SME e-business success is just a matter of perspective. Liz Warren
shows that if you are small you can still be beautiful.
The Internet can be a scary place for any company. For small and
medium-sized enterprises (SMEs) without a big IT department or a
management team stuffed with MBAs, it can be terrifying. At a time
when dotcoms are losing money hand over fist, big retailers are
launching sites which flop spectacularly, and sites stymied by
their own success can't deliver on their promises, can SMEs really
make a success of e-business?
In fact, Web consultancies believe SMEs have a number of
advantages when it comes to making the move into e-business. First,
they enjoy much greater flexibility and freedom compared with large
companies: they can make decisions and act on them quickly without
getting too hung-up about cannibalising their existing business.
That's one of the reasons many big companies are spinning out their
e-business activities into separate divisions, which can act like
SMEs.
Second, SMEs can provide an online experience which can be just
as good as anything dreamt up by a big company. "It's all about how
you present yourself on the Web and what your offering is, rather
than the size of the organisation," points out Alex Barnett,
director of sales and marketing at Web creations company
Bluewave.
What SMEs often lack are the resources - technical, financial
and Internet marketing skills - to turn vision into reality. Those
resources are likely to become ever more scarce and expensive in
the near future, but big companies are also suffering a brain
drain, as bright sparks leave to set up dotcoms and join small
start-up companies.
Barnett thinks that SMEs with strong ideas may be able to
capture some of that talent because they can offer a less corporate
atmosphere, plus the responsibility and rewards that would-be
Internet entrepreneurs are looking for, backed by the security of
an established company. Technical staff will also welcome the
chance offered by SMEs to get their hands dirty with all aspects of
an e-commerce solution, rather than being stuck as a small cog in a
big project.
However, before SMEs rush into e-commerce, they should bear in
mind that some products are definitely more suited to e-business
than others. Barnett points out that companies offering intangible
products - such as software, where you can offer time-limited trial
versions for download - will find e-business a lot easier than
businesses delivering real-world goods.
"The classic issue for real-world goods is to state clearly the
limitations for delivery. People are often surprised to find
business coming from Australia, Singapore and the US, and you have
to set rules - and publicise them - for what business you will turn
away," he explains.
There is also the practical issue of delivering physical goods.
Sean McAvan, Internet development manager at ISP Digital Exchange,
suggests that the SMEs who will find it easiest to make the
transition to e-business will be those selling small but high-value
products, where there is sufficient margin to cover the effort of
despatching them to customers individually.
McAvan also sees great potential for e-business where
interactivity with customers is a key part of the process. The Web
will be an ideal medium for offerings where customers need to fill
out forms before receiving appropriately-tailored follow-up, in the
form of a telephone call or specific literature.
Bluewave director Barnett agrees that service-based SMEs -
especially those offering professional services - can do
particularly well on the Internet.
"People are actively looking for professional services on the
Web and conversing with professionals through the Web," he
says.
McAvan thinks the Web can actively help service-based SMEs
compete more effectively against bigger rivals, especially if they
can offer extra levels of service such as online booking of
appointments or online consultations.
What SMEs can't do, unlike large corporates and pure dotcoms
backed by venture capital, is to run their Web site at a loss to
gain market share. "SMEs need to get a quicker return on
investment, grow more organically, be more commercially focused and
be more sensitive to what is or isn't working for the company,"
suggests Barnett.
That means e-business initiatives for an SME have to be backed
by a sound business plan. Chris Webster, head of integrated supply
chain management at Cap Gemini, points out that it's very easy to
spend a lot of money on technology without knowing why you're doing
it. "The first step is to understand what you want to do as an
SME," he says.
Francesco Benincasa, a director of Ihavemoved.com, which helps
people moving home to notify banks, utility providers and so on in
one fell swoop, agrees that SMEs need to think carefully about
which services to take online, and then identify the people,
premises and technical resources required to make that happen. Only
when they have done that should they look at selecting service
providers and Web consultants.
Another key question to answer before you start looking for
technology partners is the size of your budget. McAvan feels there
is a fine balance to be struck between spending too much on
e-business and spending too little. "If you spend too little, you
will end up with a poor shopfront," he warns. "If you spend too
much, you won't get a return. The key thing is to have a clear idea
before you approach a Web designer or consultancy of your budget,
the goals you want to achieve and the timespan you want to achieve
them in."
