Jigantus.com

I just got back from the CES 2009 show after spending 3 solid days there. The first thing that comes to mind is that it was exhausting! There were over 2700 exhibitors spread out over the size of over 20 football fields in multiple locations.

On top of that, there were no seats for people to sit down and rest. We had to eat our lunch on the floor along side everyone else. In most cases, vendors that we wanted to meet were not grouped by category and were scattered between buildings. Dependent I suppose on how much they were willing to pay for the floor space. So being my first time there, I wanted to see as much as I could so that meant walking, walking and more walking.

The show however was well organized. With frequent shuttles, plenty of staff and security on hand, it was impressive how they managed to move almost 150,000 people from point to point.

Aside from the “exhausting” factor, the CES show is a place where companies can display new technologies, unviel new product launches and to connect with people. From people I talked to, this years show was more subdued, with about 65% of usual attendance and scaled back displays from many vendors due to the economic downturn.

For me, the purpose was to look for new product lines to promote on the web that are complimentary to small and medium sized business needs. As this was a consumer oriented show, I would say it wasn’t hitting the nail exactly on the head but I did find some good leads and met some important contacts

From my perspective, consumer hardware products are evolving to converge with the web. Mobile applications, security systems, gaming, audio video are becoming more connecting the world then ever before. It will come to a point where every movement you make, every photo, video, sound, pulse you leave behind becomes a data point to be crunched, sorted and used to decipher some intelligent way to use to market.

We’re not quite there yet, as all the pieces are not yet aligned. In some ways it will make our lives easier, more efficient but with less peace and privacy.

Businesses that can position themselves to utilize data to make peoples lives easier will have a chance to have a huge impact in the future. Our plan at Jigantus has always been to do just that.

I recently saw statistics on sales from Amazon.com which were impressive.

Barclays analyst Doug Anmuth provides the stats:

Peak items ordered on a single day

2008: 6.3M
2007: 5.4M
2006: 4.0M
2005: 3.6M
2004: 3.6M

Items ordered per second

2008: 72.9
2007: 62.5
2006: 46.3
2005: 41
2004: 32

Peak items shipped on a single day

2008: 5.6M
2007: 3.9M
2006: 3.4M
2005: 2.7M
2004: 2M+

Amazon is a machine, with every one else slowing down, they continue the charge with sales growing year over year even in tough times. Having watched them somewhat closely, I believe there are a few reasons:

Agressive pricing - Amazon is a fierce price competitor on almost all their products. They rotate pricing up and down as they approach certain seasons to gain customers. They offer free shipping on many products which takes the guessing game out of the price when buyers compare prices and builds trust.

Service - I’ve talked about service before, but they go out of their way if there is a problem to fix it. They ship on time and provide tracking or order status details.

Selection - Buyers know that they can go to Amazon for most of the products they may happen to buy, and because they know Amazon has great prices and service, stick to the brand.

Reviews - Amazon has great product reviews, detailed descriptions so buyers don’t have to stray far to identify the product and get prices.

Resellers System - When Amazon is out of a product, they have resellers to step in. These resellers are screened and vetted, ensuring a good customer service experience.

Strategic Partners - Amazon has teamed with specialty players in specific verticals to build brand and offer specialized service and pricing. Leveraging the Amazon brand with the partner shows how influential Amazon really is.

Buyer Savvy - As buyers become more savvy to using the Internet for search and saving money, they are able to better weed out where they can find a place to buy that they trust.

There are many other things Amazon is doing, but offering what buyers want is really the key. With the recession killing sales everywhere else, Amazon grows, which means they have to be stealing business. With over $18 billion in annual sales, they certainly are on to something.

I have been running e-commerce sites for a number of years and have been fortunate enough to have done well. In each of my businesses, right from the start, we have been positive cash flow where most businesses loose money in the first year.

Of course you have to lay out some money and time to get these up and running, but once the ads go out and the site goes live, I was making money. As you can imagine this is a HUGE help to any  business. No need to lay out large sums of cash when you aren’t sure if your concept will work, it takes a lot of stress out of things and allows you to focus on making your offering even better.

