Meet Dot.com’s New Breed: Smart, Sober, Solvent

When Eric Lituchy and wife Gina Ezratty first started talking in the late 1990s about a new dot-com business, the business idea seemed straightforward enough. Sell specialty products over the Internet. Satisfy gift-givers who want to honor life’s milestones for special someones. Top off birthdays, engagements, graduations, and homecomings with delightful deliveries, from marzipan, to filets, to towers of fruit, made possible through a select network of suppliers.

The pair hatched DelightfulDeliveries.com in 1997. One hurdle would need to be addressed, though: Not-so-delightful deliveries. That was the risk in putting a service like this online. The couple knew they were not going to get far with birthday cakes and lobster tails languishing on delivery trucks. Just a few missed or botched deliveries could wreck not only customers’ special days but also the company’s reputation.

Delivery Bliss

Lituchy at first used e-mail to communicate with suppliers and customers. This system soon proved inadequate. Customer orders needed to be tracked and traced, so downed e-mail systems on any side could spell disaster.

He needed a more robust system for vendor and customer management. Soon enough, Lituchy ramped up to an e-store platform. Order changes, vendor fulfillment, and tracking features topped his to-do list. He chose the eOneCommerce application from eOneGroup to keep the front-end and back-end of the supplier/customer pipeline smooth and scalable, as his business grew.

“Without highly efficient systems, we’re in big trouble,” said Lituchy. Sales performance indicates his taking care of the technology to drive customer orders and deliveries paid off. In his earliest days, he said, there were times when activity was so low he feared the site was down. Sales, though, when they did turn the corner, rose fast. By 1999, he pulled in US$30,000. By 2000, he did $200,000, growing to $2.5 million in 2003. Sales totaled $3.7 million in 2004; Lituchy said he expects to do between $7 million to $8 million this year.

Clear Heads

Lituchy’s results are not unique in the newer world of steadfast e-business entrepreneurs. They may drink more Maalox than Merlot, but they are rewarded in the end for hard work and sound planning. Lituchy contracts with two full-time Web developers and a call center in Maryland. His main expenses, he said, continue to be “marketing, Web development, and hosting.”

In contrast with Internet entrepreneurs who spent more than they made before going belly-up, Lituchy kept a clear head.

“We were never jittery in the dot-com bust,” said Lituchy. “The dot-com bust was not related to dot-com but to the stock market. We did some very important things since day one and that has given us strong footing. A smart business plan is vital.”

Such retailers are creating a more dependable environment, too, for online shopping. And shoppers are responding in kind.

Figures vary among research groups on what annual online retail sales tally, but they’re going up. David Schatsky, senior vice president of research at JupiterResearch reported that for 2005 U.S. online retail sales will reach $79 billion versus $66 billion in 2004. As for the coming holiday sales — always a pivotal period for online retailers — JupiterResearch trackers say this year’s holiday online retails sales will reach $26 billion , a year-over-year increase of 18 percent.

Hillary Mendelsohn, retail consultant and author of thepurplebook, an annual directory of the best online shops, said the “old barriers keeping shoppers making online purchases are breaking down.” Better security, shopping incentives such as coupons, and in some instances free shipping are part of enticements drawing more people to load their carts electronically.

“The online shopping experience is improving,” she said. “And more online retailers understand the importance of product appearance, where the customer’s order arrives in a beautiful package, not an old or beat-up box.”

Customized approaches, shopping incentives to return another time soon, and smart packaging appearance all fit under the umbrella of customer care.

Lost in the Stores

“Customers tend to feel lost in stores,” said Mendelsohn, “and I tell store retailers, look, there is this great opportunity for you to dialogue, to go a step further than just ringing up the person’s purchase. I’m always impressed when I see e-commerce sites that pick up on that. They seem to get it.”

BradsDeals.com is a case in point. The co-founder is 25-year-old Brad Wilson, who, as a young University of North Carolina student, loved finding the best deals for family and friends. In 2001, he and his brother decided to launch a Web site to do just that and started making special arrangements with retailers.

BradsDeals is now a grown-up business. In estimating this year’s take, Wilson said, “We may do as much as $50 million in gross sales [for merchants listed on his site] and our share of that is in the seven figures and has been for while. Depending on the metrics, we have grown three times to five times year over year for four years.” [For every sale, BradsDeals receives a portion of the sale, between 5 percent to 15 percent depending upon the transaction.]

The site’s claim to fame is its ability to show people the best deals, with funny and personable product descriptions. Friendly, or what Wilson calls “authentic,” content, is the dominant note. While other site owners define themselves as CEO or president, Brad’s site defines him as “founder and editor-in-chief.” He takes execution of little riffs on his father’s old cashmere coat and entertaining similes on iPods very seriously.

Personality Plus

With his unique take on product presentation, he has distanced himself from shopping-guide sites that spit out prices and data. Wilson believes the difference pays off. “We are basically writing and editing thousands of little stories. But the work results in a much better and trustworthy product.”

The uniquely hands-on approach also extends to his e-commerce platform. He wears the self-determination as a badge of honor. “I have the wonderful good fortune of having been forced by the post-boom business environment, and a natural antipathy for the gluttony of venture capital, to do a great back end from scratch.”

