Alf's Articles

Climb Aboard The E-Commerce Bandwagon

by Alf Nucifora

With more than six million small businesses in the US, it remains a mystery as to why only a small percentage has elected to exploit the on-line marketplace. A number of the major on-line players, including Microsoft, AOL, Verisign and eBay, provide extensive start-up and hosting platforms for the small business that wants to crack the e-commerce code. With the Internet now firmly established as an integral part of the American home and with broadband fast becoming the preferred connection into that home, e-commerce has now become a revenue source that the average small business, particularly the retailer, cannot ignore. In fact, ecommerce sales in the US alone totaled more than $51.3 billion in 2001 and are projected to grow to $76 billion in 2002.

How Does Yahoo! Do It?

Yahoo! Small Business has been in operation for five years with a subscriber base of 20,000 merchants and a monthly audience of 10 million visitors who touch the small business site. Most merchants who use the service employ fewer than 50 employees and list revenues at $10 million or less. As would be expected, the bulk of the e-commerce action centers around retail and wholesale sales and services, with consumer electronics and specialty goods, particularly apparel, occupying a commanding presence. B2B activity remains sparse although there is no compelling reason why that marketplace, lucrative even for the small business community, should not be more aggressively exploited. According to Bud Rosenthal, Vice-President, General Manager of Yahoo! Small Business, the company's current concentration is on recruiting small businesses that are well established and employee-based, with less emphasis on the small office-home office (SOHO) single practitioner.

To a major extent, Yahoo! and its competitors provide an array of services aimed at establishing a successful front-end operation, i.e. getting the storefront up-and-running and leading customers to the front door. Yahoo! Small Business, for example, offers three primary services that help the small business develop a presence on the web, reach new customers and hopefully close sales:

Get Online... secures a web address (domain), offers an easy-to-use email option for multi-employee business use and provides tools for building a business web site. Costs range from $9.95 to approximately $30 per month.

Sell Online... offers the availability of an actual on-line storefront with attendant features such as referrals for start-up design assistance, provision of shopping cart and secure credit card processing, and access to buyers and customers who are Yahoo! users or visitors (starts at $49.95 per month). Sell Online also offers an auction capability (5 cents per listing plus fees), a classified ad service and a merchant credit card billing and payment program (starting at 2.2% of transaction amount).

Promote and Market Online... gives merchants the opportunity to buy a standard listing ($299 annual fee), and special sponsor listings in the Yahoo! Directory and Yahoo! Yellow Pages ($25 per month).

For all such e-commerce services, the key benefits to the small business merchant derive from association with a well-known, stable on-line global brand as well as the potential customer reach that the brand delivers. Most small businesses will gladly consider paying for the opportunity to be seen in the company of a Microsoft or eBay or better still have access to their massive user audience.

Since most e-commerce facilitators like Yahoo! focus on the transaction and sale of tangibles, particularly within a retail setting, for the service provider, e.g., small business consulting firm, the benefits are less evident, e.g., driving traffic to the site, domain-based email for all employees, email marketing, etc.

Does it Work?

While precise industry data is guarded, merchant churn rate is estimated to be in the 10-20% range which compares favorably with the 35+% rates experienced by cellular phone, cable television and on-line hosting services. For the majority of on-line merchants, the primary benefit lies in gaining access to customer and prospect traffic. Says Allan Schwartz, owner of We Love Macs, and a Yahoo! Small Business merchant, "they get eyeballs to the store." But there are also complaints that most e-commerce facilitators ignore the back end of the transaction, the back office functionality, namely the million and one hidden problems and hiccups that go into running a successful e-commerce operation from helping with customer fraud situations to assisting with inventory management and order tracking. As Rosenthal notes, "We need to present a more holistic approach, and we're working on it." This means that eventually even the smallest and least sophisticated small business will have access to a fully-integrated front counter-back office environment where transactions flow seamlessly and the dollars roll in.

Irrespective of the initial e-commerce hype and the equally hyperbolic and unreasonable gloom-and-doom stories that now surround the issue, the e-commerce horse has clearly escaped the corral and every small business obsessed with increasing revenue stream would be ill advised not to investigate the potential that this opportunistic channel has to offer.