Today, UrbanBaby.com.au is an e-commerce success by anyone's standards, doubling its revenues each year and supporting 10 employees. Managing director Linda Hattersley says the company has about half a dozen serious competitors, plus lots of little ones that come and go.
"We probably receive five e-mails a day from new mums wanting advice about starting an online business and asking where we source our products," Hattersley said from the company's Sydney warehouse.
She and business partner Christine Thompson were new mums themselves when they started the company. They met at a mothers group and discovered they shared a passion for stylish, practical and innovative baby products. Both wanted to return to work, but felt constrained by a traditional bricks and mortar approach. An online business allowed them to develop a successful retail operation while retaining a more flexible lifestyle.
"There are lots of people out there with no experience who want to make a living online, and plenty of people making money out of their lack of knowledge," said Hattersley. She said many Web site developers charge big dollars to deliver another company's templated product, something that most people could easily put together themselves if they knew where to look.
Certainly e-commerce is back in vogue. A significant number of medium to large companies have some level of Web presence and many SMEs are either online or exploring their Internet options. The companies that perform well in the e-commerce space have a clear vision for their online sales strategy. Business people are making the decisions about how the site should look and typically they're outsourcing the technical side of things to a company with expertise in e-commerce."
Debrincat warned that businesses that run their Web service in their own back office often lack the infrastructure to ensure a reliable and secure e-commerce environment, which puts them and their customers at risk.
"We're heading into a period of massive e-commerce growth driven by user demand, but many Australian businesses are going to be caught unprepared," Debrincat said. "We're seeing strong and growing demand from SMEs for hosted e-commerce solutions to enable them to get online quickly and securely, but most are still focused on driving customers to their storefront premises."
Major drivers of e-commerce Affordability of broadband has been a key enabler of e-commerce, with online sales growing in line with domestic broadband take-up. The percentage of Australian homes with broadband Internet connections has risen from four per cent in 2003 to 31 per cent in 2006, while two out of three individuals now have home Internet access.
At the same time, the major banks have been actively encouraging their customers to do their banking online in a bid to streamline their processes and reduce costs. Online banking has played a major role in developing confidence in e-commerce since consumers who have had a positive experience with internet banking are more like to make online purchases.
According to the Australian Bureau of Statistics, the number of people who shopped online grew from just seven per cent in 2000 to 31 per cent in 2005. Interestingly, the proportion of people making online purchases jumps sharply when age and income are taking into account.
While 23 per cent of those earning $40,000 per annum made purchases in 2004-05, this rose to 73 per cent of those earning $120,000 per annum or more.
Cornering the youth market One of the challenges for e-commerce retailers is overcoming the obstacles to making an online sale. Not only are some consumers still reluctant to provide credit card details online, but 45 per cent of adults don't even have a credit card (Reserve Bank 2006).
That number is obviously even higher amongst the youth market, most of whom are very comfortable with the Internet and more likely to shop online, but lack the means. These consumers might have a debit card and are likely to use Internet banking, which is why Melbourne company Centricom has teamed up with Unisys to develop a system that allows consumers to transfer funds directly from their bank account to a retailer's account.
Known as POLi (Pay Online), the solution is already supported by the major banks including ANZ, Commonwealth, NAB, Westpac, Suncorp, Bankwest and Bank of Queensland, with Adelaide Bank and St George soon to come on board.
POLi works by taking the consumer from a retailer's shopping cart to their online banking portal where they log in as usual within the bank's secure environment to authorise the transfer of funds. POLi populates the transaction with details of the merchant and purchase amount, recording the Internet banking receipt number as proof of purchase for the merchant and sending a receipt back to the customer.
With advantages such as higher security, real-time authentication, instant receipting, automated reconciliation, integrated reporting, minimised dishonours and reduced customer repudiation, POLi is expected to prove popular with both merchants and consumers.
Centricom's chief executive, Simon Warner, said online debit systems have received strong endorsement from the Reserve Bank for being much more secure than credit cards and far cheaper for merchants.
"POLi is completely secure because the transaction actually occurs within the bank's own environment. It operates in real time and allows the consumer only to spend available funds. This is particularly good for teenage shoppers, some of whom have previously run up substantial credit bills by purchasing items via SMS," he said.
