When e-commerce exploded, we can buy just about anything on the Web. It was to be the “new big thing.” Merchants scrambled to bring every sort of products imaginable online. From books, furniture, and groceries, even cars – name it and the Internet has it.
The Internet made our lives easier. But despite high hopes, those who predicted that Internet would eclipse the brick-and-mortar stores and spell the death of traditional retail could never be more wrong. We still go shopping the good old-fashioned way – by going to a store.
It was, therefore, not surprising that the Internet bubble burst in the early ’90s. The dot-com massacre has shown us that not all products do well on the Internet. Many e-businesses, even those with deep pockets and management prowess, have closed shop because they were not able to match their offerings with the nature of the Internet. They overlooked the fact that some products are simply not meant for the Internet.
If you intend to open an online business, you can avoid the mistakes of other Internet retailers. When thinking of selling a product online, you need to realize that the Internet is not the best medium for every product. To know if your product will do well on the Internet, ask yourself the following questions:
Is it easier to buy your product over the Internet than in a retail store?
The Internet lends itself well to products that are not commonly sold in retail stores and groceries. Take eBay for example. eBay is a success because it provides a venue for online shoppers to find products that may not be easily available in the shopping mall. If you are looking for an Indian silk painting, an art deco lamp, or a rare baseball card, you have a higher chance of securing these items on eBay than in the mall.
However, it doesn’t make much sense to sell on the Internet products that can be bought easily from neighborhood stores. Can a Web site be sustained by selling cigarettes? I don’t think so. Why pay an additional $2 shipping fee for a product you can purchase just about anywhere?
Dog food is another example of a bad choice of online product. Remember the now-deceased sock puppet mascot that was everywhere in the late ’90s selling pet supplies and pet food? Despite heavy advertising by Pets.com, people did not come in droves to buy dog food online. Why buy pet food online and pay extra for shipping costs for a product that every grocery and pet food shop sells? The product’s high shipping costs further hindered people from buying pet foods online. No one was surprised that Pets.com eventually perished.
I don’t mean to say that all products sold by groceries, stores and shopping malls cannot be sold on the Internet. The key is to create additional value for your customers. According to Nick Earle and Peter Keen, in their book “From .com to .profit”, the online businesses who successfully provide value to their customers are those who “know how to build relationships, manage logistics, mesh their channels, and transform their financial capital and cost structures.” In layman terms, you must provide your customers with additional benefits, beyond the basic convenience.
Take RedWagons.com (http://www.redwagons.com), an online store that Tony Roeder started out of his home. He distributes Red Flyer toy wagons on the Internet. While giant toy retailers such as ToysRUs and eToys also carry Red Flyer wagons, his competitors carry only two or three models of the product. To stand out from both his offline and online competition, Tony provided his customers with a wider variety of Red Flyer wagons by carrying the entire product line. His efforts paid off. After three years, his online business surpassed the million-dollar mark last year.
Will you be selling a famous brand-name product?
On the Internet, trust is a key factor. With products seen only through the computer screen, online businesses should entice a high level of trust from the customer. And who can better bring trust than the brand name products? People already know the reputation of the company, have tried their products, and believe that they deliver what they promise.
Tony built his successful e-business on the brand name of Radio Flyer. By selling a brand name product, success came faster and easier for RedWagons.com. According to him, “The “Radio Flyer” name is a known name. It has built a strong business based on trust from many generations of consumers. My grandfather had a Radio Flyer. My parents had a Radio Flyer. I had a Radio Flyer. My child will have a Radio Flyer. It is a known brand. We have leveraged that name because people know that name. They know the product. When we say we’re the Internet retailer of that product, people say “Oh yes, I remember that product. What a great idea.” So we leveraged that name and saw the doors opening for us.”
Of course, home business entrepreneurs like us do not always have the opportunity to sell a brand name. Our own products do not have the kind of brand recognition enjoyed by the big companies. Nor do we have the marketing muscle to develop and nurture a brand. Does this mean that home businesses cannot make it on the ‘Net? Of course not! There are a number of home businesses out there that are doing great business on the Web.
To rise above this constraint, your site must contain all the elements that are needed to create a feeling of trust among your users. You have to make your customers feel confident that they are dealing with a legitimate business, and not someone who will steal their card and money. Fear of credit card fraud remains a top reason why many consumers do not shop online.
In this aspect, even the little things count. You need to use a secure server for the checkout process. The contact information should be clearly placed on every page of your site, so customers know where and how to reach you in the event of a problem. You can also direct customers wary of ordering online to just send out the check or money order to your address.
