La Curacao Cashes In
By admin | July 18, 2008
With open-door policies, the Los Angeles-based department stores foster loyalty among Latinos, who build credit history and drive retail success
May 01, 2006
By Derek Reveron
After Teresa Rodriguez arrived in Los Angeles from El Salvador in 1984, she started shopping regularly at the La Curacao department store a few blocks from her apartment. With no credit history and her only identification documents issued by her home country, Rodriguez applied for and received a credit card with La Curacao two years later.
Eventually, Rodriguez began working as a nurse’s aide, and she and her husband used the card to buy kitchen appliances, televisions and furniture from La Curacao for their family, which now includes three children. She made timely payments and established a credit history good enough to obtain JCPenney and Sears credit cards and financing for a new car — all within five years of arriving in the United States — and went on to get a Visa and Mastercard and buy a house in 1998. She even used La Curacao’s export services to send a refrigerator and television to her mother in El Salvador.
“They give credit to everybody,” says Rodriguez about the chain’s willingness to help Latino immigrants become credit-worthy consumers. “Lots of friends shop there. The stores are close by, and they give a good price. It’s our community store.”
La Curacao (koo-ra-SAO) is a Los Angeles-based chain of six department stores that writes its own rules for marketing to Hispanic consumers. Most general-market retailers have policies that make it difficult for Latino immigrants to get credit. But La Curacao
approves 75 percent of credit card applications regardless of immigration status by using unconventional and confidential credit scoring methods and interviewing techniques. La Curacao targets cardholders and other Hispanic consumers with advertising and incentives to buy a wide range of products and services. La Curacao credit cardholders account for about 90 percent of the chain’s sales, much of which are consumer electronics, appliances and furniture, says Mauricio Fux, vice president of new business development.
Credit is the cornerstone of La Curacao’s success. The retailer has more than 500,000 active cardholders who pay an interest rate of 23.99 percent. That’s up to six points higher than rates at some general-market retail stores but lower than rates at others. Retail credit cards commonly carry high interest rates. Sears, for instance, charges 24.99 percent, and Kohl’s charges 21 percent. Macy’s rates are 21.6 percent or 24.9 percent, depending on credit history.
Targeting low-income consumers with easy credit and high interest rates is hardly a new retail concept. “[La Curacao] has taken an old business model and is applying it to a specific demographic where there is clearly an opportunity,” says Aubie Goldenberg, a partner in the retail group of Ernst & Young in L.A.
La Curacao caters its credit and other services specifically to the needs of Latino immigrants. In April, the company launched money transfer and home mortgage services. Customers will be able to use their cards to borrow the money they transfer. By the end of the year, consumers will be able to apply for credit cards online. Some services have their own brand names. CuraTel provides local and long distance telephone service. Pasito.com offers Internet access. The retailer also has a travel service, and its export service delivers merchandise to Central America and Mexico from warehouses in Mexico, El Salvador and Guatemala.
A unique combination of services and products makes La Curacao the largest and most successful U.S.-based retail chain that focuses exclusively on U.S. Hispanics, say retail and Hispanic marketing experts. La Curacao plans to open 15 to 20 stores over the next three years, including its first outside of Los Angeles in San Diego and San Jose, as well as branching out to Las Vegas, Phoenix and Tucson. Fux declined to reveal La Curacao’s sales, but in August Citigroup Venture Capital Equity Partners bought a 10.5 percent interest in the retailer for an undisclosed sum. Citigroup declined to comment.
Venture capitalists often make such investments in a company in anticipation that it will go public eventually and produce a big return on investment.
“We plan to grow the company over the next few years and then evaluate,” Fux says. “At that point, there are a lot of things that can be done and one of them is going public. At this point, it’s too early to tell.”
INIMITABLE STRATEGY SO FAR
Corporations would have to create a new business unit or separate subsidiary with business models and strategies not bound by the limitations of mainstream policies to compete with La Curacao’s strategies, says Terry J. Soto, president and CEO of About Marketing Solutions Inc. in Burbank, Calif.
“It also means an approach to doing business that requires an understanding and empathy for the immigrant mentality, something few mainstream organizations have. It simply doesn’t work as a sub-strategy because mainstream operations are not geared to deliver in a manner that is required to really connect with this consumer,” says Soto, who also penned Marketing to Hispanics: A Strategic Approach to Assessing and Planning Your Initiative.
General-market retailers that prize loyal Hispanic consumers may not want to copy La Curacao’s entire strategy, but some try to pick up pointers on scouting trips to the company’s stores, Fux says. “We see them all the time — small groups of white people in their 30s and 40s dressed in suits. They stand out.”