Empowering SME e-commerce Another way in which financial institutions are playing a major role in encouraging e-commerce is through their provision of services to customers. Some Australian banks are exploring the possibilities around offering packaged e-commerce Web sites to business customers to ease their transition online.
Not only would this allow these institutions to create an online community of their business customers, but playing such a role would help to cement the relationship and reduce customer churn.
This is already happening overseas with companies like British Telecom, which has reduced turnover on its broadband plans by over 80 per cent after offering low-cost e-commerce facilities to its business customers.
Online communities such as that created by BT have the potential to evolve into digital shopping malls, providing consumers with a portal to a broader range of products and services than they could access from a single retailer.
Integrated shopping malls A good example of this is the way Telecom New Zealand has brought together leading retailers from around New Zealand to create an online shopping mall that caters for everything from books to perfume and bikinis to mountain climbing gear.
Ferrit.co.nz was launched in November 2005 by Telecom NZ as a natural extension of its Xtra broadband and Yellow Pages businesses. General manager Ralph Brayham says it was an easy step to move from being a directory service to a shopping mall, providing an online presence for over 120 retailers with no up-front capital cost for the merchant.
"We offer an investment base and development base that retailers can leverage to get their products online. Since they only pay us when they sell something, it's a no-brainer for the retailers," he explained.
"New Zealand is very underdeveloped in relation to online retailing, particularly when compared to the UK and the US. We have just 1.1 million households and 4 million people, but the same breadth and depth of product choices as any English-speaking country. Given our small population, it's difficult for retailers to think about making the capital outlay required for an e-commerce Web site."
Even though much larger than NZ, Australia is in a similar position when compared with other developed nations, so ferrit.co.nz offers a model that might well be exploited there.
Until very recently, ferrit.co.nz didn't have a shopping cart, so if a customer wanted to buy an iPod, socks and a CD, they had to click through to the individual retailer Web sites and make separate purchases. However, the company introduced an integrated shopping cart in November which can bundle multiple purchases from different merchants into a single transaction.
"We can now place all three products into one shopping cart and make one charge to the purchaser's credit card. But it shows up on their statement as three individual items from three merchants to help them track their spending," he said.
Very few companies offer this level of multi-retailer service anywhere in the world, US-based Shop.com being a notable exception, but Brayham believes that other malls will quickly follow their lead.
"This model is very challenging technically, but it offers a great experience for the shopper and the retailer. Established merchants like Amazon will struggle to adapt their technology to this approach, but we had the advantage of starting from scratch."
Brayham says their biggest challenge is in the area of market development, with less than 0.5 per cent of NZ retailers online. "In other countries, the level of online representation is typically 6 to-10 per cent or higher, so we have a lot of ground to make up. We are investing heavily in education to grow the market and encourage other players to offer a level of competition."
eBay offers low cost entry Of course, the biggest e-commerce phenomenon around the world is eBay, which boasts 193 million members worldwide, including around 3.5 million Australians.
According to AC Neilsen, 52,700 Australians use eBay as a source of income, including 17,567 businesses that rely on eBay as their primary or only sales channel and 35,133 that use the online marketplace as a secondary source of income or channel for their business.
eBay offers the benefits of low overheads and an established customer base, with the potential to reach a global market.
However, recent moves by the Web site to increase the cost of selling goods on eBay could encourage more established retailers to start developing their own Web sites and building a stronger online presence for their business.
Giving power back to consumers eBay's latest venture to win widespread applause has been the introduction of Shopping.com, a global price matching Web site that detects each visitor's country of origin and automatically directs them to a local site.
Shoppers can search for products in a wide range of categories, comparing features and prices before clicking through to the Web site of their chosen retailer to conduct the transaction. The site also provides useful links to manufacturer sites, eBay listings for similar products and even links to Choice evaluations relevant to the product search.
Price comparison engines such as Shopping.com or GetPrice.com.au allow shoppers to compare offerings from a selection of merchants before making a buying decision.
They focus on the three criteria of most interest to consumers - price, availability and delivery - putting more power into the hands of consumers. The cost of these comparison engines to the retailer is surprisingly low, and they have proven to be enormously effective in driving traffic.
In Germany, where eBay has only been in operation for just over three years, 18 per cent of all Deutsche Post packages are now sourced from eBay. While this kind of data is not tracked in Australia, eBay's obvious success here makes it reasonable to assume that a similar proportion of packages have an association with the site.
