AFTER YEARS OF HYPE AND PROJECTION OVER ITS COMMERCIAL potential, it's clear that the Internet is finally having a impact on the way businesses interact. Jeff Bezos, founder of Amazon.com, the superstore, was Time's Man of the Year. Research company Jupiter Communications estimated that $7 billion was spent online during 1999's holiday shopping season. Business to business (B2B) e-commerce transactions amounted to $145 billion in 1999 and should reach a staggering $7.29 trillion by 2004.
But how does all of this relate to our lives here on the North Coast? Are local businesses taking part in the new digital economy?
A visit to the locally focused web directory service, HumGuide, reveals that of 1,331 websites related to Humboldt County in its directory, 581 (44 percent) are listed in the business category. More are added nearly every day. Still, that's only about 16 percent of the 3,600 businesses in the county.
And just because a business has a website doesn't mean that business transactions -- meaning actual sales -- are taking place. A random sampling of the HumGuide list indicates many are brochures providing general information about the company and its products. Yakima's nicely designed www.yakima.com, for example, is focused on providing information about the company's products but makes no attempt at direct sales in spite of a shopping cart button. The Arcata-based company, one of the two largest manufacturers of car-top roof racks in the world, does not compete with its own retailers. The purpose of the site is to refer potential buyers to vendors both online and off.
Then there are websites that are only slightly more than a brochure. The companies might have a graphically pleasing site with an order form attached, but that doesn't mean visitors are buying much online -- yet.
Plaza Design (www.plazad.com), a home furnishings and gift store in Arcata and McKinleyville, does "minimal" online sales, according to owner Julie Fulkerson.
"We are in the early stages. We want our staff to be well trained and familiar with how the operation works," Fulkerson said. So far the store has sold and shipped carved animals, glasses "things that people can recognize easily and feel confident buying."
Whether web sales will grow to become a significant portion of sales remains to be seen. Fulkerson said since one-fifth of the store's mailing list is from out of the area, the site will help serve those customers better.
Bon Boniere (www.bonboniere.com), the specialty ice cream shop in Eureka and Arcata, might seem to have a product difficult to sell over the web. Not so, said Bob Judevine, owner. The store offers hot fudge, caramel corn and fudge candy. And reservations and payments for birthday parties can be made online. There is also an employees-only site where workers can see their payroll records and tax information.
But selling ice cream on the net?
Judevine said it's possible. Technology already exists to pack products in dry ice and styrofoam. But to date, he said, only about 1 percent of his sales come from his website.
Barriers to e-biz
Surveys on consumer habits show that while the Internet has great potential as an avenue for retail sales, certain features are vital to its success -- features still missing from many of the HumGuide sites.
Automated purchasing ability and a sense of security are two important factors in whether a purchase is made. A recent article from Cyberatlas (www.cyberatlas.com) reported that "while Internet users are rapidly becoming online shoppers, purchase failures, security fears and service frustrations are rampant."
Rick Seigfried, who owns and operates Imagemaker, a Eureka web page design firm, says that it is important for "people to be able to navigate" sites easily. He also said many try to make their sites too fancy, increasing the time it takes to load the pages.
"Keep it simple so that it'll load fast, easy to navigate so people can find stuff, and then you have to have something to offer."
The Internet is a new medium with rapidly evolving methods and some traditional "bricks-and-mortar" businesses lack the time and resources to learn the technology. But for many businesses a presence on the web is fast becoming mandatory -- as necessary (and in some cases more profitable) as a listing in the Yellow Pages.
E-biz success stories
Several local businesses illustrate the earning potential of the new medium. They have embraced the web and learned a good deal about using it to their advantage.
Two retail stores, Northern Mountain Supplies (www.northernmountain.com) and Arcata Pets (www.arcatapet.com) have found ways to turn a real profit on their websites. While both stores are thriving in their physical locations, each has found a worldwide market using the tools available to any Internet entrepreneur.
Don Bradner, owner of Arcata Pet, has had his products online since 1994.
Don Bradner, owner of Arcata Pets, has had his site online since 1994, although it was originally to market his graphics software. Bradner was a programmer before purchasing Arcata Pets and has continued to sell his programs through the web. The pet site came in January of 1998 and by May of that year was already producing a profit.
Visiting the site makes it clear that Bradner's software background has influenced his site design. Arcatapet.com is clean, simple and direct. Navigation is logical and easy through links, drop-down menus and searching. Perhaps most importantly, it is clear the purpose of the site is to sell pet items.