Some of my success has to do with the following approach:

Design a scalable business - By putting certain components in place that can adjust to sales in correlation with cost, a business can adjust costs to scale to good times or bad (due to seasonal or economic influences (recession)). These can include things like establishing contracts based on volume with critical suppliers. In down times, this can save you a lot of money and keep you in the game for the long run. At all times, keep your costs low. This is ultimately where the buck stops. Look at all the recent lay offs at high tech start ups trying to extend their lives.

Market right the first time - Jumping out of the gate with the right business model that is strategically priced gives you instant appeal to your customer and a reason for them to try you. This means knowing your competitors and the market habits of the customers you are trying to draw.

Be creative - Offer something unique that differentiates you from the others, better return policies, draws or something else that might appeal to your demographic. (Zappos.com offers free overnight shipping and liberal return policies).

Anticipate - If your company begins to make progress,  anticipate what the competition or the market will do. If you are a success, they will hear about it and react. In both my e-commerce sites that is just what they did. You may start with an edge, but how do you keep it?

In addition, your competitors are restricted by certain parameters which they may or may not be able to change easily. For example, if they are a very large, they will have trouble changing, they may have old technology not easily changed.

Listen to your customer - No matter what, you will get some customers if you market correctly. Once you’ve started, you will earn a lot from your customer, listen to them, learn their pain and develop the solution. This is your bread and butter.

Leverage technology - Wherever you can, technology can allow you to be much larger and more powerful then a traditional business could ever be.

There are still other ingredients to success like marketing efficiently, logistics etc, but the core ideas that I try to follow are above.

When we launch Jigantus.com we will be trying to find a way to do all these things.

So you’ve decided to set up an e-commerce site?

I’ve run a few e-commerce sites of my own, and years ago used to help others to do so. When the Internet started, we charged clients $25,000 minimum to build a site, which was cheap at that time. The back end of the system would be sparse and clunky, but get the job done.

Nowadays, starting an e-commerce site is very easy. If you have a product, you can get up and running in no time. Many software companies offer template e-commerce web sites for very little money usually charged on a monthly basis with no contract required. You can even get a free trial from many of them.

Don’t underestimate the power of these sites. They can handle hundreds of transactions per day and millions in sales with no trouble, I’ve done it. No need to get too fancy unless you are already making millions in profit, in which case you may want something more custom.

The back end features offered are extremely powerful and allow the seller to manage many key functions including:

• tax
• shipping
• customer relationship management
• email marketing
• inventory management
• SEO
• affiliate programs
• coupons
• gift certificates
• automated email response
• customer invoicing
• and more

These features are all easy to use with self service tools that are already set up when you start. You can choose from template designs or have a custom design done by you or by the software provider for an extra fee.

There are also sites that offer template graphic design for very little money like www.templatemonster.com.

Template e-commerce sites can start from as little as $10 per month but allow you to only list a few items. Higher end systems without limit can go up to $150 per month depending on who you go with.

SOME are listed below,

• www.volusion.com
• www.3dcart.com
• http://smallbusiness.yahoo.com/ecommerce/ (Yahoo web store)
• http://www.amazonservices.com/content/webstore-by-amazon.htm?id=hm1 (Amazon web store)

But if you can search the web for many others:

• e-commerce web site
• e-commerce hosting
• e-commerce software
• e-commerce store

Once you select your e-commerce site you will need a merchant account to accept Visa, MasterCard, Discover or American Express. Most banks will have an arm that offers this or go to the web and search “merchant accounts”. You will end up paying a higher rate then a face to face business because of the fraud risk factor of online transactions, but should have no trouble.

Once you get this done, you simply plug in a simple number they give you into the back end of your e-commerce store and you are ready to conduct transactions.

If you want to speed up the process you can sign up for Paypal or Amazon Payments. Both offer easy integration into the site with very little set up barrier. These services are not as elegant and can cost more, so if you can, set up an e-commerce merchant account.