Emerging technologies The emergence of more feature-rich technology will also drive new capabilities and functionality on e-commerce Web sites. The next release of Microsoft Vista and Internet Explorer 7.0 will offer far more multimedia capabilities, as will the Web V2 as it comes online over the next 12 to 18 months.
Already some progressive sites offer early indications of what these emerging technologies will offer, such as 3D views and live demonstrations via streaming video to highlight the features of high-value products like cars and real estate.
Of course, these kinds of facilities are more bandwidth intensive and will need to be supported by increasingly higher data speeds. For example, some cities in Germany are being wired with 50MBps links in preparation for these more demanding types of applications and Australia must inevitably follow suit if we want to stay in touch with leading edge trends.
Combining clicks and mortar While some retailers have embraced the Internet with open arms, bricks and mortar malls have been fearful of e-commerce because they believe it allows consumers to shop from home and avoid going to the store.
However, eCorner's Debrincat believes there is enormous potential for traditional shopping malls to leverage the power of e-commerce to their advantage.
"People like the Internet because they can access information about the features, pricing and availability products. But in a lot of cases they still want to see the product and hold in it their hands before they buy it.
"Companies like Westfield or independent malls like Macquarie can use the Internet to extend their range and quality of services to streamline and improve the shopping experience."
Debrincat pointed to the severe traffic congestion that gridlocked major shopping malls like Macquarie Centre and Roselands in Sydney in the days leading up to Christmas last year.
"Instead of putting people through the unpleasant experience of fighting traffic jams and driving around for an hour looking for a parking space, these companies could use the Internet to allow shoppers to research their purchases online, place orders from the shops they want to visit, and then book valet parking for the length of time they wish to stay.
"If mall owners create the right kind of e-commerce solutions, rather than discouraging people from shopping at their centre, they can attract people by offering a better quality shopping experience."
As UrbanBaby.com.au's Hattersley will attest, it's the quality of shopping experience that brings customers back.
"We focus on driving traffic to the Web site and then backing it up with fast delivery and quality service. Our customers love our Web site and the products, so we have a very high conversion rate. And as we continue to grow, we know it's critical that we maintain our service levels and still ship products within 24 hours.
"Other sites often make customers wait weeks for delivery so we need to keep that point of difference."
"We probably receive five e-mails a day from new mums wanting advice about starting an online business and asking where we source our products," Hattersley said from the company's Sydney warehouse.
She and business partner Christine Thompson were new mums themselves when they started the company. They met at a mothers group and discovered they shared a passion for stylish, practical and innovative baby products. Both wanted to return to work, but felt constrained by a traditional bricks and mortar approach. An online business allowed them to develop a successful retail operation while retaining a more flexible lifestyle.
"There are lots of people out there with no experience who want to make a living online, and plenty of people making money out of their lack of knowledge," said Hattersley. She said many Web site developers charge big dollars to deliver another company's templated product, something that most people could easily put together themselves if they knew where to look.
Certainly e-commerce is back in vogue. A significant number of medium to large companies have some level of Web presence and many SMEs are either online or exploring their Internet options. The companies that perform well in the e-commerce space have a clear vision for their online sales strategy. Business people are making the decisions about how the site should look and typically they're outsourcing the technical side of things to a company with expertise in e-commerce."
Debrincat warned that businesses that run their Web service in their own back office often lack the infrastructure to ensure a reliable and secure e-commerce environment, which puts them and their customers at risk.
"We're heading into a period of massive e-commerce growth driven by user demand, but many Australian businesses are going to be caught unprepared," Debrincat said. "We're seeing strong and growing demand from SMEs for hosted e-commerce solutions to enable them to get online quickly and securely, but most are still focused on driving customers to their storefront premises."
Major drivers of e-commerce Affordability of broadband has been a key enabler of e-commerce, with online sales growing in line with domestic broadband take-up. The percentage of Australian homes with broadband Internet connections has risen from four per cent in 2003 to 31 per cent in 2006, while two out of three individuals now have home Internet access.
At the same time, the major banks have been actively encouraging their customers to do their banking online in a bid to streamline their processes and reduce costs. Online banking has played a major role in developing confidence in e-commerce since consumers who have had a positive experience with internet banking are more like to make online purchases.
