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Buying from
Sites Unseen
Local firms find that with e-commerce, the ‘E' stands for ‘exponential growth'
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Business New Haven
12/14/1998
By: BNH
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Whether companies have just introduced electronic commerce as an experimental adjunct to more conventional ways of doing business, whether they have been growing their Web sites for a few years now, or whether all their business is done over the Internet, local purveyors of everything from fine wines to concert tickets to used tools are reporting a boom in Internet sales.
The impressive numbers being reported may be very recent, but they are significant enough to be producing marked optimism about the future of e-commerce.
Everyone is aware, of course, that a handful of companies dedicated solely to selling over the Internet have been enormously successful: firms selling books, CDs, airline tickets. Two of these, actually, are right here in Connecticut. CD Universe of Wallingford was started in 1996 solely as an Internet company. Today it is the third-largest online music store.
CDs lend themselves particularly well to online sales. “They're not like buying a mohair sweater,” says marketing director Jill Grossman. Grossman says that the experience of buying music online in fact is better than that of buying CDs in a store. The store's site, cduniverse.com, offers shoppers sound clips of CDs - something you can't get in most stores. This, plus the fact that people are feeling increasingly comfortable online, Grossman says, accounts for her company's success.
Another online giant located in tiny Kent is Cyberian Outpost, a company dedicated to selling computer hardware, software and peripherals over the Net. When Darryl Peck founded the company in 1995, the idea of selling exclusively online was so unpopular he was able to raise only $28,000 in seed money.
Potential investors may now be kicking themselves: In the quarter that ended last August, Cyberian reported $17 million in sales - a figure that represents growth of 270 percent since the previous August. Today, taking advantage of the Internet's global nature, the company sells to customers in nearly 150 countries.
Computers, however, are an even bigger online item than books or CDs - three times as big, according to Peck. What about companies selling products not regularly thought of in connection with the Internet?
The good news is that many of these, experimenting with adding e-commerce to their standard marketing tools, are also getting impressive results.
A classic example is the Lorensen Group, a group of car dealerships including Acura of Milford, Westbrook Honda, Lorenson Toyota in Old Saybrook and Acura of Avon. Lorensen launched its Web site and started selling over the Internet about two years ago, reports advertising director Steve Cohun. Cohun says it took six or seven months for the site to catch on, but since then business has been growing steadily.
Now customers can view the entire used car inventory from all five dealers online, get detailed information on each car, and download color photos of any they are interested in. They can e-mail for a quote on either a new or used car and bargain online.
As of late November, each Lorensen dealership got its own computer system, and the capacity to send and receive its own e-mail. Cohun reports that while Internet business still accounts for just five to ten percent of total sales, it is up dramatically in the last four months.
What is attracting people to buying cars online? “People are very busy nowadays,” says Cohun. “The customer who e-mails knows what he wants, is more informed, so the whole transaction is quicker.”
Also, Cohun reports that more and more people are willing to travel a distance to get a hard-to-find vehicle. People from as far away as Colorado are searching his site for cars. Distant buyers can find lorensen.com easily, as it is registered with the major search engines and hot-linked to the auto manufacturer's Web sites.
The Yale Bookstore on Broadway in downtown New Haven has a similar success story to tell.
The store put its gift catalogue online about a year ago. Now, just 13 months later, general manager Gary Spearow reports that 70 to 75 percent of the store's catalogue sales can be attributed to Internet sales.
This still accounts for only a small percentage of the Yale Bookstore's total sales. However, says Spearow, sales have been increasing rapidly of late. “Now, this is not real significant, but I think it will eventually be one of the most significant numbers we have.”
Spearow points to several factors that account for the promising numbers. First is the fact that the store can now reach a broader market. Another is the online medium itself.
“The graphics are out there,” explains Sperow. “You can make a thing almost seem real to a person [online].”
Not least, Spearow points to the importance of having a secure credit-card payment system. The bookstore did not have a secure system the first six months of operation. Since introducing one, however, online sales have tripled.
Advantix is a firm that was founded in Guilford in 1984 and is now headquartered in California. Originally Advantix developed software used to sell tickets - at the box office, through outlet networks, or over the phone.
For the last two years, the company has had its own ticket sales operation, and recently began selling over the Internet. “Net sales still represent a small portion of the tickets sold,” acknowledges Bob McClintock, senior vice president of software development. “But as far as growth, it's the Internet. Every week we see growth in the number of tickets sold [online]. We expect it to be very big.”
These three companies, while all reporting current “booms” in online sales, acknowledge that e-commerce is still but a small part of their overall business. Some companies that added online sales to their marketing arsenal have really taken off, however.
A case in point is the Bargain News, based in Stratford. The barter newspaper went online two years ago. “Right now,” crows Dan Rindoes, the paper's vice president of marketing, “the Bargain News is the most successful Internet site in the United States.” It registers approximately 1.1 million hits per week, and earned the paper $1 million in revenue this past year.
Here, too, the rate of growth is as impressive as total sales. In its first full year online, the Bargain News reported $230,000 in online sales. The projected figure for 1999 is $3 million.
When the paper first went online, Rindoes says talking to a local business about buying an ad on the Bargain News Web site “was like trying to sell a TV ad before there was television.” Today, print advertisers can have space online for just a ten-percent premium over the cost of the print ad. Rindoes can imagine the day, however, when online advertising will cost more than print.
If a company can succeed selling everything from used bedroom furniture to collectible toys online, is there any limit to the kinds of businesses that will succeed with e-commerce?
One impediment to online sales, John Schwarten of Fairfield discovered, can be the very same global nature of Internet traffic that is customarily touted as its great advantage.
Schwarten's company, Vinyard Values, sells wine online. “Not everyone has time to go into a store and talk to a knowledgeable merchant,” Schwarten says, explaining how the concept for the company originated. Also, he adds, “I felt the information content aspect of the wine business merited an electronic medium where you could do sifting and sorting.”
One slight problem: It is illegal to ship liquor over state lines, and since very few servers can provide geographic sortings, being unable to help the customer from Virginia or Ohio who shops his site (vinval.com) has prevented Vinyard Values from getting really big. Still, Schwarten reports that even given this limitation, the site does pay for itself.
So it seems that the past 12 to 24 months has really marked the beginning of an online revolution in the way companies market products. There is little reason, if a company has not already done so, not to open up an Internet store.
Cyberian Outpost's Darryl Peck does have a few words of caution for those eager to get on board: “It's nothing to open a great Web site. You have to get people to go to that Web site. It's a lot harder to get recognized now. Be prepared for a lot of frustration.”
Jupiter Communications, a market research firm, predicts that by the year 2000, online sales of domestic consumer products will total $37.5 billion. Maybe the frustration is worth it.
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