Fux considers Sears, Best Buy and Target to be among La Curacao’s competitors. Says Sears spokesman Chris Brathwaite, “The Hispanic market is one-fourth of our business. In terms of that particular business model, we wouldn’t feel comfortable commenting on it because Citigroup owns [Sears'] credit card business.” Target and Best Buy did not return phone calls.
La Curacao charges more for many items than its competitors, although the company launched a price-matching policy two years ago. “In some areas we are equivalently priced; in some areas we are higher,” Fux says. One reason for the higher prices: La Curacao has more salespeople per customer than its competitors, Soto says, so customers do not have to wait long to be helped.
La Curacao also believes its customers are willing to pay some higher prices because the retailer delivers good service in nontraditional ways. For instance, the retailer guarantees deliveries to Mexico and Central America. Recently, a crew was taking a refrigerator from a warehouse in Mexico to a more rural area when the group encountered a washed-out river bridge, Fux says. The crew crossed over on a boat without the truck and rented a mule-drawn wagon to make the delivery.
Customers who buy computers receive individual attention with free installment and a two-hour training class in their homes. Consumers also can call a toll-free number to get assistance from Spanish-speaking service employees. “These services are very successful traffic builders and contribute strongly to the bottom line,” Soto says.
La Curacao believes it has pioneered a unique three-pronged approach to the Hispanic market. “To put together the expertise of a retailer, the expertise of a financial institution and the expertise of specializing in the Hispanic community, you don’t find a lot of people who have the expertise or the will to focus on all three at the same time,” Fux says.
The business development vp stresses the key to La Curacao’s success is treating U.S. Hispanics as the most important market. That belief is reflected in La Curacao’s motto and advertising tagline, “Un Poco de Su País,” and in details such as the company’s recorded answering service. It says, “Para Español, oprima el uno. For English, press two.” Most employees are Spanish dominant.
Mexican immigrants are the backbone of La Curacao’s business, accounting for 65 percent of cardholders. Salvadorans and Guatemalans make up 20 percent to 25 percent, and the rest come from Honduras, Nicaragua and South America, Fux says. Customers can choose one of three payment plans that best fit their budget and pay no annual fee. Some applicants qualify for zero-interest financing for up to 18 months. To qualify for a card, customers must be at least 18 years old, have a valid address and phone number in the U.S., and a minimum monthly income of $400. La Curacao also requires valid identification such as a U.S. driver’s license or official documents from an applicant’s native country, such as a voter registration card. Matricula consular, a form of ID issued by the Mexican, Argentine and Guatemalan consulates in the United States, also are accepted.
Easy credit is just the beginning. La Curacao provides one-stop shopping for 85,000 brands in 100,000-sq.-ft. stores with an authentic Latin American ambiance to make customers feel comfortable so they will shop longer and return. The colorful stores feature Mayan and Aztec architecture and décor and Spanish-language signs. Mariachi, banda and merengue music plays on the loudspeakers. Sometimes live bands perform and adults dance while their children amuse themselves in play areas supervised by La Curacao staff. And each store has a Pollo Campero, a Central American fast-food chain owned by the founders of La Curacao, brothers Jerry and Ron Azarkman.
BUSINESS BORNE OF IMMIGRANTS
Like La Curacao’s customers, the Azarkmans are immigrants. Jerry came to the United States from Israel in 1977, at age 23, and sold electronics and other consumer goods door-to-door in Los Angeles neighborhoods, including Hispanic communities. The younger Ron arrived soon after and teamed up with his brother.
Business became so successful that in 1981 they opened a small outlet in downtown Los Angeles. The Azarkmans named the business La Curacao after a store in Central America that was popular with some customers from the region. In 1983, the Azarkmans moved their fast-growing business into a larger space and set up a credit department to offer cards. Sales flourished. The second La Curacao opened in 1995, another followed in 2000 and another in 2002. Two more opened last year, for a total of six. Both owners were out of the country and unavailable for comment.
Despite its growth, La Curacao does not have an advertising agency. An in-house advertising and marketing staff of more than 12 employees creates strategy, scripts and copy. The staff also selects the products to include in ads and direct mail and makes media buys. La Curacao may eventually hire an agency. “We are definitely thinking about it,” says Eli Barak, La Curacao’s vice president of marketing. “We will continue thinking about it for the different markets we are planning to grow into.”
GETTING THE WORD OUT
La Curacao advertises on local Univision and Telemundo affiliates and at least five Spanish-language radio stations in the Los Angeles area. The company does little print advertising, occasionally running an ad in Spanish-language daily La Opinión. Twice a month, La Curacao mails cardholders a 24-to-48-page catalog that promotes a wide range of merchandise. Each mailing goes to an average of 300,000 people, Barak says.
