E-BUSINESS SPECIAL REPORT
The 7 Deadly Sins of Online Selling

The e-commerce sector's recent successes are staggering. Combined sales of Amazon (Nasdaq: AMZN) and eBay (Nasdaq: EBAY) totaled US$19 billion in 2002, according to Forrester Research, and robust fourth-quarter numbers bucked the lackluster offline trend. But the path to those lofty results was paved with the failures of countless dot-coms and brick-and-click firms whose initial online endeavors were unsteady and fraught with errors.

What are the mistakes -- the big ones -- that repeatedly have torpedoed companies online? Here, the E-Commerce Times takes a look at the seven deadly sins that can make or break a company's e-commerce efforts.

1. Backward Priorities

Naturally, much of the focus in online selling concentrates on the front end: the Web site, the presentation of inventory and the customer experience. But the back end, though less glamorous, is the heart of e-commerce, and neglecting it can have dire consequences.

"Much of the cost of e-commerce is tied up in handling, packing and shipping," IDC research manager Jonathan Gaw told the E-Commerce Times. "That's where Amazon has it over everybody. Everything is automated, and [their] cost of handling is lower than everybody [else's]."

After all, business success requires a healthy bottom line -- and nothing skewers an e-commerce balance sheet like inefficient operations that drag every transaction into the red.

2. Single-Channel Thinking

Another problem for many companies is that even though the Internet-boom mantra, "If you build it, they will come," has died on the vine, they still seem to think new e-commerce ventures can exist in single-channel splendor.

Such channel isolation is deadly primarily because it goes against customer expectations. As online commerce becomes more integrated into the lives of multichannel consumers, it also must be increasingly integrated into overall business operations, on equal footing with catalog, in-store and all other transaction channels. Accomplishing this goal is primarily an IT challenge, involving coordinating back-end systems that receive customer data from all angles.

Competition in this regard is brutal. Established brick-and-mortar stores that were slow to embrace e-commerce in the 1990s have swiftly developed multichannel expertise, giving their customers abundant latitude to drag their shopping carts from Web site to printed catalog to physical store. Single-channel competitors may find themselves out in the cold.

3. Falling Behind the Tech Curve

Budgeting for technology improvements is also an issue. Everyone knows IT budgets have been squeezed hard, and nobody is recommending big-bang installations of brand-new data systems anymore. But technology keeps evolving, and customers will never grow less demanding. Indeed, according to a study published by Forrester Research, the most successful retailers of 2003 will be those that best manage data and technical systems.

So, how can e-commerce companies stay apace of technological developments when money is tight? If in-house expertise is lacking, consulting is always an option, especially for small and mid-size businesses (SMBs), Yankee Group senior analyst Helen Chan told the E-Commerce Times. "SMBs tend to use Web consultants in the initial stages," she said. "On an ongoing basis, outside technical help is relied on less, as consulting shifts to sales and customer support."

4. Lack of Distinction

A company's ignorance of its own strongest qualities can sink it, too -- and identifying those strengths is not easy. "Why do people come to your site?" IDC's Gaw said. "Identify what's core to you. Sometimes that's the hardest part."

The most profound way to distinguish an e-commerce destination is through product selection. "Don't sell commodities," Gaw said. "If you're selling CDs, they better be rare, imported or bootleg."

Unique product niches not only create a corresponding target audience, but also shift the competitive focus away from juggernauts like Amazon, whose economies of scale and buying power give it a powerful advantage in selling commodity products.

5. Poor CRM

Inadequate customer relationship management is another factor that damages loyalty and injures brand integrity. CRM is no place to cut corners. It is a tricky business in which privacy concerns must be balanced against knowing as much as possible about the customer. Furthermore, CRM is an increasingly technical and expensive operation.

The core values of effective customer management are personality and speed. But companies that do not have a lot of capital on hand are not necessarily lost. Automated services are satisfactory and can even be exemplary if they are fast and sufficiently explanatory. E-mail notifications that confirm purchase, order reception, and shipping and tracking information all serve to hold the customer's hand throughout the fulfillment process.

It is important to remember that although consumers are becoming multichannel sophisticates as a group, many individuals still think e-commerce is "a weird thing," Gaw noted. Reassurance and explanation are keys, and the more those elements exist in the shopping (pre-order) experience, the less burdened the CRM machinery will be after the sale.

6. Stagnation

Fresh or moldy? Sparkling or flat? The correct choices are obvious, and they apply to e-commerce sites as much as they do to food. There is a good reason why mail-order catalog companies send out more catalogs than most customers need. Refreshing the product line stimulates desire.

A Yankee Group study determined that SMBs refresh their e-commerce content only eight times per month, on average. But Chan noted that even using off-the-shelf page-building tools, keeping content fresh is doable. "Using FrontPage and other programs, it's not hard to refresh frequently," she said.

Slicker automated solutions are also available for rotating and resurfacing inventory display. Intelligent, personalized displays based on customer data-mining reach toward the high end of online freshness. The key, whether accomplished by hand or machine, is to renew the shopping experience frequently enough to keep customers interested.

7. Ignoring Existing Customers

According to Chan, many companies migrate online to build brand awareness and ultimately gain new customers. While that motivating force might get the ball rolling, it often cannot produce success on an ongoing basis over the long term.

The quickest return on investment in e-commerce is likely to come from customers who are already buying items from a company via other channels. Get the gears moving in an online site by pulling existing customers to the new channel, not by waiting for new customers to find the site.

To that end, Chan recommends putting a new Web site URL in the faces of existing customers. "Don't let the site exist in isolation," she said. "Promote the URL on shopping bags, catalog pages and everywhere else." Of course, this also goes back to the warning about single-channel sites -- they are unlikely to succeed in this day and age.

Admittedly, the e-commerce environment is harsh right now, and tight budgets make competing difficult, especially for new corporations. But by steering clear of the seven deadly sins of e-commerce, companies can vastly improve their chances of surviving and thriving in a changed and rocky -- but still potentially lucrative -- business landscape.