It will take some knowledge of computers and you will have to invest the time into understanding how to load products, manage sales and use the system to execute orders etc. , but it can’t get much easier then it is today.

So should you start an e-commerce site? That’s a future article

Yahoo recently announced that they will be closing Brickhouse by the end of the year.

http://www.crunchbase.com/product/yahoo-brickhouse

Brickhouse is a division of Yahoo where approx 4-6 people work for 4-6 months on a short term project, hoping to create something new and exciting.

Obviously, it didn’t prove it’s value. Yes was a good idea in “theory” but it is often difficult to force something to happen, vs letting it happen.

Ideas  just strike you, and there are a lot of lightening strikes that hit everyone. Usually it has to do with an experience that happens to them and in turn they come up with a solution.

Whether it succeeds or not depends on the persons execution, and other business factors such as, is it big enough, timing, competition etc.

Innovation comes from everywhere and people of all different skills and backgrounds. Many don’t make it for various reasons but the key is, people try. Something is bound to work its way to the top. These become companies like Facebook, Myspace, Craigslist, Youtube and Twitter to name a few.

VC’s “spray and pray” and hope that an idea that sounds good, will make it. So home growing your own, is difficult.

I like the competition aspect that Amazon and Facebook took.

Facebook created fbFund, a $10M seed fund focused on enabling innovative and engaging applications on Facebook Platform.

http://www.facebook.com/pages/fbFund/40962810690

“We provide the following benefits:
* Funding: Receive $25k-$250k non-recourse grants
* Mentorship: Learn best practices and receive valuable feedback from Facebook engineers and other fbFund developers. Get immeasurable benefits that come with introductions to potential investors.
* Marketing: Receive press attention at f8 and Facebook Developer events.”

This competition just recently closed and it resulted in a number of innovative ideas for Facebook. The money provided incentive to build something (building things are cheaper these days) and gave Facebook users more applications to play with. Making the Facebook experience better for its users is key to growing and maintaining interest.

In the case of Amazon, they recently closed a similar competition for companies using their development products/services. http://aws.amazon.com/

In both cases, great ideas developed, the best rose to the top.

The next big thing is coming, from where or what this will be we’re not exactly sure, but it will. You can’t develop innovation, it just happens.

In the spring of this year, I received an e-mail from Shopping.com advising advertisers that they had modified their algorithm to adjust ad spending. Basically, the system would analyze conversion rates for products and give back advertisers some money based on a set formula. They call it Value-Based Pricing(VBP), here is an excerpt:

“We have recognized that not all clicks convert equally and as a solution we implemented a value-based marketplace pricing model – Value-Based Pricing (VBP).   With this system, our partner team proactively adjusts the charges per click to you by rating the partner against a standard model.  From rating all of our partners’ performance against a standard model, they created a scoring system that accurately and quickly communicates a partner’s performance in terms of average cost of sale and conversion to sale of their overall traffic performance.” 

What this meant to me was, advertisers were spending too much money for their ROI (return on investment) and were loosing. Shopping.com realized this and tried to adjust.

Also, in lead up to the Christmas rush, Shopping.com sent another e-mail advising their minimum bid rates would drop by 15% in an effort to attract more sellers. In previous years, minimum bid rates were raised in an effort to generate additional revenue during the holiday shopping season. Here is an excerpt from this email:

“Effective November 15, 2008 through December 31, 2008 we will decrease the standard CPCs in over 25 categories by 15%!  The 15% decrease will be applied in top holiday categories and sub-categories such as GPS devices, MP3 players, video games, flat panel televisions and musical instruments. ”

Both of these changes by Shopping.com tell me they are having trouble keeping sellers happy on their site. Sellers are only happy if they have a good ROI, or at least even a break even. Based on CPC (Cost Per Click) problems, sites like Shopping.com, Google, Yahoo, MSN loose advertisers because the ad spend is too high vs. the conversion rate. 

As Jigantus.com keeps saying, the “Internet Marketing Model Is About To Change,”  we intend to change it.

