

14. Rewrite Sales Copy to Increase Purchases

What makes people click the order button? A variety of motives. A couple of months ago I spent several days applying the direct marketing principles contained in Ken Evoy's Make Your Site Sell (http://sales.sitesell.com) to my single product offering -- newsletter sales for Web Commerce Today. Study the techniques I used at http://wilsonweb.com/wct/. I ask a question, and try to get people to click on the problem that is most compelling for them. Then I tailor my sales approach to a particular kind of buyers and their special motivations and interests. It has resulted in a substantial increase in the sales rate. I encourage you to adapt my approach to your own single-product site.

If you offer multiple products, such as in an online store, you'll increase your sales conversion rate if you work at rewriting the sales copy for each of your best selling products. Take a look at Land's End (http://www.landsend.com) descriptions for some excellent models. Consider the motivations of the people who might be interested in each product, and write to those motivations. If you need to, hire a copywriter to do this for you. I think it'll pay back your investment quickly in increased sales.

I'm very excited about the e-commerce potential of the Internet. Despite the many high profile sites that will doubtless fail in the year 2000, YOU can be a success. Make very sure your business plan is sound and that you have a clear and compelling Unique Selling Proposition. Then be quick on your feet. Your good ideas today can be easily copied on the Web -- just as you will be adapting the best practices you observe on other sites. Expect your first-mover idea advantage to erode in a few months, so plan to have some new improvements or features in the hopper that can keep you on the forefront of your niche.

I know that Bill Gates is the entrepreneur people love to hate -- and some of his business practices have invited that animosity. But look at what he did. His genius was not in inventing a new product, but his acute vision of future marketplace directions. He purchased technology developed by others, improved and focused it, and then repackaged and marketed it for the coming wave of sales he foresaw. Use your own strengths and peculiar kind of genius to succeed in YOUR field. Just don't wait too long to get started.