E-commerce – Living the Online Dream

With website trade accounting for seven per cent of total retail sales, there's never been a better time to be online. But to really succeed you need to ensure your e-commerce strategy is built around consumer convenience, trust and simplicity - not the latest technological wizardry.

Until he went on the web, Adrian Lee had a happy-go-lucky existence fitting floors at American military bases all over Europe. As part of a two-man band trading under the name of Keswick, his sales were ticking over comfortably at £100,000 a year.

In 1998, he had a go at posting the company on the web. All he got back were questions about holiday cottages – consumers were mistaking him for the holiday town in Cumbria. Undeterred, he changed his trading name to Flooring Supplies and registered ‘wooden flooring’ as a domain. Enquiries have not stopped since.

This year, Flooring Supplies will have sales of nearly £7 million with operations in Germany, France and Spain, as well as a satellite site in Shanghai. ‘We have gone from a single page to 9,000 products and 100,000 pages,’ says Lee. ‘Last bank holiday, we took £60,000 with people spending an average of £750 each.

‘Along the way, we have had loads of hiccups, such as customers not being in and us sending the wrong colour wood. It’s a never-ending learning process.’

Wooden floors are heavy to move around, so guaranteeing free delivery next day on orders of over £350 is a hard promise to keep. ‘We have tried every courier company and they smash more wood than they deliver. So we now hold £1.5 million worth of stock for delivery into the customers’ hands with our own dedicated couriers.’

While the group has thrived, the spend to gain sales is high – both on- and off-line. The group sponsored the last three Big Brother houses and has just promoted itself for the first time at an England football match. Lee is also thinking about offering a slot on Richard Branson’s first commercial space flight for all purchases over a certain value.

But, even though competition for customers is high, lucrative positions in the market can still be found. Last year, Lee set up a trade section on the site, offering competitive pricing directly to builders. ‘We now have 5,500 accounts with no reps at all and are currently doubling sales month-on-month.’

Mass-market phenomenon

Shopping at sites like Flooring Supplies is streaking ahead, according to the latest figures from IMRG. In April, the value of online transactions was up 30 per cent year-on-year. At the same time sales on the high street were falling 1.3 per cent, their biggest drop in a decade.

‘Consumers are voting with their keyboards for the convenience of shopping online with brands they trust that consistently give value and service,’ says James Roper, chief executive at IMRG.

In April, more than seven per cent of all retail sales were on the web, as the 22 million Britons who shop online bought goods worth £1.4 billion, spending an average of £60 each.

Commenting on the figures, Laura Wade-Gery, CEO of Tesco.com, said that it was good to have confirmation that internet shopping is becoming a mass market phenomenon. ‘We see this shift everyday. Whether it is a pensioner logging on for the first time, a family taking out a monthly DVD subscription or a mum signing up for a personalised online diet.’

By 2010, IMRG’s Roper expects 36 million Britons to be shopping online. Sales will be approaching £60 billion, he believes, accounting for 20 per cent of all retail sales.

Extra holiday

In some sectors, such as travel, online purchases are already much higher than average, helping to make 2004 a bumper year for companies like Coast & Country Cottages on the west coast of Wales. It sold 2,500 holidays through its site, taking a total of £1.2 million.

The business has been running for 15 years and at first it looked as if the web would have little impact. When company founders Rachel Thomas and Liz Davies spent £5,000 setting up the site five years ago, they had no responses for three months. ‘It was a lot of money to invest if it was not going to work. By the end of September though, we had sold 50 extra holidays and taken £250,000, so we knew we were on to something,’ says Thomas.

She admits it has been a steep learning curve since then. ‘Don’t be taken in by the technology. Find out what works best for you and never assume that you have got it licked. We test everything out on our husbands, who are not technologically minded at all.’

So far, business has been slower this year than in 2004, in line with the overall decline in the number of people taking their holidays in the UK. However, Coast & Country’s website is the one sales channel that has held up and it now accounts for 70 per cent of business. To catch late bookings, Thomas is building a second site, lastminute-wales.com, with offers not just on her own properties, but a thousand other attractions around Wales, which is helping to drive traffic her way.

From the start, Coast & Country has accepted payments by downloading details of credit cards. Thomas would like to upgrade her payments system, but is held back by the lack of broadband in her part of Pembrokeshire, which means any changes on the site can only be dialled up every hour instead of happening in real time.

Huge catch-up

Once broadband is properly available, Adam Wellings expects there to be a ‘huge catch-up’ is using the web for business solutions. As well as advising rural SMEs across the north of England, he is chief executive of an animal health company, where he has struggled to develop an effective online presence for six years.

For sites to work effectively, he has learnt, you should always put your business case first. ‘Technology can run away with you. You can be led down the road to a solution that doesn’t work. You have to be certain that the technology is applicable to what you are trying to do, so people can do what they want to do with it.’

Make sure too that your technology can be developed, he says. ‘Every time you go back with a new shopping list of requirements, you want to be sure you can accommodate them. I’m fearful of companies that say they want to develop it all by themselves.’