Finding the right technical partners can also be particularly
tricky for SMEs. McAvan thinks smaller companies tend to suffer
more from bad advice because they lack the resources to shop
around. "Big companies will look at a dozen consultancies - the
average SME will look at just two," he says. "There's also a
temptation to go for an off-the-peg solution which, while it will
work, may not offer anything specific for your business or
product."
Ihavemoved.com took its business brief to a series of agencies
to get their reactions and ideas. "You need to find a company that
really understands what you're trying to achieve and which can
respond rather than slavishly fulfilling the brief," Benincasa
says. "You also need to find someone who can demonstrate similar
projects and show how it will work for you." That's why Barnett
advises on always finding e-business consultants through the Web.
"Go to sites you like and find out who did them, then check out the
developers' own sites," he says.
The next step is to understand what resources will be required
in-house to maintain and manage the site once it has been delivered
to you. You should also do some modelling to look at what might
happen if, for instance, the site becomes much more successful than
expected. Webster points out that one of the keys to being able to
handle rapid expansion is to automate as much of the process as
possible. Where processes involve people, you will face issues
recruiting and training them quickly enough so that the workflow is
not impeded.
Picking the right technology can also be something of a lottery
at the moment, because the marketplace is moving so quickly and
your own requirements may be shifting too. There are definitely
technical limitations on some of the low-end solutions being
offered, but highly scalable, highly robust technologies are very
expensive.
Case studies show that almost all SMEs now trading successfully
on the Web have been prepared to junk the first version of their
site - often because it has served its purpose by allowing them to
learn how to move on to the next stage.
Barnett suggests that because Internet technologies are evolving
so quickly, it's actually not reasonable or feasible to ask for a
system which you can afford today but which can increase by several
thousand per cent in the future. He also thinks it doesn't make
sense to spend a lot of money to support volumes you're not
expecting for another year. He agrees you should start small and
learn from that experience, then be prepared to look around for a
new system when you need to make the next step.
However, Barnett goes on to point out that if you are expecting
significant growth in the short term, your developers must be made
aware, so they can incorporate an upgrade path into the solution. A
good tactic, he says, is to develop a modular system so you can
start with simple or small-scale solutions and then swap in more
complex or robust solutions later.
This will also allow you to take advantage of e-business
services, such assecure creditcard authorisation, offered on a
pay-as-you-go basis by Internet service providers (ISPs). "It will
be rather like operating a franchise within a department store,
where you rely on the store's infrastructure to help sell your
goods," Webster suggests.
Finally, Benincasa urges that you should provide a clear window
for testing before launch. "Most sites are developed in a rush and
testing suffers, but it's critical that you eliminate small bugs,
which will immediately put off visitors," he warns. "It's more
prudent to push back the launch date than to launch a product
that's not robust."
However, even if your site looks good and works well, you may
still face problems. Simon Cairns, business development director of
portal software supplier Ardeo, points out that SMEs don't have the
brand name and promotional spend that big companies have to attract
customers to their sites. He also thinks that search engines don't
serve SMEs well, since many search engines operate on the principle
of indexing the biggest and most popular sites.
"Because SME sites aren't big or popular, it can be like putting
a billboard in the middle of a field seven miles from the M1. You
won't do any incremental business except with your regular
customers," he says.
The solution, he says, is to link into a portal or
community-based site, since these will attract enough traffic to be
indexed by search engines, while you should benefit from passing
traffic attracted initially by other firms on the site.
Ardeo offers software that allows ISPs and trade associations to
create portal sites for a particular geography or community of
interest. It is also franchising a number of geographically-based
Ardeo Business Centres which will create local portals and offer
services such as training, graphic design and catalogue imports to
tenants.
If your site does get known, you could find your business going
global. Handled in the right way, the Inter-net can allow SMEs to
extend their geographical reach, Webster points out. But it can
also cause you problems, as US-based popcorn retailer The Popcorn
Factory found.
"We haven't really addressed international sales as well as we
should, partly because there are lots of restrictions with food
products," admits director of marketing Cheryl Zatz. The company's
current approach is to ask surfers outside the US to telephone the
company.