According to the Australian Bureau of Statistics, the number of people who shopped online grew from just seven per cent in 2000 to 31 per cent in 2005. Interestingly, the proportion of people making online purchases jumps sharply when age and income are taking into account.
While 23 per cent of those earning $40,000 per annum made purchases in 2004-05, this rose to 73 per cent of those earning $120,000 per annum or more.
Cornering the youth market One of the challenges for e-commerce retailers is overcoming the obstacles to making an online sale. Not only are some consumers still reluctant to provide credit card details online, but 45 per cent of adults don't even have a credit card (Reserve Bank 2006).
That number is obviously even higher amongst the youth market, most of whom are very comfortable with the Internet and more likely to shop online, but lack the means. These consumers might have a debit card and are likely to use Internet banking, which is why Melbourne company Centricom has teamed up with Unisys to develop a system that allows consumers to transfer funds directly from their bank account to a retailer's account.
Known as POLi (Pay Online), the solution is already supported by the major banks including ANZ, Commonwealth, NAB, Westpac, Suncorp, Bankwest and Bank of Queensland, with Adelaide Bank and St George soon to come on board.
POLi works by taking the consumer from a retailer's shopping cart to their online banking portal where they log in as usual within the bank's secure environment to authorise the transfer of funds. POLi populates the transaction with details of the merchant and purchase amount, recording the Internet banking receipt number as proof of purchase for the merchant and sending a receipt back to the customer.
With advantages such as higher security, real-time authentication, instant receipting, automated reconciliation, integrated reporting, minimised dishonours and reduced customer repudiation, POLi is expected to prove popular with both merchants and consumers.
Centricom's chief executive, Simon Warner, said online debit systems have received strong endorsement from the Reserve Bank for being much more secure than credit cards and far cheaper for merchants.
"POLi is completely secure because the transaction actually occurs within the bank's own environment. It operates in real time and allows the consumer only to spend available funds. This is particularly good for teenage shoppers, some of whom have previously run up substantial credit bills by purchasing items via SMS," he said.
Empowering SME e-commerce Another way in which financial institutions are playing a major role in encouraging e-commerce is through their provision of services to customers. Some Australian banks are exploring the possibilities around offering packaged e-commerce Web sites to business customers to ease their transition online.
Not only would this allow these institutions to create an online community of their business customers, but playing such a role would help to cement the relationship and reduce customer churn.
This is already happening overseas with companies like British Telecom, which has reduced turnover on its broadband plans by over 80 per cent after offering low-cost e-commerce facilities to its business customers.
Online communities such as that created by BT have the potential to evolve into digital shopping malls, providing consumers with a portal to a broader range of products and services than they could access from a single retailer.
Integrated shopping malls A good example of this is the way Telecom New Zealand has brought together leading retailers from around New Zealand to create an online shopping mall that caters for everything from books to perfume and bikinis to mountain climbing gear.
Ferrit.co.nz was launched in November 2005 by Telecom NZ as a natural extension of its Xtra broadband and Yellow Pages businesses. General manager Ralph Brayham says it was an easy step to move from being a directory service to a shopping mall, providing an online presence for over 120 retailers with no up-front capital cost for the merchant.
"We offer an investment base and development base that retailers can leverage to get their products online. Since they only pay us when they sell something, it's a no-brainer for the retailers," he explained.
"New Zealand is very underdeveloped in relation to online retailing, particularly when compared to the UK and the US. We have just 1.1 million households and 4 million people, but the same breadth and depth of product choices as any English-speaking country. Given our small population, it's difficult for retailers to think about making the capital outlay required for an e-commerce Web site."
Even though much larger than NZ, Australia is in a similar position when compared with other developed nations, so ferrit.co.nz offers a model that might well be exploited there.
Until very recently, ferrit.co.nz didn't have a shopping cart, so if a customer wanted to buy an iPod, socks and a CD, they had to click through to the individual retailer Web sites and make separate purchases. However, the company introduced an integrated shopping cart in November which can bundle multiple purchases from different merchants into a single transaction.
"We can now place all three products into one shopping cart and make one charge to the purchaser's credit card. But it shows up on their statement as three individual items from three merchants to help them track their spending," he said.
Very few companies offer this level of multi-retailer service anywhere in the world, US-based Shop.com being a notable exception, but Brayham believes that other malls will quickly follow their lead.
