[thelist] does anybody make any money with e-commerce?

Sean German seanmgerman at yahoo.com
Thu Mar 14 16:09:00 CST 2002


Does anybody make any money with e-commerce?  In a word, no.

However the important point is not to study the answer, but rather to examine
the question.

Would you ask if anybody makes money with a store front?  Does anybody make
money publishing words on dead trees?  Well, if you're in the business of
building store fronts or making paper, yes.  Just like the people that build
web sites do a good business when lots of people are building web sites.  But
that's not the question.

Think of a web site as you would a store front or sales catalog.  But dude, I
can reach the whole world with my web site, even more than I could reach by
catalog.  Okay, think of a web site as you would a store front on a REALLY busy

How do you make money with a store front, even one on a REALLY busy street?
You have something--goods or services--that the folks who pass by your store
will pay for and pay enough for you to make a profit.  In addition, you need
some additional incentive to pull them in--either lower prices, or convenience,
higher quality goods, a unique product they can't find elsewhere...something to
make your store front stand out from the competition.  Just having a store
front on a busy street will not make you money.

Many folks trying to do business on the web completely ignore the basic premise
stated in the previous paragraph.

* If your plan to attract business by selling below cost, then as your business
grows you will loose more money.  Sure it's a great way to get traffic, but
those bargain hunters will leave as soon as you raise prices.  If you keep
selling below cost, more business only means more loses.

So you charge enough to make a profit.  How do you get business going?  What's
the incentive for the customer to come to you?

* If you use the web to add value with convenience, make it convenient for the
customer!  Think furniture.com.  Great, I can buy a chair from home.  Only when
I buy a chair, I want to know if the seat is big enough for my butt, will my
feet touch the ground without my knees sticking into my face, is it too hard,
etc?  A web site does not provide any convenience over a store, where I can
actually sit on the chair and answer all those questions in a quick moment.

The flip side is a company like UPS.  Being able to track shipments through the
UPS web site is convenient for the customer, not just for the company.  Another
example is 800-flowers.  When sending flowers across the country it’s
convenient to deal with a national provider rather than trying to track down a
local florist in an area with which I am not familiar.

But the real killer ap for e-commerce is

* If you offer a product or service folks want but cannot get anywhere else,
they will give you business.  (Build the better mouse trap!  Pie in the sky!)
This is where most companies of the web boom failed.  Taking an old product and
selling it through your web site is NOT NOT NOT a new product.  Would a store
that sold only light bulbs succeed in your local mall?  No?  Then a site that
sold only light bulbs won’t succeed on the web.  (Bulbs.com is now The U.S.
Netherlands Flower Bulb Information Center.)

The flip side, say it with me, EBay!  When I wanted to replace the Strawberry
Shortcake record my girlfriend lost years ago, I couldn’t just pop down to
Tower Records.  EBay offered a service I could not get elsewhere.

This aspect of e-commerce is key because you can create new services with the
web that could not exist otherwise.  Example?  Apartment referral services.
(Folks in San Fran, NYC, Boston will know what I’m talking about.)  Old way:
pick up the local paper a get a list of apartments that WERE available.  Ads
are due in to the paper 3-4 days before publication.  Hay, even I could  tell
you Enron was going bust…if you asked me 4 days after they declared bankruptcy.
 New way: you get an email or visit a web site and get real-time up-to-date
listings filter for your preferences.

Another example: discount stock trading.  Maybe my stock broker can’t make
money on my IRA with a couple thousand dollars and only occasional
trades—especially when I’m only paying 10 bucks a trade, and I call in several
times a day for quotes and news.  But if he sticks it all in a server so I
don’t have to monopolize his time just so I can figure out how set I’d be if I
had put all my Bar Mitzvah money into Microsoft 15 years ago…then maybe he can
make some money off me.

So, does anybody make money with e-commerce?  No, you can’t build a business
out of just having a store front on a busy street.  You still need an actual
product or service to sell.

Does anybody make money using e-commerce as part of the big picture?  Yes they

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