George Matyjewicz
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The Emperor’s New Suit
Parable of the New Economy
“There once were many
companies (“dotcom’s”) who convinced people (called
“investor’s”) that they possessed magic cloth (called “the
Internet”) which had the wonderful quality of being
invisible to any man who was unfit for their caliber of
business or unpardonably stupid. And so the investors
came, and they lined the streets with money, and everybody
partied as these dotcom’s continued spending big bucks.”
“Then came that little boy along the parade route who said
“But he has nothing on at all.” And his father added “good
heavens! listen to the voice of an innocent child.” And
all the people shouted in unison “but he has nothing on at
all.” That made a deep impression upon the investment
world, for it seemed to them that they were right. So they
cut off funds, and the dotcom’s thought to themselves “we
must bear up to the end.” And they walked with still
greater dignity, as if they carried the train which did
not exist.”
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My
most humble apologies to Hans Christian Anderson and the classic
“The Emperor’s New Suit,” but that parable seemed to speak of
our new economy. This past holiday season, sales at brick and
mortar retailers were down, but online sales were fifty percent
higher than the previous year. Still many dotcoms are failing –
140 this past year according to a “60 Minutes” segment entitled
“Dotcom Millionaires.”. Challenger, Gray & Christmas' projection
is quoted often, that dotcoms lost 31,056 jobs. Yet there is no
mention of the fact that the Internet created some 2.3 million
jobs in the past seven years (that’s a 1.4% unemployment rate).
Or that a major portion of the 16,345 companies funded in the
past five years were Internet related. In 1999 alone, more than
1,700 dotcoms were funded alone, according to
PricewaterhouseCoopers .
So what are the real issues facing online businesses? Manage
your business, find customers, have a product mix that customers
will buy, sell products, service customers, have adequate
security, ship goods and collect for goods sold. Funny thing –
the same issues facing brick & mortar stores! The major
difference between the two channels is that online companies
neglect that one most important ingredient – MAKE A PROFIT!
While we have examined these issues in the past, there are some
that are very important if you are going to survive and prosper
in the coming years. Let’s examine customer service, security
and payment methods and managing your business.
Customer Service.
One of the greatest
innovations available online is a “live person” technology which
allow you to service your customers while they are at your site.
For example, let’s say I went to your site looking for a unique
gift for my son. I could ask you for suggestions, and you could
ask me questions about my son’s lifestyle, occupation and
interests which would help make recommendations. You could then
select some products, and show them to me online. Most of the
questions you ask could be “canned” whereby you select a
particular menu item (on your end), which passes the questions
to me. Once I am satisfied, I purchase. Or, if we can’t get
answers online, you could have me click on a button which
connects us via telephone!
Most surveys taken now all indicate that customer service is one
of the major ingredients for customer retention. I personally
experienced live person technology this past Christmas. I wanted
to purchase a particular Lenox china pattern and found Murphy’s
Department Store (Oklahoma) who had the particular pattern.
Since I tried three other stores to no avail, I wanted to be
sure they had the pattern in stock before purchasing. They had a
live person link powered by Human Click which I tried and was
able to chat with a person, even though it was 9:00 PM my time
(8:00 PM). I confirmed that they had the goods and they could
ship before Christmas, so I ordered. They also followed up with
a telephone call within an hour of placing the order, as one
particular item (of the eight I ordered) wasn’t in stock. Now
that’s service! And they are not one of the big guys – a smaller
store like most of giftware retailers.
Security and Payment
Methods.
While a lot of the security issues are perceptions and media
hype, there are some real concerns. But they are no different
than your brick and mortar store, and everybody can be hit with
security issues. The U.S. Postal Service had a major theft of
money orders, which started showing up at retailers through the
holiday season Creditcards.com was hacked , and 55,000 card
numbers were held hostage for $100,000. When the extortion
attempt failed, the hacker posted the card numbers on the Web.
The company has since put up a Web site where merchants and
customers can check for fraudulent transactions. Egghead.com
(EGGS) announced that its system was breached by computer
crackers in the week before Christmas. The online bandits may
have made off with 3.7 million credit card numbers, according to
a warning Egghead delivered to credit card companies. There was
even one site that explained how to defraud supposedly safe
payment methods like PayPal!
Any wonder why consumers are leery about giving out information
online?
How do merchants provide adequate security measures? One of the
major problems all of these security breeches had was the fact
that they kept all the confidential data online for any hacker
to access. A better approach would be for the consumer to give
his or her information one time to a service provider, and the
merchant has no access to that information. There are payment
services online now that provide that convenience – e-Gold and
Standard Reserve do that now. With each the consumer completes
an application, and deposits funds into their account, When they
purchase from a merchant, they are linked to their individual
account, via a secured payment screen. Only the consumer knows
the account number, and can access that account using a private
password that is known only to them. The merchant never sees any
personal information, and is paid immediately as soon as the
consumer transacts the payment. E-Gold is completely autonomous
and is used online only. Standard Reserve has a completely
autonomous account, and a premier account which includes a
stored value card which can be used at any location that accepts
Plus-based debit cards.
Managing Your Business.
Dotcoms are usually
associated with twenty-somethings running a business for which
they have no idea of how business operate. This past year they
got smart and started hiring the “gray hairs” who had business
knowledge. And that seems to be working. “Clicks and mortars”
i.e., brick and mortar stores who have a site, have other
issues. Usually they have no idea how the Internet works, and
depend on the knowledge of folks who design Web sites, but may
not have retail experience. So they end up with another
disaster.
Use common sense with every part of your business – online or
off. Listen to the advice of others, but if it goes against your
instincts, don’t follow the advice. Just because “everybody” is
using credit cards online and “it’s the only way you will
increase your business” don’t believe it, especially if you sell
the type of merchandise that can be easily ripped off, i.e.,
music, software, downloadables, etc. Don’t create an online
store with the expectation of gaining a boatload of business. If
it makes sense, do it. If you manage your business, find
customers, have a product mix that customers will buy, sell
products, service customers, have adequate security, ship goods
and collect for goods sold, then open an online store. And use
the same common sense ides and tactics that you use to make your
brick and mortar successful.
Managing a business is the same on- or off-line – sales, less
cost of sales, less expenses equals profits. Exorbitant spending
on advertising has proven to be ineffective as was evidenced by
those dotcom’s who spent millions advertising on TV in 2000. If
it makes sense, and it hits your target audience, do it. And be
sure you know your target audience.
Oh yes, and one last important thing: Please Keep Your Suit On!
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