The biggest advertising campaigns are centered on new stores. Leading up to openings, La Curacao runs 30-second television and radio spots that feature Don Francisco, host of Univision’s Sábado Gigante. The openings attract thousands of people waiting in long lines to enter. The retailer’s advertising spokesperson is Renán Almendárez Coello, host of the popular syndicated radio show El Cucuy de la Mañana, which is broadcast out of the Spanish Broadcasting System’s KLAX-FM in Los Angeles. El Cucuy appears in all of the approximately 20 different ads that La Curacao runs every year, Barak says.
The company also runs what Fux calls “image” and “hard-sell” television and radio ads. The hard-sell ads pitch merchandise such as electronic products, jewelry and appliances. “The image commercials stress our 25 years serving the community, our growth and our attachment to our market,” Fux says. The company declined to disclose its advertising budget. But, Barak notes, “Our ad budget grows as a percentage of sales to a certain degree, but there’s not a direct correlation.”
Advertising is aimed at low-income Latino immigrants that general-market retailers and financial institutions consider bad credit risks. The average annual income of cardholders is about $20,000. La Curacao is the first credit card for about 90 percent of its cardholders. Ten percent of credit card applicants own homes, and only 20 percent have bank accounts.
La Curacao’s Puntos Program encourages cardholders to buy with plastic instead of cash. Customers accumulate points with each purchase and can exchange them for gifts. The retailer sometimes promotes double or triple points for certain items and offers even more points based on the purchase amount for customers who buy with La Curacao credit cards.
CREDIT, DOLLARS AND SENSE
Some customers, especially those who get more cards after obtaining La Curacao plastic, overburden themselves with debt, says Fux. But the percentage of cardholders who default on their payments is on par with that of the credit card industry, he adds. Fux declined to be more specific.
However, the company reportedly has about a 7 percent payment default rate due to its proprietary credit screening methods, says About Marketing Solutions’ Soto. Many immigrants say they feel grateful for La Curacao’s trust and the chance to establish credit and feel an obligation to make payments on time, she adds.
The company does not rely on credit scores because many of its customers lack Social Security numbers and don’t have the ratings. Instead, La Curacao creates its own lender profiles and credit scores based on applications and one-on-one interviews that include non-traditional questions.
Interviewers seek information such as whether applicants share rent and household expenses with relatives and friends. Such factors can give applicants disposable income that is disproportionately higher than their salaries, Fux says. Interviewers also ask for pay stubs and utility bills as proof of income and the ability to make payments. Other factors include how long applicants have lived in the United States, family connections in the area and length of employment.
La Curacao uses the information to create “behavioral scores” that predict which customers are most likely to be delinquent. The company’s credit collections staff uses the data to determine which new cardholders to call before their first payment is due to remind them.
Most customers who pay late do so because they don’t know how the U.S. credit system works, Fux says. “The calls are a form of education.”
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How Hispanics Learn Unhealthy Eating in the U.S.
By admin | July 18, 2008
On the heels of the recent RetailWire discussion concerning the appeal of beef among Hispanics (see Hispanics and Beef: Economics or Ethnics? - RetailWire 6/16/06), I thought it important to share some insights from a recent article I wrote for the May issue of the Shelby Report regarding the impact of culture and acculturation on eating and wellness.
To begin, one could argue that Hispanics arrive in this country with an inherent orientation towards healthy foods and that, indeed, greater exposure to packaged and fast foods lead their food choices to, at least initially, deteriorate. After all, in spite of higher beef, dairy and carbohydrate-skewed diets, immigrants arrive in this country with habits of eating fresh foods: vegetables, fruit, legumes (beans, lentils, and peas), nuts and grains (rice, barley, oats, and quinoa). Scratch cooking is the norm.
Why do Hispanics use fewer packaged foods in their meal preparation? It’s actually more convenient to cook what and how they’re used to; it satisfies emotional/nostalgic needs for traditional tastes; and fresh food preparation is generally more economical.
Another significant consideration is Hispanics’ definition of healthy and what constitutes a healthy person - many associate plumpness and even being overweight with health and affluence.
Socio-economic positions in countries of origin often limit access to food items such as whole milk, eggs and, depending on the country and region, seafood, red meat, chicken and other meat products. Additionally, colonization, along other regional influences, has resulted in Latin American diets that have been protein deficient, and carbohydrate and produce dependent for centuries.
When Hispanics arrive in the U.S., regardless of their income level, a whole world of food possibilities opens up. Suddenly, they can afford to buy all those things they couldn’t afford back home, and they thrive on it. They feel privileged and, subconsciously, they define higher consumption of these foods as “healthy” because of their image of the “well-to-do and well-fed” person in their home countries.
As they and their children put on a bit of weight, they see this as a highly positive consequence. From dozens of focus groups, Hispanics are adamant that whole milk, lots of eggs, and red meat, pork and organ meats are good for them because they are whole, creamier, and have the fat they consider healthful.