Clearly state what users can expect when buying from your site. If you do not have expensive software that automatically computes the shipping cost of the order, tell your customers that the full cost will be sent through email. Be honest with your customers. Your company’s return policy should be clearly specified to protect you as well as the consumer.
Is it expensive to deliver?
Shipping is expensive. In fact, studies estimate that shipping amounts to 11 percent of sales for online retailers. Hence, if you are planning to sell on the Internet, you need to make sure that the shipping costs will not price you out of the market.
Many Internet retailers made the mistake of selling products that aren’t suitable for home delivery. Pets.com, for example, thought selling heavy bags of cheap kitty litter online was a good idea. Wrong. Not only did the shipping costs jack up the price, but also there is so little profit margin to start with in kitty litter products. That ultimately killed Pets.com.
In an attempt to attract and build a customer base, some Internet retailers offer low-cost, flat rate or next-day delivery. Free shipping has become more common. Ask yourself whether your business can afford to offer free shipping for your products. Note though that some studies show that buyers attracted to bargain-basement shipping tend to shop around for the lowest prices, make small purchases, and tend not to remain very loyal.
You don’t necessarily have to limit yourself to small items. Even big items do well on the Internet – if it creates such a value in the mind of a customer that he or she is willing to ignore the cost of shipping. Some online retailers adjust their pricing to keep the total cost of the product (including shipping) lower.
Potentially high shipping costs of their bulky and big wagons did not deter Tony of RedWagons.com. While their wagons may be bulky and potentially expensive to ship, they were able to offset this constraint by having the selection and maintaining a high quality of service. “Yes, our products are kind of expensive to ship,” Tony says, “but we cut our margin so we can stay competitive.” He admits that if somebody goes to a big toy store and find an item similar to what they sell, “many times they will find it for less.
“Where we blow everyone out of the water is when he or she gives it as a gift. No one will gift wrap these wagons because they’re too large. But we will gift-wrap them, put a card, and ship them anywhere in the country for the same costs as you would have it shipped to your house. If you go to ToysRUs and get the wagon for less, and have it gift-wrapped, first it would take you about three hours to do it and it would cost you the same amount of money. We have the extreme advantage when you are trying to send it as a gift.” While shipping is a potential turn-off for Tony’s customers, “convenience wise, we can blow the competition out of the water.”
Does the customer touch or need to feel the product?
Some products are simply not suited for distribution over the Internet, particularly those where customers need to experience the product before buying it. Some products are meant to be touched or tried on before customers can be convinced to buy. For a business to thrive online selling these kinds of products, it must first drastically change the buying habits of people. A large e-business may be able to change consumer behavior, but even the Internet has proven that it takes time and a lot of money.
Take shoes for example. When people buy shoes, they want to fit it and walk on it to test how comfortable it feels and how it looks on their feet. Buying shoes online implies that a consumer takes on a greater risk in terms of fit, look and comfort. What may look good on the screen may not necessarily feel good on their feet.
Because of consumer behavior in buying shoes, it is not surprising that shoe online retailers normally experience higher returns than other shops on the Internet. In fact, NFO Interactive finds that 20% of online shoppers returned women’s apparel and accessories, including shoes. As such, well-known brands of shoes (and apparel) are more likely to be purchased online compared to those by unknown or generic brands for the reason that users are already familiar with the products. Fewer unknowns for the consumer, the greater the likelihood they will purchase the products online.
The Web has come a long way from the dot-com bubble in the 90s. Nowadays, you can pretty much sell anything from clothes to food to ebooks — as long as you provide value that will make the customer overlook the inherent disadvantages of online shopping mainly shipping fees and inability to inspect the products up close.
The key rule to remember is that successful online goods are those that carry big profit margins — such as apparel, gourmet foods, and novelty gifts. If your product cannot be sold with a high profit margin, if it is expensive to ship, readily available just about everywhere and does not enjoy brand recognition — you better think twice before creating that web site. Also remember that just because Amazon.com has seen a big success in selling clothes and books does not mean that you will as well. While no one can predict the success of your business, past lessons have clearly shown what works and what doesn’t on the Web.
Recommended Books on How to Sell Online:
- Sell It Online: How to Make Money Selling on eBay, Amazon, Fiverr & Etsy
- Big Ticket Ecommerce: How To Sell High-Priced Products And Services Using The Internet
- The Secret To Selling High Priced Products Online
- Choosing What to Sell Online: A 4-Point Formula for Profitable Product Selection
- Retail Rebellion: How To Start Your Own Online Retail Empire
Category: Online Business