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e-Tail, Boom Or Bust? (Pt2) 28 June 2000 Edition
Previous Edition

FlyingPig and peers. Now I don't profess to have any inside information about Flying Pig so I'm going to address these comments to "generic book/CD etailers" and not Flying Pig in particular.

First let's look at how it should be done:

Cranium.co.nz sells music online and has an excellent reputation with a strong and growing customer-base that has turned the operation in to a very viable online business. What's the difference between operations like Cranium and the other book/music etailers?

Well Cranium takes to its market like a scalpel in the hands of surgeon. It knows exactly what its market is and carves a very neat path between product and consumer. They sell CDs -- but there are no Spice Girls, Backstreet Boys, Steps, Daphne and Celeste titles there. Likewise there are no Beethoven, Bach, Chopin, Barry Manilow, Tom Jones or other names that might be recognisable to mainstream listeners.

Cranium focuses on what many would consider to be a tiny segment of the music market, knowing full well that by doing this it can offer a better service with much lower overheads. It doesn't take a brain surgeon to figure out that we've just described what your all shoppers are seeking: Better Service and Lower Cost.

They also realise that while the local market is tiny, the global market is huge. They're taking a small chunk of a large market (geography-wise).

Now the mistakes others are making:
Unlike the "bricks and mortar" world, economies of scale don't always work well on the Net. Just because your e-tail venture is bigger doesn't mean the cost per sale will fall or the profit margin will be higher.

In fact, if there's one thing that most e-failures share in common it is an propensity to spend large amounts of money -- seemingly just because they can or they feel that there is some unchallenged relationship between money spent and the profits that will be generated.

I see that many e-tailers are gradually coming to the realisation that a dollar saved is worth three dollars earned. It also looks suspiciously as if they either performed no market research in respect to the anticipated sales volumes -- or the research they undertook was flawed. How much money would have been saved if they'd done their homework properly?

The other common factor is a lack of innovation. This is particularly true in the online book/CD marketplace where inevitably there is one major player (losing large amounts of money) which all the others blindly follow like a flock of mindless sheep. Ask yourself... why would you want to duplicate a business model that is proven to lose ever-increasing amounts of money?

Now compare the Flying Pig site with Amazon.com -- see what I mean?

Note also that "the pig" has made the mistake of trying to take a large chunk of what is in reality, a very small market -- New Zealand. Never forget that the Internet is borderless and that, in today's tarrif-free environment, geographical boundaries mean nothing. Who do you think sells more books into the NZ marketplace -- Amazon.com or Flying Pig?

When it comes to innovation (or the lack of it), I suspect the problem is that those with the wallets are very, very far removed from (and maybe even hold contempt) those with the kind of ideas, drive and "smarts" that are needed to build an successful online venture. Most of the e-commerce sites you see on the Web today are mired in 1900's "real-world" analogs.

Just check out all the "Cybermalls", "Superstores", etc.

Admittedly there's a growing evolution towards affiliate schemes which are capable of taking advantage of the networked architecture of the Net in a manner that's not possible with bricks and mortar -- but such leverage of the Net is just a hint of what's really possible if people start using their brains as well as their wallets when developing an e-tail strategy.

Here are some sage words for budding e-tail kings: research, focus, low-overheads, simplicity, innovation, distinctiveness.

I'll elaborate more on those tomorrow when I also tell you why the vast majority of online retail sites represent a big mistake for those who run them.

The INL Site
So far I've not had too much time to peruse this site but most readers who have sent in their comments have said that it's quite nice and possibly some real competition for Xtra, NZoom and The Herald.

What people liked was that the site was quick to load, easy to navigate and had the kind of regional content that the others have sorely lacked.

Negatives include a feedback form that didn't work (permission denied), a seeming inability to bookmark individual sections of the site (as opposed to stories), possible browser incompatibility hassles, and the fact that it looked too much like all the others -- where's the flair?

One point they might want to address is the way they end their news stories with the single word "STUFF." A neophyte might mistake this for an editorial comment ;-)

Keep your comments flowing in.

As always, your feedback is welcomed.

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