Additionally, Hispanics have a huge sweet tooth, so it is uncommon and almost surprising to find low-sugar anything in local restaurants and food stands in Latin America. Consequently, habit and preference for sweets transfer to high sugar consumption in the U.S.
And the effects are alarming. Clinical studies have consistently reported a high prevalence of obesity, cardiovascular disease, diabetes, dental cavities, and over/under nutrition in the Hispanic population. Approximately 10 to 12 percent of Hispanic-American adults have diabetes.
Research also indicates that Hispanics in the United States eat more meat and saturated fats than Anglos, and use fewer low-fat dairy products. Hispanics are actually less aware of and unable to recognize or acknowledge higher fat contents in foods.
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Hispanic Segmentation Made Simpler
By admin | July 18, 2008
I’m often asked how companies can avoid stereotyping or generalizing when creating a Hispanic strategy, given the various ways in which the market segments.
One of the first considerations when creating a Hispanic brand strategy is to understand how a product or service is purchased. Unless a product is country specific or purchasing behavior is representative of a certain country, nationality is often not a consideration. It is a consideration, however, for certain types of food, music, concerts, restaurants, or specialized services like money transfers. What’s important is to be clear on whether the product or service is a functional purchase or an emotional purchase.
Functional purchases are typically for commodities and are usually inelastic in terms of costs. This means price sensitivity is high and they meet minimum characteristics considered acceptable or preferred options between brands. Defining a Hispanic target for one of these categories is more about basic demographics and consumption patterns. Target profiles are typically broad. Areas like distribution and pricing are likely to be the drivers of the business. Branding work that focuses on special attributes or advantages is especially important in these categories to create a distinction between similar competitors. These categories also tend to be very promotion activity dependent.
Emotional purchases are very different. They are discretionary purchases and are made not because they are necessary, but because they make the purchaser feel good. These categories include wine, premium distilled spirits (cognac), luxury cars, fine restaurants, jewelry, flowers, specialty foods and spa services. The important segmentation work here is based not only on behavior, but attitudes, values, life style and life stage. This results in the psychographic profiles most likely to be consumers of your product/service/brand. In these cases, developing a brand personality that closely aligns with how the Hispanic consumer perceives him or herself is a strong consideration when developing a brand strategy.
Messages depicting how the consumer sees himself as the user and the emotional benefit gained are most effective. These messages tap into consumers’ emotional and psychological hot buttons. Pricing is typically elastic. Merchandising and distribution channel exclusivity is important to conveying a distinctiveness for which consumers are willing to pay more. Demographics such as age, gender, education and income are important factors, but they typically fall naturally out of the behavior or lifestyle description of the category user. Again, nationality is typically unimportant here.
Once a target market and its purchase hot buttons for your category or banner are clear, the objective becomes creating a message that best motivates functional and/or emotional purchases. Here, it’s important to craft messages that avoid colloquialisms to avoid misinterpretation, unless they are necessary to make the point or if tongue in cheek humor is being employed. Messages should focus on using language that ensures comprehension among as many different Hispanics within a target definition as possible.
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Selling on the Web
By admin | July 18, 2008
Can a well designed interactive Web site sell products and replace the functions of sales and customer service reps? In an effort to stay ahead of the information revolution and reduce payroll costs, many a company is trying to sell in a new way. Will they succeed?
An on-line store can automate, handle more volume, reach a larger audience, and do it cheaply. If a company is competing solely on price, Web-based selling has big advantages and fewer potential pitfalls. But competing mainly on the basis of price is a difficult strategy in the long run since the low price arena is where the fiercest battles are waged. Most companies must gain advantage by providing other distinct benefits with their products and services. Key to a Web based sales strategy is carefully choosing what to automate and how to use a backbone of sales/customer service staff to greatest advantage. It’s essential to use the Internet to help companies better know their customers and help their customers better know them. If instead, Web-based automation interferes with this type of interaction, the long term results may be devastating.
Almost without exception, new technologies both help and hurt us. I am reminded of a trip taken not quite twenty years ago to a strange little community located on an island on the Chesapeake Bay. Surprisingly isolated, Tangier Island had a distinct culture whose only industry was fishing. Its people carried a unique accent–almost cockney mixed with eastern shore southern. My wife and I had made reservations to spend the night at the island’s only bed and breakfast. Our reservations were lost and the only way off the island was by ferry. It didn’t run again until the next morning so we had to stay in someone’s home. A polite but no nonsense woman who sometimes took in mainlanders agreed to have us. To our good fortune we got a rare glimpse into their world. After dinner at the inn, we settled into her parlor for tea. Almost immediately, visitors arrived. An elderly couple served themselves tea and sat with the three of us. Both had one butter cookie, talked for twenty minutes, told their hostess that they were moving on to visit another neighbor, and quickly left. Other guests arrived, chatted, and left in precisely the same manner. This continued at a seemingly relaxed pace but she saw a surprising number of quests that evening. During a lull in the activity we became aware of a television droning on in another room. “We now have cable,” she said proudly.