McAvan suggests that having a company with a .co.uk domain name
rather than .com will usually exclude most foreign traffic. "It's
also about managing customer expectations by stating clearly on the
site where you are prepared to deliver." He suggests this should be
reinforced by limiting the options users can select when entering a
delivery address.
Despite these difficulties, SMEs can make a success of
e-business, once they realise there is no mystique to it. They
should treat it like any other business proposition, says McAvan.
Look at where you are now, where you want to be in one, two and
three years' time, what the site should say about your company,
what you want to sell and in what volumes, your budget and how much
you expect to reinvest - and develop clear business plans.
He offers a final piece of advice. "You should then stick to
those plans: if you're not meeting your goals after the cut-off
point you set, you should cut your losses and invest in something
else."
10 steps to SME e-business success
- Find ways to differentiate your offerings
- Look for organic growth and quick returns on small
investments
- Determine what resources and processes will be required to
fulfil orders
- Decide where you're prepared to deliver to and explain clearly
what you have to offer visitors to your site
- Shop around for consultancy services and use the Web to find
implementation partners
- Identify the resources needed to maintain and manage your site
in-house and make sure you own any solutions delivered by
consultants
- Be aware of limitations in the scalability and robustness of
technical solutions - but don't expect to find a solution that can
scale massively
- Be prepared to throw away your first site and start again -
with the benefit of the knowledge you have gained
- Attract traffic by linking to a portal or community
Case study: Just the ticket for Nottinghamshire County
Cricket Club
With its main ground - Trent Bridge - a leading venue for
international cricket, Nottinghamshire County Cricket Club was
quick to recognise the potential of the Internet to communicate
with supporters around the world. The message was driven home
during the 1999 Cricket World Cup, when the club's Web site was
bombarded with requests from supporters looking to purchase tickets
online. Since the majority of the club's sales were already made by
credit card, with a sizeable proportion made over the telephone,
Web-based sales seemed a natural progression.
The club therefore scrapped its first, information-only Web
site, created around two years ago, and developed a new one
providing online sales of tickets and merchandise, using BT's
StoreCentre catalogue service. Lynn Steel, the club's membership
secretary and ticket office manager, explains that StoreCentre was
chosen because the club felt it would be simple to set up and easy
to maintain, as well as cost-effective.
The revamped site was launched last November to coincide with
the release of tickets for this year's international matches.
Tickets for all international and domestic games, as well as coach
travel and club memberships, are now available through the site.
Web customers can also purchase club merchandise and around 250
items of cricket equipment, building on a limited mail-order
service already being operated by the club shop.
Development of the site was handled entirely in-house by the
shop and ticket management team, who have only limited technical
expertise. According to Steel, they were amazed at how easy it was
to set up StoreCentre. The major drawback, she explains, is that
the visual appearance of the StoreCentre part of the system can't
easily be customised to look like the rest of the Nottinghamshire
County Cricket Club site. The club is now pressing BT to develop
StoreCentre to make this possible.
In the site's first six months of operations, around £20,000 of
business has been received, mostly for international tickets and
club memberships. Steel is delighted that the Web site appears to
have tapped into new markets, since a high proportion of people
booking through the site have never previously visited Trent
Bridge. Sales of cricket equipment are also starting to take off as
the domestic season opens.
The club hasn't yet received any international orders from
customers in the two countries whose test sides are touring England
this year - the West Indies and Zimbabwe. However, Steel expects to
see significant overseas traffic through the site next year, when
Pakistan and Australia are playing, since the company normally
receives a large number of telephone-based orders from Australian
supporters.
Visit the site at: www.trentbridge.co.uk
Case study: Catalogue of success for the The Popcorn
Factory
The Popcorn Factory has been selling gift tins of popcorn
through mail order catalogues and a factory shop in Chicago since
1979. Retailing its products through the Internet was a relatively
simple step, because it was already set up to make home deliveries,
and it has been trading online since 1997. "We saw that other
catalogue companies were getting good results by linking up with
Internet service providers (ISPs) such as AOL, so when the Internet
opened up, we felt we couldn't fall behind," explains Cheryl Zatz,
The Popcorn Factory's director of marketing. "We felt that we
should at least get our foot in the door and learn, even if we
didn't create the best Web site to start with."