The site has many innovative and important features: Each time the home page is loaded a new "special" item is featured right at the top with a link to a secure shopping cart. At the bottom of the home page are links to three third-party sites that verify the legitimacy and security of the Arcata Pet site.
Other features include the opportunity to sign up for an e-mail newsletter that alerts the subscriber of monthly specials and the ability to create an account so that personal information can be stored with the site. This eliminates the need to re-enter the data with each new order. These kinds of conveniences greatly enhance the shopping experience, making it easy and inviting for consumers to buy -- and then return to buy again.
The effort has paid off. Bradner says the site already accounts for 25 percent of Arcata Pet's retail sales. He estimates that percentage to grow to 30 percent this year and 50 percent within five years.
"To keep up with these increases we are working on several infrastructure items, including more bandwidth, more server capacity," he said. Bradner's overall business has risen 30 percent this year, causing him to add two employees at his store, which houses all of the goods he sells over the Internet.
Arcata Pets' success stands in stark contrast to the behemoth Internet enterprises that garner most of the media attention. In fact, while billions of dollars are being raised for and spent on companies such as Amazon, few of the large companies have yet to show any profit. Perhaps in some cases, small is better.
"Most" of these companies, Bradner said, "have one thing in common, which is that they are trying to sell their companies, not their products. Product sales are incidental to the numbers game -- high numbers are necessary to do well" in the stock market. And it is from the rise in stock prices and not from profits that Internet entrepreneurs have been getting rich.
And why aren't these companies producing a profit?
"Almost all of those sites lose money," Bradner said, "and will never make a profit so long as their cost of customer acquisition remains high."
So how does Bradner acquire customers?
"Fortunately, the nature of the Internet is that you can actually do nothing and have a steady increase in traffic," because search engines will automatically find you for some customers, while other web users will hear about you through word of mouth or site-to-site linkage.
"Proactively," Bradner advised, "one can work diligently on search-engine placement, which is what we have done. We hit very well on all the major engines for a number of keywords."
Two years into the black
Eureka's Northern Mountain Supply (www.northernmountain.com) has also been on the web for some time. Northern Mountain, an outdoor equipment outfitter, is similar to Bradner's business in that it is using the web to try to grow retail sales. But it took considerably more time to turn a profit than for the online pet store. Northern Mountain's site went live in 1996 and only in 1998 did it cross the line from red to black ink.
Northern Mountain Supply store owner Scott Sway
watches the activity on the company's website.
Northern Mountain has a fairly well thought out site with good navigation and a secure shopping cart. That's thanks to Seigfried, who designed and maintains the site. It incorporates all three elements Seigfried outlined as being essential to a successful e-commerce presence: A fundamentally clean and simple approach that reduces loading time, relatively easy navigation and a product that people will want -- including, in this case, the largest selection of tents in the world!
Northern Mountain's site also offers a feature store owner Scott Sway contends "is our answer to competing with REI," (www.rei.com), a major retailer of outdoor goods that offers discounts and rebates to shoppers who sign on. Northern Mountain created "MountainClub" and offers discounts on purchase and rental of gear, early announcements of special offers and the promise of discounted excursions from selected tour outfits.
While Sway would not reveal how many visitors the site gets each month, he did reveal the Mountain Club membership numbers in the "many thousands." He claims the website now accounts for 50 percent of the store's retail sales but is wary of how long the growth can last.
"Competition on the Internet is already intense and it is increasing every month," Sway said.
With an estimated 800 million web pages and several multimillion dollar ad campaigns competing for surfers' attention, his concern may be well founded. It has probably contributed to their success that they both started relatively early in the Internet commerce game. Although the web itself was born in rudimentary form in 1993, the flood of big money and big name commercial sites did not begin until 1998. By that time both arcatapet.com and northernmountain.com had been able to establish niches and cultivate an audience.
Maintaining and even expanding their positions will be an ongoing challenge.
The B2B connection
Retail sales on the web are expected to grow exponentially as consumers become more comfortable with issues of security and privacy, use of technology in general and as the online population continues to grow. But business-to-business (B2B) transactions have also exploded recently. They are expected to outstrip even skyrocketing retail sales in dollar volume by many trillions of dollars.
Sun Vallen Floral Farms Webmaster Paul Arebalo says in the near future their customers will have access to an automated ordering system.
B2B transactions allow companies to buy goods and services from each other through the web. Retailers can purchase from manufacturers and wholesalers, manufacturers can purchase from parts makers and materials suppliers, and so on up the supply chain. It is becoming common for large corporations to use the Internet to track sales, purchases and shipping, or to automate purchases and compare prices. And recently, the web has begun to find its way into the small business world as well.