Aha! Now we saw. TV reception was very poor before cable arrived. Without TV these people maintained a highly structured means of socialization. TV would destroy this, I thought. I now realize that there was something lost and something gained. The island was boring. There were no bars, and only one small combination deli/general store. The people enjoyed the entertainment TV brought and would be better connected to the rest of the world. But they would lose a tradition of social interaction and eventually become isolated from their own neighbors and community.
Our use of TV demonstrates a human preference for non interactive behavior. For a company, a path leading away from interaction could be the road to ruin. In the same way that TV era adults are less skilled socially and less connected to their neighbors, new communication technology may lead a company to be unskilled in communicating with customers and satisfying their wants. Employees who have customer responsibilities are the eyes and ears of an organization. Without them a weakened customer relationship is likely. Such a company risks missing emerging trends in the market and being left in a poor strategic position. Isolation results in not knowing and not caring. Not caring leads to a lack of purpose which in turn results in poorer products and services.
Let me say at this point, I am not about to sputter wistful longings for covered bridges and butter churns. Rather, I hope to point out how a depersonalized environment may affect our ability to compete and sell products. Note that the social skills and rituals of the islanders parallel that of a good sales rep. Although in some ways salespeople are getting better connected to the world via new technology, they are also at risk of becoming isolated from their customers in new ways.
On the bright side, the Web, if used appropriately, is an excellent resource for reaching more customers. Sales and promotional functions are best handled based not on what can be done with the Web but what works best. Ed Bennet, a representative of Planet Communications, a company specializing in both Web development and Internet hardware, suggests that companies benefit most from integrating routine information with existing computer systems and sharing key information with customers. This can include general information such as delivery schedules, invoices, and customer account balances. “In this way companies can free up resources to provide better customer service where personal interaction is most needed.”
Consider some of the first stages of promoting and selling such as exposure and attention through advertising, creating interest, and providing information. All are required to ever have an opportunity to sell. The Web is an economical and effective communication tool for the early stages but good customer information is required to make it work. Next consider some of the later stages of selling such as handling objections, closing the sale, and maintaining post purchase relations. These later stages are difficult to support without a backbone of customer oriented staff. Such functions may work well on the Web for routine and high volume purchases but most Web-based purchases are not so routine.
During the last stages of sales, automated systems can be less effective. On-line surveys will sometimes miss subtle customer needs and complaints. Robots don’t act as customer activists and relationships cannot be built without personal contact.
Companies must be willing to devote appropriate levels of resources to Web oriented customers. According to Bonnie Raindrop of DoubleClick’d, a Web design firm specializing in Internet Marking, “Established companies often don’t have the commitment needed to make the Web work. The same level of customer service is needed regardless of the source.”
L.L. Bean, widely used as a benchmark for customer service, knows that the Web site is an adjunct to their sales force, not a replacement. A representative at L.L.Bean acknowledged that their Web site is useful but cannot give the level of service their salespeople provide on the phone.
A sales force carries an employee knowledge base. A happy and well-established sales force has the energy and opportunity to care about their customers. They become customer advocates and push development of products and services in the right direction. Customers in turn develop relationships or at least a comfort level that would not be achieved otherwise.
One important advantage of person to person communication is the filtering process. People can filter well both while listening and presenting. While a company’s pool of information presented on the Web can be comprehensive and its search engines helpful, clients are often lead down a number of erroneous paths. The result: clutter, distraction, information overload. Customer satisfaction can suffer if inappropriate products are purchased.
At DELL, a popular mail order computer source, Internet sales are growing but overall customer satisfaction may be suffering. According to a seasoned sales associate, this may be due to the salesperson’s ability to better tailor PCs to customers’ needs and interests. They can recommend less expensive ways to achieve the same performance. He notes, “When dealing with a person one-on-one, you can’t help but care about them and that makes it a priority to work in their best interest.”
Professional copywriters are more likely to put a puffed up spin on a product’s benefits. In fact, research shows that acknowledgment of product flaws and limitations can actually improve customer perception of a product. This is in part a credibility issue. Skilled and ethical salespeople steer customers away from inappropriate products and disclose product limitations, improving post purchase satisfaction.
More familiar presentation and discussion formats may better meet customers’ informational and emotional needs. Case in point, while working at a university specializing in worldwide on-line education, I was very satisfied when site traffic nearly quadrupled. Unfortunately the percentage of hits that converted into student admissions remained very small. When I added a friendlier inquiry screen and began automatically inviting all on-line inquiries to live telephone conferences, the results were dramatic: conversion rates increased to 50% of attendees. This telephonic “open house” allowed students to air concerns, hear the thoughts of other students, and ultimately feel a higher level of trust and comfort.