"This model is very challenging technically, but it offers a great experience for the shopper and the retailer. Established merchants like Amazon will struggle to adapt their technology to this approach, but we had the advantage of starting from scratch."
Brayham says their biggest challenge is in the area of market development, with less than 0.5 per cent of NZ retailers online. "In other countries, the level of online representation is typically 6 to-10 per cent or higher, so we have a lot of ground to make up. We are investing heavily in education to grow the market and encourage other players to offer a level of competition."
eBay offers low cost entry Of course, the biggest e-commerce phenomenon around the world is eBay, which boasts 193 million members worldwide, including around 3.5 million Australians.
According to AC Neilsen, 52,700 Australians use eBay as a source of income, including 17,567 businesses that rely on eBay as their primary or only sales channel and 35,133 that use the online marketplace as a secondary source of income or channel for their business.
eBay offers the benefits of low overheads and an established customer base, with the potential to reach a global market.
However, recent moves by the Web site to increase the cost of selling goods on eBay could encourage more established retailers to start developing their own Web sites and building a stronger online presence for their business.
Giving power back to consumers eBay's latest venture to win widespread applause has been the introduction of Shopping.com, a global price matching Web site that detects each visitor's country of origin and automatically directs them to a local site.
Shoppers can search for products in a wide range of categories, comparing features and prices before clicking through to the Web site of their chosen retailer to conduct the transaction. The site also provides useful links to manufacturer sites, eBay listings for similar products and even links to Choice evaluations relevant to the product search.
Price comparison engines such as Shopping.com or GetPrice.com.au allow shoppers to compare offerings from a selection of merchants before making a buying decision.
They focus on the three criteria of most interest to consumers - price, availability and delivery - putting more power into the hands of consumers. The cost of these comparison engines to the retailer is surprisingly low, and they have proven to be enormously effective in driving traffic.
In Germany, where eBay has only been in operation for just over three years, 18 per cent of all Deutsche Post packages are now sourced from eBay. While this kind of data is not tracked in Australia, eBay's obvious success here makes it reasonable to assume that a similar proportion of packages have an association with the site.
Emerging technologies The emergence of more feature-rich technology will also drive new capabilities and functionality on e-commerce Web sites. The next release of Microsoft Vista and Internet Explorer 7.0 will offer far more multimedia capabilities, as will the Web V2 as it comes online over the next 12 to 18 months.
Already some progressive sites offer early indications of what these emerging technologies will offer, such as 3D views and live demonstrations via streaming video to highlight the features of high-value products like cars and real estate.
Of course, these kinds of facilities are more bandwidth intensive and will need to be supported by increasingly higher data speeds. For example, some cities in Germany are being wired with 50MBps links in preparation for these more demanding types of applications and Australia must inevitably follow suit if we want to stay in touch with leading edge trends.
Combining clicks and mortar While some retailers have embraced the Internet with open arms, bricks and mortar malls have been fearful of e-commerce because they believe it allows consumers to shop from home and avoid going to the store.
However, eCorner's Debrincat believes there is enormous potential for traditional shopping malls to leverage the power of e-commerce to their advantage.
"People like the Internet because they can access information about the features, pricing and availability products. But in a lot of cases they still want to see the product and hold in it their hands before they buy it.
"Companies like Westfield or independent malls like Macquarie can use the Internet to extend their range and quality of services to streamline and improve the shopping experience."
Debrincat pointed to the severe traffic congestion that gridlocked major shopping malls like Macquarie Centre and Roselands in Sydney in the days leading up to Christmas last year.
"Instead of putting people through the unpleasant experience of fighting traffic jams and driving around for an hour looking for a parking space, these companies could use the Internet to allow shoppers to research their purchases online, place orders from the shops they want to visit, and then book valet parking for the length of time they wish to stay.
"If mall owners create the right kind of e-commerce solutions, rather than discouraging people from shopping at their centre, they can attract people by offering a better quality shopping experience."
As UrbanBaby.com.au's Hattersley will attest, it's the quality of shopping experience that brings customers back.
"We focus on driving traffic to the Web site and then backing it up with fast delivery and quality service. Our customers love our Web site and the products, so we have a very high conversion rate. And as we continue to grow, we know it's critical that we maintain our service levels and still ship products within 24 hours.
"Other sites often make customers wait weeks for delivery so we need to keep that point of difference."
No comments:
Post a Comment