Sun Valley Floral Farm is a well-known and long established Arcata grower that is beginning to use the Internet to serve its customers. The Sun Valley site (www.sunvalleyfloral.com) is an example of the rapidly growing and evolving B2B Internet tool. While only 10 percent of its approximately 500 wholesale accounts are registered with the site, more are expected.
Aside from providing general information about the company and products, the site performs other specific functions like managing accounts with wholesalers. Wholesalers who have accounts with Sun Valley, for example, can log in with an ID and password and access reports on account history, daily specials and price lists.
And the site is still in its early stages of development. Webmaster Paul Arebalo said that within six months Sun Valley customers will have full access to an automated ordering system that will allow them to check inventory, place orders and manage their accounts completely through the web. The payoff, according to Arebalo, will be a tremendous increase in efficiency and convenience for both the company and its customers.
Sun Valley is already beginning to see the results in cost savings and improved communication with customers via the web and e-mail. As they move the rest of their system online, they anticipate a tremendous organizational return on their investment: the ability to handle more customers and a larger volume at reduced cost.
Editor's note: This week's cover story represents just a sampling of how North Coast companies are using e-commerce to expand their business. We are interested in starting a regular column in the Journal that highlights other success stories. Let us know how you are using the Internet. Our e-mail address is email@example.com
ON THE FLIP SIDE OF THE E-BIZ COIN ARE BUSINESSES THAT DO NOT POSSESS a brick and mortar storefront. One such site is www.cosmicgirls.com, a T-shirt sales company run by Buzz Parker.
Parker's office is a tiny space tucked away in the Marsh Commons building in Arcata. Two work tables are covered with papers and computers. Shelves on the back wall are overflowing with hundreds of T's, sweatshirts and accessories in a wide variety of designs, a product line aimed at girls from 14 to 25 years old.
"Our customers have grown up with the web," said Parker. "They're the i-generation -- kids who go on the Internet instead of watching cartoons. Every day we get a batch of folks wanting shirts. We print out their invoices, drop them in a bag and send them off in the morning."
The website is more than a catalog. It is designed like an online magazine with cartoons, stories and record reviews. During busy periods the site averages 1,200 users per day with over 3,000 hits on a peak day. Each visitor spends an average of nine minutes looking around.
"This month we got a plug from Courtney Love in Mademoiselle," said Parker. "She picked our site as one of her top five places to hang out on the web. That created a huge traffic boost. Things kind of went nuts."
The original wholesale line was started in 1993 by Rob Reger and Mat Reid. Selling to boutiques across the country and around the world, the business grew until they had around 800 domestic accounts and more than 100 in Europe and Asia.
Parker and Reger have been friends since high school. They met in art class and silk screened T-shirts together when they were teenagers. Parker received an art degree from Humboldt State University. After graduation he got into web design. He created a website for the monthly music magazine, Rhythmic Review, and worked for a while on a Marie Callender's in-house site that allowed contractors to share construction plans. A year and a half ago he was visiting his old friend Reger and posed the simple question, "What about the web?"
"We launched last February and since then we've had three site revisions; I'm working on a fourth. Last September I started shipping from here; before that I was throwing the orders down there, but it was getting overwhelming. They had enough to deal with on the wholesale end. Now I handle all of the on-line users."
The Kitty Hoody jacket that is available online.
"I also get a lot of contacts from new stores who see the ads," he said. (They run anywhere from 10 to 30 ads depending on the season mostly in mags like Teen, YM.) The ads all have the URL: cosmicgirls.com. From there you can get to all the sites: Cosmic Girls, Yum Pop, Emily and Eleven Eleven, the new men's line.
"The four lines are going great. December was a big month; up into five digits in (online) sales, but March was even better. Courtney's plug had a lot to do with it. And it's growing. I already need a new office with more space.
Parker has just completed a comic book based on Reger's creation, Emily. Parker is working on another site revision, one that will include a Flash section with an interactive tour of Emily's world. Details magazine will have a piece on emilystrange.com in its next edition.
"You get to go through Emily's house with a flashlight finding secret passages," said Parker. "It's kind of like Myst but walking with her through a comic world as she busts stuff up with her sling shot. Her cat's eyes will be looking at you wherever you go.
"Emily is becoming a career in herself. We just came out with a bunch of back-to-school lines of Emily stuff. We had a meeting this week with a book publisher about putting together address books, journals and full-on hard cover book of cartoons.
"The book is going to be rad. It will
open up a whole new market for us going out through book channels and taking
her places we haven't even touched."