Another benefit from this activity was the ability to learn the opinions and needs of new students. A process such as this can provide an organization with a level of knowledge that could only be achieved from the continuous use of focus groups. Most importantly this approach allows more resources to be focused on the best qualified customers.
Someday, perhaps not long from now, reliable real time audio and video conferencing will be ubiquitous. When this happens maybe then we will find it easier to use communication technology more appropriately. I expect there will be new problems and distractions that will make knowing the customer just as challenging. And knowing the customer is really the answer to successful selling. Armed with the right information, a company can end up exactly in the right place. As they say on Tangier Island, “In order to catch the fish you gotta know where they swim.”
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E-Commerce: Is the Information Highway Paved in Gold?
By admin | July 18, 2008
Today everyone wants a piece of the Internet action. Large and small retailers are beginning to recognize the potential. Shopping carts can allow expansion without the huge costs of building new stores, moving into new regions, transporting merchandise to retailers or printing catalogs. Through secure credit card transactions with instant verification, there’s less potential loss from shop lifting and damaged merchandise. And, by using credit cards, international transaction are simplified. The cost of producing and maintaining Web sites is falling nicely as are the costs of setting up Web-based shopping carts. The public is beginning to accept the idea that purchasing products on-line can be safe and convenient. Wow!
There’s gold in them thar hills.
Yes, there is profit potential for many. But much like the gold rush of a century ago, most people do not get rich quickly. Most find wealth only through hard work and dogged determination. So before you head west with your virtual picks and shovels, take a careful look at where the gold is.
There is huge potential for a nationally established firm in the electronics industry. Cisco Systems, a manufacturer of computer networking equipment, now sells more than $7 million per day through electronic commerce and they have stated they are saving $270 million a year in personnel costs. And their growth has been nothing short of phenomenal. GE sold more than $1 billion to other businesses last year. A leading retailer on the scene, Dell computers, is selling more than $1 million a day from its Web site. Dell is doing very well, but note that Cisco Systems and GE combined easily exceed the entire world’s retail dollars in sales.
So where’s the gold?
The safer money is in business-to-business sales and in savings gained through improved efficiency. But retailers should not despair. They too can find savings with the Internet, through greater efficiency. Further, Internet usage should double by the beginning of the next millennium and the potential increase in sales is considerably larger. It may seem that the Internet arena is already crowded but, in fact, one study shows only about 3% of business-to-business Web sites are designed for selling. So far, only about 1% of U.S. sales come from e-commerce, so the potential for expansion is enormous. Capturing just a smidgen of the projected growth could yield the mother lode.
Even if transactions don’t occur on-line, Internet promotional efforts can give companies a big bang for the buck. The cost of producing catalogs for the Web is very cheap when compared with print. Dollar-for-dollar, banner advertising can yield results two to 20 times better than direct mail. But many campaigns deliver far less because of poor targeting and a lack of knowledge about Internet strategies. One study commissioned by the Direct Marketing Association reveals that ad-to-sales ratios have nearly doubled for the Internet in the past three years. Now $1,000 spent for targeted advertising, yields an average of $7,000 in sales. The promotional tools now used are in their infancy. Tremendous advances can be expected over the next several years.
Before you head out west on the Internet . . .
Anyone considering entering the Web arena or expanding their Web presence should carefully plan their time and investment. Often companies must plan events, provide free services, and find ways to interact with Web visitors, on and off-line. The odds of success are greatly enhanced by being unique, strategic, and persistent. It is crucial that good old-fashioned customer service, print advertising, sales promotion and all traditional marketing are well integrated with any on-line strategies.
Now a little cold water—some large Web centered businesses such as Amazon and Excite have yet to turn a profit. They are gambling that the future of e-commerce will be rich with gold.
So roll up your sleeves, consult with the experts–if you can find them. There’s gold out there but get ready to mine some holes and break some rocks.
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Shopping Online: Is it Safe?
By admin | July 18, 2008
Attitudes have changed dramatically in the past six months. Surfers were saying they were not comfortable shopping online. Now they are saying they already have made a purchase or plan to soon. If you have a burning desire to order six dozen hand-carved Manahikian swizzle sticks on a Sunday night, you can. That’s good news for online businesses and good news for the consumer as well. But these new frontiers tend to attract the riffraff. A few of the darkest Net alleyways are crammed full of shady characters most eager to abscond with your hard earned cash.