In fact, the company quickly realised that its first site wasn't
up to scratch - with reliability a particular problem - and that it
needed to invest more in its online activities. In October 1998, it
brought in European-based Web creations company Bluewave to
overhaul the site. According to Zatz, Bluewave was able to take The
Popcorn Factory's marketing ideas and translate them into a robust
technical solution, finding partners such as its host ISP, PsiNet,
as well as creating the site.
Zatz explains that the Web site doesn't simply replicate the
paper catalogue: the number of products is limited, to avoid
creating navigation problems for users, but the site does include a
number of exclusive lines. Zatz says it also proves a very useful
channel for clearing older or overstocked merchandises, since
offers can be added easily and then removed quickly once the stock
has been sold. The company also sends out monthly e-mailings to
alert customers to special deals on the Web site.
The new site has proved a hit. According to Zatz, sales through
the Web have grown from 5% in its first year of operation to 10%
this year, despite the company undertaking very little marketing to
promote the site. Around half of these orders are from new
customers, although Zatz is still analysing the data to determine
how many are pure Internet customers and how many have previously
received a catalogue but are choosing to place their first order
online. "One of the things we are trying to monitor is whether we
are cannibalising our catalogue sales, but so far it seems to be
incremental business," she says.
However, success has brought some problems. In the run-up to
Christmas last year, the site proved so popular that bandwidth
bottlenecks became an issue, while additional sales through the Web
caused problems with stock levels because they hadn't been
accurately factored into the company's manufacturing forecasts. The
company is now planning to introduce a new order entry and
fulfilment system later this year which will be integrated with the
Web site, so that customers can find out whether stock is available
and check the progress of their order.
Visit the site at: www.thepopcornfactory.com
Case study: Virtual reality flythrough fires up Chantry
Kitchens' trade
Getting yourself noticed among all the clutter on the Internet
is a hard task for any company, but it is especially difficult for
smaller businesses. A revamp of its Web site has helped
Yorkshire-based Chantry Kitchens to improve its performance and
position in search engine results, while a virtual reality
flythrough of its showrooms is grabbing the attention of potential
customers. As a result, the company has increased its business by
around 10% month on month since the revamped site was launched six
months ago, and it has extended its customer base from Yorkshire to
the whole of the UK.
The company, which manufactures its own range of kitchen
furniture and offers associated services such as planning and
installation, first went online around two years ago with a very
simple, static site. Managing director Graham Ware explains that
the company was spurred on by the sense that it simply had to have
a Web site to remain credible, but he admits the company initially
found it hard to relate the possibilities of the Web to its own
products.
The breakthrough came when the company began investigating
computer-aided design (Cad) and estimating software. Around the
same time, one of Ware's former business partners joined Web
consultancy Vital Online and opened Ware's eyes to the potential of
combining Cad models with the Web. Ware commissioned Vital Online
to develop the virtual reality showroom and overhaul the rest of
the site.
Although Chantry Kitchens uses its Web presence to generate
leads, Ware says the company has no plans to move into selling
flat-pack kitchens entirely over the Web. "We fully intend to
continue to offer the full service you would get from a specialist
kitchen company," he says. However, the volume of responses -
between 20 and 40 leads a week from across the UK - has obliged it
to change the way it interacts with customers.
"Initially we sent out our full-colour brochure to each enquiry
made through the Web site, but that proved very expensive," Ware
explains. "Now we send out a more limited leaflet, with information
about the company. We only send out the full-colour brochure if
potential customers come back to us. We're also hoping to determine
through the Web site what potential customers are looking for, in
terms of style, price range and whether they've already had plans
drawn up."
The company's transition into a nationwide supplier - with the
majority of its Web business coming from the South East - has also
forced it to make changes to its fulfilment operations. Ware points
out that many different components have to be brought together to
create a complete kitchen. The cost of getting that wrong and
delivering an incomplete or incorrect order becomes much higher
when you are delivering to customers who are 200 miles away rather
than 20. Its Web-generated business has therefore forced Chantry
Kitchens to strengthen the management and quality control aspects
of its fulfilment process.
Visit the site at: www.chantrykitchens.co.uk