A professional shop window

In setting up a transactional website, there is normally an enormous difference between expectations and budgets, says Paul Godfrey at Delphi Creative, who specialises in building e-commerce sites for companies like BT and Tiscali. ‘Smaller companies always know someone who can do it on a shoestring, but they often forget that the web is a serious shop window. It is worth the commitment to making it work.

‘There are off-the-shelf packages for £400-£500, which allow you to set up a basic shop. The advantage is that the template is designed to interface with major payment service providers. The downside is that it can easily end up looking messy. Even if it means spending £1,000 more, a professional design will give you a shop window to win some respect, giving you a template for the layout and letting you look after the content yourself. It is harder to muck it up then.’

For any serious e-commerce project, Godfrey recommends creating your own system with an initial set-up fee of £4,000 to £10,000.

‘You can then create multiple points of access. You can’t assume that your logic for organising the shop will suit everybody. Your customers may well
take a completely different approach. But the more value you give people, the better. Give links to similar items that other people have bought and promote any offers on which you are beating your competitors.’

The downside of e-commerce is the delivery of items. ‘People are used to websites, where goods are only sourced once you place an order, so they arrive late. Try to show your stock quantities. It shows that you are in control.’

Charlie Crow

For kids wanting to dress up as knights or furry animals, Charlie Crow is the site to visit. It has over 300 costumes, all designed and made by Sue Crowder and her team in Stoke.

She began 16 years ago by supplying Toys’r’us with outfits for carnivals and for Christmas, but found herself being squeezed by low-cost production in China. Half of her £500,000 turnover is still through wholesalers and distributors in the UK, but they only take six of her designs at a time. Five years ago, she set up Charlie Crow on the web as a direct way of offering the full range to her audience.

Named after her first son, Charles, she admits that the design of the first website was terrible, even though it was built by professionals. ‘At that time we were making things up as we went along. Finding what you wanted on the site and paying for it was like breaking into a dungeon.’

The site is now so easy to use that Charlie Crow landed a DTI e-commerce award last year. ‘I make sure we answer the questions that people want to ask,’ says Crowder. ‘We bring strangers in off the street to see whether they can find their way round. What is obvious to us might not be to anyone else.’

Charlie Crow online currently has sales of £250,000 a year, with a healthy sideline in accessories such as swords and wands. Payments are made via encrypted e-mails. Credit card details are then entered separately into a sales order, although Crowder is hoping to switch to online payments soon.

Fully automated

‘Most businesses don’t have a clue about how their shopping carts should work,’ says Paul Martin, creative director of Wizbit Internet Services, who works with growing companies designing and building sites. ‘You might get by with a simple PayPal extension or sign up with a full blown provider like World Pay, depending on who you are selling to and in what numbers. And you might incorporate everything into your site or switch across to the payments server, which doesn’t look so professional, but is easier to set up.’

In terms of security, banks do not like you to hold credit card information, he says. ’They prefer you to send the final stage of the payment process to them, so it is never stored on your end server, although you might hold the last four digits. The usual mistake for smaller companies is not to have proper certification or a firewall, which makes it easy to hack into a database.’

The main challenge in e-commerce now, he believes, is fully automating the processing of orders. ‘Goods can be sent direct from the supplier to the customer’s home address without the web company having to hold any stock or get involved with the packaging or delivery of the product. Minimal supervision by the site owner is required. It might be beyond the needs of many internet businesses, but it shows just much you can do.’

No great mystery

If you do automate your sales process, you might end up with a different business. It happened to Ben Caldwell. His family had been selling nuts and bolts to ICI for seven generations, but Caldwell recognised that he had to offer more to engineering departments and set himself up as an outsourced purchaser, buying all non-production items.

‘It only took off when we started to use front end technology, particularly the internet. The difference was that, instead of using it as a glorified catalogue, we used it as a way to communicate between IT systems, so we could run the customer’s business for them on our system. They can see where all their stock is and order parts. It saves a lot of time and money.

‘The site itself is just a promotional page saying how wonderful we are. The clever bit is buried behind where we run all the stores and catalogues. We discovered that, by using XML, we could pull in data from our customers and send back all their financial information. Everything can be allocated to cost centres and reports can be run at any time in the day. We have totally transformed the business. Our merchanting days really are over.’

In the last five years, Caldwell’s direct sales have risen from £2 million to £30 million. It also processes another £55 million through its system. Business is currently growing at 100 per cent and Caldwell expects that rate to continue next year.

‘There is nothing mysterious about the web,’ he says. ’It’s just a language to communicate more effectively. The great thing with the internet is that you can do it yourself. We have probably spent less than £20,000 on software for the internet. We started off on a PC and an 18-year-old from college on his summer holiday. It has all grown from there.’

Related: Five key ways to keep e-commerce customers engaged

Marc Barber

Marc Barber

Marc was editor of GrowthBusiness from 2006 to 2010. He specialised in writing about entrepreneurs, private equity and venture capital, mid-market M&A, small caps and high-growth businesses.

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