For many people the biggest worry is security. Can the technology really be counted on to protect credit card information? In nearly all cases, yes. The most common secure Shopping online- Is it Safe?protocol uses Netscape’s Secure Sockets Layer (SSL). SSL makes use of encryption technology that sends a digital certificate with a public key. The public key can only be decrypted with the corresponding private key. Depending on the level of encryption used–40 bit, 56 bit or 128 bit–breaking the code is either quite difficult, extremely difficult or next to impossible. Online credit card can, in fact, be sent directly to the credit card company and never viewed by the merchant. For these reasons, your credit card number is considerably better protected online than when used in a store, a restaurant or for phone orders. The most likely risks come not from decryption technology but from basic thievery and elaborate misdirection.
Beware the Scam
I am reminded of the memoirs of a long dead mobster. One of his favorite “jobs” was the time he wheeled a safe over to a bank after hours. Dressed in a crisp security officer’s uniform, he hung an out of order sign over the night deposit slot. Then he placed an official looking sign on the safe instructing people to place their deposits through a slot on the top of the portable safe. No one challenged him nor did anyone decide against using the temporary night deposit slot. On the surface, the trick seems too obvious. How can a night deposit slot be out of order? But no one could see past the demonstrated signs of security–an official person in front of a respectable bank openly “protecting” their money from theft. That’s classic misdirection.
You might not be fooled by the obvious stuff: get rich quick business opportunities, prizes that you pay for, pyramid schemes. But if you think you’re buying from a company you are familiar with or you are too focused on some other issues due to clever misdirection, you too can get taken. Here are some ways to avoid getting hornswoggled:
Only deal with businesses you are familiar with and make sure they really are who you think they are by examining the URL (web address). A false front version of a legitimate store can easily be placed at another location and you can be tricked into going there from the same crook’s fake directory or banner ad. A quick check on the URL eliminates that risk.
Never respond to unsolicited e-mail, commonly known as spam. Remember, spammers are violating Net etiquette, they probably got your e-mail through illegal means, and they are generally known to be a lower life form. Don’t deal with them.
When making purchases, check the fine print for shipping dates, item numbers, product features, guarantees and warrantees. Save this information in a safe place in case there’s a dispute later.
Pay only via major credit card. Visa and MasterCard limit consumer liability to $50, and they usually waive that. Following this rule alone essentially guarantees that you won’t take a significant personal loss with ordinary purchases.
Verify that your connection is secure by watching for a pop up window in your browser stating you are entering a secure site. Then look for a closed lock or an unbroken key in the lower left corner on your browser. Understand, you are not looking for this icon in the browser window but on the browser itself. I know of a merchant who gets a fair number of credit card sales from a form that sends him the information via unencrypted e-mail. His customers happily enter their credit card numbers, and no one has ever even questioned it. Nevertheless, he is playing with fire.
According to several sources, including the Federal Trade Commission and Internet Fraud Watch, here are the most common scams:
The most popular scams these days involve auctions. The buyer gets caught up in the bidding process, comes away with a good price, but never receives the merchandise. Auction fraud makes up about half of the Internet fraud cases.
Merchandise is paid for but never delivered.
Charges for Internet services that were supposedly free. This figure may be under represented since many of the “free” subscription services are for pornographic sites, and consumers are usually too embarrassed to report an incident.
Shopping online may be new, but the laws governing commerce are well established. The same laws that apply to mail and telephone orders apply to online shopping. See the FTC web site for more details http://athttp://www.ftc.gov/bcp/conline/pubs/buying/mail.htm. For more information about Internet Fraud, see the FTC http://athttp://www.ftc.gov/bcp/menu-internet.htm or contact Internet Fraud Watch ( http://www.fraud.org ) at 1-800-876-7060.
Buyers are Satisfied
The vast majority of Internet shoppers are getting good products at good prices and receiving good service. Consumers and merchants alike have more options than ever before. And a recent survey shows consumer satisfaction with online purchases is high. So shop on. How else are you going to find those hand-carved Manahikian swizzle sticks?
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Dot Com Losers: Is Anyone Really Turning a Profit on the Web?
By admin | July 18, 2008
Until recently, I fantasized about hitting it big with my own start up dot com. Just give me a sock puppet and a room full of anxious investors-”Wouldn’t you just love to invest big bucks in our latest venture, InTheREDforYearsToCome.com? Or how about ReallyAbsurdBizModel.com? Er, maybe IwannaBeABillionaireIn6Weeks.com?”
Alas, the days of feeding fat from the troughs of easy venture capital are gone. But this may be a good thing. Sure, if you’ve already invested in dot com stocks, the recent stock market reality check may be a painful thing, but I think the future of the dot com is actually strengthened. Resources will ultimately go to more deserving companies-those that have a plan that involves being profitable. In an industry where the business life cycle can be measured in dog years times two, a realistic goal of profits within the first few years ought to be a necessity.