I just read an article that says Yahoo will offer Abstracts of Search sometime next year.

What they plan to do is offer a summary of a web page with the link, rather then just links. It is an automated system that extracts key data they think the user is looking for. It will make filtration of the results better for the user.

This sounds like exciting technology, people are essentially lazy so they want faster quality results. That is why Google has done so well.

It’s a big job they are undertaking, so I wish them luck, Google needs a strong competitor while Yahoo needs to improve their search.

Not really, but in an earlier post, I mentioned that Youtube.com was allowing sponsored video ads on its network but there was a concern about sexually explicit videos showing up.

Youtube just recently announced they will be cleaning up content to filter out this problem.

http://www.youtube.com/blog?entry=AEX3_7h40mk

This is a good thing as we don’t want our kids happening into the wrong video. Also, these types of videos would be considered spam, which none if us want. There are other ways to search for sexually explicit material, we don’t need it on a family site.

Hopefully the video filter technology does it’s job!

So the official Cyber Monday starts and we are seeing the Christmas the CPC traffic surge by almost 30-40%, this is huge! Bidding on terms has also increased as retailers become more aggressive.

Sales are starting to roll in for my other e-commerce business, but because we sell mostly business related goods we get increased consumer traffic in areas where we don’t make much money on. To top that off, this is an area also of high returns.

Most business don’t really ramp up their spending getting close to Christmas, with the exception of those trying to blow their budgets near years end, so the Cyber rush, doesn’t work as well for businesses like us.

So we’ll tighten our key word targets and back off from more generic terms for now. We do like acquiring customers, but not as this price

In an earlier post, I mentioned I got a call from an EBay representative that was trying to help us to raise our sales. One recommendation was that we offer FREE shipping on our listings.

As a background, in one of my e-commerce businesses, we are a Powerseller with over 8500 sales done over a period of about 1 1/2 years. We list limited products and don’t really try. EBay was and is a place where we wanted to learn about this market and see if we could make a buck.

In the beginning, we experimented with Free shipping. This would result in us pricing the units higher to include our shipping costs. Then we tried pricing our units lower with shipping as an additional cost.

We found the latter to be more effective. I think this worked well because the price appeared to be lower, and most customers know shipping is a real cost and agreed to buy. Perhaps we came up higher in a sort by price as well resulting in more traffic. Whatever the main reason is, we got more sales by not offering free shipping and charging on the side.

The EBay representative told us that FREE shipping would generate more sales, that one of the most popular search terms was “Free shipping”. EBay is also offering a discount for sellers offering free shipping until Christmas. This would help reduce our fees, as EBay takes fees on the sale price, not the shipping cost. By pricing the unit higher and including shipping, EBay would generate more fees when the discount ended.

So we changed some of our listings to include free shipping and actually lowered the overall take on the revenue to make the pricing sound attractive (we originally were taking in $51.99. With free shipping we charged $49.99).

On another less active listing, we got only 25% of the average sales by offering free shipping while still lowering the overall price. 

Our final result is about the same, not more sales, a bit less actually. So we are doing worse then before.

Don’t get me wrong, I believe customers like free shipping, but as long as you state your ship rates up front, they will be ok with it. In most check out systems that don’t include free shipping, the buyer has to go thru the check out process to find out. Right there, you loose buyers as the process gets longer. Buyers don’t like to do extra work and sometimes sellers charge inflated shipping prices to make up for the lower priced item, so buyers loose trust.

Seeing a set price that includes free shipping takes the guess work out of it.

With the poor result,  I think Ebay is making a grab for more revenue at the expense of merchants. Get sellers used to free shipping and after Christmas take the discount away and make more money overall reducing the sellers take.

According to comScore, eBay had 70.7 million unique U.S. visitors in October, down 11 percent from the year before. EBay is on the decline and is looking for ways to get back their lost revenue but, if you are going to run any good business, you have to make it work for everyone. In our case, their recommendations appear one sided.

When we launch our site, our goal at Jigantus is to make it a win win proposition for everyone.