Number 21: Winter 2003

 

Where is e-commerce heading?

Interview with Budd Margolis (December 2002)

Budd Margolis has written a number of article for Pool over the years. With the onset of multi-channel e-commerce we felt that it was a good idea to talk to Budd and see what lessons he has learned from working in e-commerce from the beginning. Budd has also had the benefit of having worked across the different e-commerce channels.  

Pool: You have been involved in a number of new initiatives in the e-commerce area over recent years. What are the major changes in the way companies have approached e-commerce?

Budd Margolis:  Many companies are still reeling from their misguided e-commerce ventures. The big suppliers have burned the market by promoting expensive and often unusable applications. I still see companies building new applications, hosting large IT departments and consequently making the same mistakes as before.

I would say that the biggest failure in the e-commerce field is also the result of the best solution out there today.  Boo.com’s software was years ahead of its time and Venda has perfected the e-commerce platform and has provided a very cost effective and sustainable solution. Dan Wagner bought up the Boo.com software and realised that the solution for the market place was to develop a truly dynamic e-commerce platform. The system includes a full CRM management capability, constantly upgraded platform and adaptable marketing capabilities. The Venda system requires 15% of the typical IT lead staffing can be launched very quickly and it provides consumers with a great retailing experience and the merchandiser with vital performance and behaviour metrics. 

Pool: Why are companies still building their own e-commerce applications?

The really innovative applications that help with their lives will of course win the day. I am very positive about the Internet, interactive television, streaming, Bluetooth, convergence, gaming and any form of media and communications.

I see the merging of retail and entertainment as especially fascinating. Certainly mistakes will be made but if managed properly, both corporations and consumers can harvest vast benefits.

Pool: We have been able to observe that some organisations were quick to adopt electronic forms of selling, whether this is television, Web or interactive television based. Would it be fair to say that the early companies were able to gain a significant first mover advantage or were the followers able to learn from their experiences and benefit to a greater extent?

BM: No. Some companies such as eBay and Amazon did gain an advantage but there were many other failed companies that despite easy and plentiful funding never presented a commercially successful proposition.

It is natural for one to survive out of a hundred but in this case it is surprising how many silly ideas were taken as the new “paradigm” to new age business thinking.  We are all a bit guilty in wishing it was all true and the waking up to a large hangover.

It took 7 years after QVC’s start for TV shopping channels to explode onto the UK market and now the past two years has seen an explosion with some 35 selling, auction and travel channels. The UK TVHS was worth about £1.2 billion in total gross revenue in 2001 and 2002 results are very strong as well. It’s another goldrush era and many will disappear but we are learning. The competitive market will grow new ideas as costs are reduced. Many will be driven by greed and ego instead of business sense and regulators and the gatekeeper Sky TV will have to rein in some of the exuberance in this market or see an increase in disillusioned consumers.

The companies that did well had some synergy with the new area of business that they jumped into. QVC is the 8th most successful merchandiser on the American Internet with $350 million in sales.

Interactive TV is another amazing new area and I have seen dramatic sales velocity created through this vehicle. QVC UK now generates 25%+ of its Sky TV orders via the handset. With 2002 gross sales expected to be about £280 million one would think that tremendous savings are being made and the need for an additional call centre is no longer on the drawing boards.

Pool: amazon.com is usually thought of as the leading company in terms of e-commerce development. Is there one overwhelming lesson that we can learn from amazon.com?

BM:  Amazon took the time to build a state of the art system to deliver a real and easily  perceived need.

Keeping it simple is still a challenge especially when quarter after quarter the markets and media yell for results.  But Amazon was brave enough to crawl before attempting the Olympic 100 metre dash.

Amazon still has some areas to improve. Customer prediction and product to profile linking capabilities are still years away from being really clever but the service is still great, the brand is still refreshing and the offer is as simple as can be. Need book, get book.  Need game, get game.

We trust Amazon because they perform and this means they care about what they are doing and who they are serving. 

How many companies truly champion the customer?

Pool: Who would you say are the other leading-edge e-commerce retailers?

BM:  You have to love eBay. I have watched live sales grow tremendously just before close off times and it is just pure and spectacular fun and profit!

Users are hooked! They love it, they truly enjoy using eBay and eBay has built a community that serves its members well.

I like Roundpoint.com as a service to purpose material across various platforms. 

Redmatch is the planet Earth's best job placement application and is purposed for the newspaper client to gain back lost employment advertisement revenues. It can perform so many functions that it is better to visit the Web site and review for yourself.

Pool: There has been much talk about multi-channel retail strategies. This can refer to on-line and off-line (clicks and mortar) but electronic channels have also fragmented into Web, PDA, iTV, etc. Should a retailer be looking at working across the different channels or focusing the offer on a single channel?

BM:  Retailers, whether e-commerce related or traditional, all have to utilize every available sales channel and platform.

But we have to stop thinking about technology from the technologist’s point of view and experience everything through the eyes and wallets of the consumer. Technology should make life and choices simpler, not harder.

Fragmentation should be avoided. The brand is of paramount importance and as long as the brand is respected its relevance will remain. 

So many companies are frightened to try new things. I think TV can service the salesmanship gap that many brands have and are working to create new retail solutions that enhance the brand, drive new traffic to stores and Web sites and explore new programming concepts and technologies. But new does not mean we throw out the lessons and experience gained from traditional retailing and consumer behaviour.

Web streaming for a TV home shopping channel might add 2% of sales growth in the first year of implementation but eventually this form of broadcasting may replace the need for satellite dishes. Sales would grow to 4% and then 6% in the next two years. Add foreign sales which might generate around 6%, Web sales which might typically run 6% for a shop channels, the ability to order by touch tone and remote control or cell phone and it all adds up to a sizeable and new revenue stream. Why ignore it? If the implementation is managed efficiently then the end result is more revenue for the company and more convenience for the consumer.

Marketers are the wizards of the commercial world. We perform SWOT analyses, create brands, target consumers, study human consumer behaviour and create strategies. If we serve the interests of the client and end user and do so successfully then we will have created jobs and helped the economy.

Consumers are hassled by modern life today. Often they are tired, stressed and unhappy and are searching for solutions and companies they can trust. They would love to give you their business, to stay loyal and to listen to your every message if only they could trust your company. Companies that understand this will and are constantly looking at making the consumer experience better will win the battle for their hearts and minds and wallets.

The economy was already faltering prior to September 11th. Added concerns over accounting practices and the upcoming invasion of Iraq all add continued worry to the markets and prospects for the economy at this time remain a bit dreary. Despite this, the streets are crowded with holiday shoppers and e-commerce has especially taken off this season. Driven in part no doubt by the problems of modern life and traditional retail. Hard to park, little time to find and then there is crime!  As with the national train service, little will improve so we do have some good tidings to look forward to in the UK and European home shopping market to look forward in.

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