Wilson says he also personally built every iteration of the site’s front end. “It is too important not to. It is the language with which we communicate to our customers.”

Wilson looks forward to the many seasonal communications that will come his way with this year’s holidays around the corner. He predicts hot, in-demand items this season will include “iPods, jeans, anything portable.”

Wilson expects sales activity to be “a little better than last year,” with gas prices subsiding and a slightly longer shopping season with Thanksgiving falling on Nov. 24 this year.

Holiday Gains

Lituchy is also keen on the holiday season, as he normally he gets 50 percent of his sales between Thanksgiving and New Years Day. “We’ve come to learn through years of experience that almost all advertising during this time period has a positive ROI. We can’t advertise everywhere so we choose the area where the potential is greatest and the risks are minimal.”

But even when handling advertising targets with care, Mendelsohn notes that the very best publicity for any online business is word of mouth from customers who are happy with their experience.

Rules for Success

The first annual “purplebook,” named after what the author calls “everyone’s favorite color,” came out in 2003 and caught on edition after edition as a useful Internet guide. Trying to help shoppers avoid wrist cramp and bleary eyes surfing for sites that can give them the right selection, pricing, and convenience, Mendelsohn through the years has sifted through thousands of sites, whittling them down to only the top percent. Mendelsohn, who also has her own marketing consulting firm, shared some rules for anyone intent on making a go of selling online:

  • Think about your returns policy.

    Coping with goods that need returns has been a real on-line shopping barrier, says Mendelsohn. “Customers felt it was too much of a hassle to go to UPS or Fedex to deal with returns.” She said she liked what she saw in a simplified “returns solutions” coming from technology providers, Newgistics. “This is a great example of a service option for vendors who want to eliminate the hassles, and that translates into more consumer motivation to shop on-line.”

    Mendelsohn is referring to Newgistics’ SmartLabel. The customer wanting to return an item works with an information-rich, barcoded, pre-addressed label, sticks it on to the package, and puts it in the U.S. mail.

    (According to the Newgistics Web site touting SmartLabel, within two days of the customer mailing the return, Newgistics intercepts the package. Customer data is scanned off the SmartLabel barcode and sent directly to the Newgistics client.) Once alerted to the customer’s return, the retailer can swing into action promptly to address customer needs.

  • Keep it simple, stupid.

    Mendelsohn urges site pioneers to forget about making big impressions with flashing lights and dancing bears. “This is all about giving customers ease of use and convenience,” she asserted. “That means enabling them to see the stuff easily no matter what system they’re using. I say, ‘Design your site as if someone was using a dial up connection.'”

  • Explain your product.

    Seemingly obvious enough, but there’s no end to sites who write a lot of words yet no easy-to-understand definition of what’s for sale. “Translate,” she said. “You can be funny or serious, as long as you pay attention on how to translate your product so that customers understand instantly what you’re offering.”

  • Give customers a phone number.

    Visitors feel more confident when they see a phone number on any Web site, says Mendelsohn.

Mendelsohn agreed that e-commerce owners are also making visible efforts to show consumers that their sites are protected. In turn, the CEO of Shari’s Berries, sellers of hand-dipped strawberries, would most definitely add security to a list of rules to live by for Internet retailers.

Security Watch

“Security concerns have always posed one of the biggest challenges for online retailers,” said the company’s president and CEO, Kevin Beresford. “Shari’s Berries needed to address this issue and reassure prospective customers that Berries.com is secure.”

Beresford and team went for a model where they pay out an annual subscription to a remote service called HACKER SAFE from ScanAlert.

The green seal of a logo is perched on the Berries.com home page, which tells consumers that the site is constantly scanned for vulnerabilities.

SEM for Good Measure

As for Lituchy, he is also vigilant about ways to know his customers and prospective customers better and better. Lituchy believes that without smart marketing as well as smart technology platforms, you’re doomed. For example, Lituchy said he will spend $1 million in Search Engine Marketing this year. “We continually test different marketing and if it performs well we put a lot of money behind it the following year.”

Such measures as roping in security services and drilling down on search behavior for optimal customer reach are just a few of the signs that the business of e-commerce is peopled by hard workers immune to the excesses of the first dot-com bubble era.

How could it be otherwise? In the annals of history, one is supposed to learn from bad days or else repeat them. Sound planning and smart technology investments indicate that the careless days of the past are over. People like Wilson were determined to plan responsibly, whether naysayers at first believed they had a chance or not.

“We were utterly scoffed at,” recalled Wilson, when he and his brother started the site. Some people said the Web site idea was too little too late. Never mind, said Wilson. “All the venture capitalists I talked to were still looking for their mythical Icarus-like $10 billion idea.” He said they had drifted from funding and fostering the growth of actual businesses. Now Wilson scoffs back. “Pure delusion,” he said. “I saw through it at age 21. The desire to be the anti dot-com crystallized. Having to take the old fashioned approach was the best thing for us. Besides, I’ve read too much [Warren] Buffet to do otherwise.”

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