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New Zealand's longest-running online daily news and commentary publication, now in its 25th year. The opinion pieces presented here are not purported to be fact but reasonable effort is made to ensure accuracy.

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They spent HOW MUCH on Ferrit?

13 January 2009

Telecom's Ferrit online shopping site has gone belly-up and I doubt anyone is surprised.

What will surprise many however, is the amount of money that has been poured into this white-elephant and the number of people who were employed in the creation and operation of this decidedly "average" venture.

According to reports published today, it cost a gobsmacking $15 million to create the Ferrit site and an even more unbelievable $12 million a year just to keep it afloat.

By anyone's metric, those are incredibly large amounts of money for a website that attracted (at its peak) just 8,000 visitors a day.

Telecom admits that it would require a turnover of $240 million a year just for Ferrit to break even. What the hell were they smoking?

But Telecom isn't alone in such folly.

Remember Flying Pig, NBR's first website and more recently IYomu?

And there are plenty of other online ventures that have had a snot-load of cash poured into them in the belief that they'd spin a profit.

Do none of the people behind these ventures have the slightest clue as to the meaning of the term "market research"?

Do they really believe that "if you build it, they will come"?

If there's one thing I've learned during the 20+ years that I've been working in online systems it's that you've got to offer people a real reason to use your system.

Simply playing "me too" will never work (as IYomU, Ferrit and many others have found to their cost).

Sometimes I despair when I see how much money is thrown down the cyber-toilet by otherwise sensible people who seem to throw all their regular checks and balances out the window when a project has the word "internet" or "online" associated with it.

Most of us thought that this kind of silly folly had had its day in the era of the dot-com boom but it seems that Kiwis are still happy to blow millions of dollars in crazy, ventures that are ill-conceived, poorly designed and badly implemented.

According to the people at BusinessDay, Ferrit was a real reincarnation of the dot-com idiocy. In a story filed by Gareth Vaughan, he says "Working in Fairfax's offices across the road from Ferrit, its staff quickly came to remind me of the excesses of the dot.com bubble I covered in London at the turn of the century".

Other reports indicate that 37 workers have lost their jobs as a result of the Ferrit closure. THIRTY SEVEN? My God! It was just a website for goodness sakes. Did they have people arranging the pixels on every webpage by hand each time a page was requested or something?

Ah... perhaps now we see where the $12 million a year went!

And even now, it appears that the people behind Ferrit really don't get it.

They appear surprised that many of the shops in the Ferrit cybermall are opting to focus on their own websites rather than work through Telecom's.

What made them think that retailers would be happy to pay a commission to Ferrit rather than cut out the middle man as soon as they could?

So what does Ferrit's demise mean to the online shopping scene in NZ?

Well not a whole lot really -- that's because it was never really a major player.

Every morning of every day I still grumble to myself that I must get my finger out and finish my own TM-killer uber-retail system but I'm too busy earning the rent to spend the time/money required. Unfortunately, the real effect of Ferrit's failure will be that those people out there (and I'm sure there are plenty) who do have viable concepts for making very good money from online commerce will find it even harder to get their hands on the necessary startup capital.

The same lard-brains who have backed dim-bulb concepts like Ferrit, Flying Pig, IYoMu etc., will now snap their wallets closed in the belief that the Net is not a good place to invest.

Such a shame because there's a lot of money to be made for whoever gets it right.

Keep the overheads as low as possible -- and that means no "dot-com" excesses.

No flash offices in downtown Auckland, no huge salary packages for executives, minimal staff levels (work smarter not harder), and no constantly patting yourself on the back and saying "bugger the functionality -- just look how *clever* we are".

But most of all -- don't even spend a penny until you have a concept and some kind of killer benefit that will leave your competitors choking on your dust right from day one.

Don't go head-to-head with everyone else in the e-tail market. Create a new market and/or a new model for e-tail that makes people want spend money through your service rather than anyone else's.

Don't follow -- lead!

According to Ferrit's Ralph Brayham, e-tail transactions make up just 0.5 percent of NZ's total sales, whereas in the US and Britain this figure is closer to 10 percent. With this in mind, it's easy to see the target that Ferrit was chasing -- it's just that they chose to tie their shoelaces together before they'd even set out.

I wonder how long before we see the next ill-fated "me too" e-tail megasite launched in a vain attempt to grab that huge e-tail market?

Will it too be named after an animal and if so, will they at least have the honesty to call it something like "Shopping Dog"?

Or will we eventually find someone with the money, the vision and the courage to try something refreshingly new and different and do it properly?

But perhaps the biggest question is whether there will ever be a mega e-tail site in NZ. Might it be that the old analog of the huge shopping mall simply doesn't translate to the Net in any usable way? Maybe the real way to make money from e-tail is to accept this and think "network" and "leverage" instead.

And (like Forest Gump) that's all I have to say about that (for now).

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