Most of the losers seem to be failing in two important areas. First, a plan for revenue should be in place. Amazingly, many of the failing dot coms have no realistic model for generating income. Some clever strategies have yielded tremendous market penetration without generating any real income. Second, the cost of attracting and sustaining each customer must be less than the net revenue generated per customer. Sounds obvious but many of the floundering dot coms are consistently paying more attracting each customer than they can realistically hope to get in total sales.
Who’s Winning?
In general, business-to-business companies that are already succeeding off-line are able to expand their reach when they apply intelligent marketing strategies to the Internet.
Established off-line catalog companies are succeeding if they manage to deliver online catalogs effectively and efficiently. Companies such as Lands End and DELL have been able to expand their base by delivering strong Web-based catalogs.
Startup online catalog companies that satisfy a narrow niche are succeeding when they deliver in a focused way. Babygiftidea.com has increased sales tenfold in the past year with only modest increases in overhead. Success, according to owner Natalie Taylor, comes because “We provide good products that focus on a narrow need. We improved sales with better action-oriented selling strategies on our pages, strong search engine placement, affiliate programs, and of course, word of mouth from satisfied customers.”
Having a great product that can be delivered cheaply in real-time is a good start. One beautiful example of the Web delivering on its promise of sharing resources is ExpertCity.com. It provides real-time computer expertise via chat room and a shared access to the customer’s computer. ExpertCity facilitates and delivers good service without employing anyone. All support comes from affiliate members. ExpertCity simply takes 15% of all billables. This “just-in-time style of employee” makes the company highly scalable and provides a consistent profit margin. Company spokesperson Shannon Kelly says, “We’re successful because we’re able to get difficult-to-find talent connected with people within two minutes.”
It’s important to emphasize that the dot com failures have little relevance to traditional businesses who are using the Web to extend a marketing channel or expand services. So don’t give up on the potential of the Web. Business is still going strong.
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Integrating Your Goals with an Internet Strategy
By admin | July 18, 2008
a lot to think about. We feel that organizations achieve better results when they are well prepared to get involved with the ongoing marketing and customer service functions. That�s why training, an integrated marketing plan, and a plan of implementation are so important. The result: your company becomes Web savvy.
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Anything on the Internet
By admin | July 18, 2008
Funny things can happen with the Internet. You just might find something you really want . . . even if you don�t know it exists. There are products out there to suit very specific needs.
Everyone in my household, myself excluded, wanted a dog. The trouble is every one of us is allergic to dogs. Being an Internet savvy family, my kids pursued an online search for robotic dogs while my wife hit the search engines with, �dogs for people with allergies.� She tested poodles and an assortment of �low allergen� dogs in person � achoo! But soon she came across a new breed recognized by the American Kennel Club as the American Hairless Terrier. She saw pictures (cute) and read testimonials from highly allergic people who were able to cohabitate without the use of a big plastic bubble.
She emailed owners and breeders and was quickly drawn into a unique family of helpful folks whose lives have been touched by the hairless breed. The result: soon a plane from Baton Rouge was carrying a tiny allergy free dog in an animal crate to BWI. What arrived was pink, totally hairless and smooth like a naked baby. I tried to name him Rubber Dog or Yule Brenner but the kids found a better name, Gadget. You guessed it, they found the name from a Web site for naming dogs.
The American Hairless Terrier is practically allergy proof, does not shed and never gets fleas. Yet they are not particularly valuable. In fact, no one we know, even veterinarians have ever seen one.
There�s a lesson to be learned here. The Internet is a good tool for finding very specific things but it�s not so easy to get the word out. Niche marketing can be powerful stuff on the Net but when there�s potential to expand demand more broadly, the challenges become greater. Although excellent for just-in-time demands, branding is difficult for the seller. So even a great product may not become widely known unless the right channels are used.
In the case of real live rubber dogs, better use of the major portals associated with dogs and pets could help with branding. Feature stories, promotional events and better use of multimedia, would do an excellent job of promoting wider recognition.
Affiliations with larger more established sites is critical to getting the word out. And don�t forget non-Internet media including TV and print. It�s a big country and with so many messages out there, viral style marketing (tell a friend) may have an even greater impact. Anything enhancing word of mouth communications is worth reinforcing. Don�t underestimate the vastness of the market. Some untapped niches may be quite large. I know of Web sites that sell commercial products such as industrial strength mixing bowls only to find wealthy consumers buying them in droves for their homes.
So look out, if you have the right product and make use of all the Internet has to offer, it might soon be raining rubber dogs.
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Quick Connect Toolbar for Connections
By admin | July 18, 2008
Best described as efficiency in a simple click, Quick Connect is a quick launch toolbar that provides direct access to Conncetions by eliminating multiple log-in and web-browser requirements. With Quick Connect, you can search Connections directly from your desktop, quickly and easily.
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