THE INGREDIENTS OF SUSTAINABLE ONLINE SALES TO CONSUMERS EPISODE 1 START WITH YOUR AUTHENTIC PRODUCT

Transcription

1 THE INGREDIENTS OF SUSTAINABLE ONLINE SALES TO CONSUMERS EPISODE 1 START WITH YOUR AUTHENTIC PRODUCT PATRICK PITMAN, THE E-BUSINESS COACH (Lightly edited transcript; reading time: 15:45) This is Bayless for Human Scale Business. I'm speaking with Pitman, the E- business Coach. 's experiences with ecommerce started in 1996 in rural Alabama helping a remarkably progressive fruit and nut candy manufacturer set up a shopping cart on its first website, something pretty inventive at the time. Since then he's helped manufacturers and product designers across the country and in the UK grow direct ecommerce sales channels. His projects have been featured in Internet Retailer magazine s Hot 100 list. In short, brings a unique perspective on how small businesses can thrive online for the long term. Today we're going to talk about the key ingredients to building sustainable online sales to consumers by manufacturers. So,, in your experience how important is it for small businesses to build a direct-to-consumer sales channel? Well,, I'm happy to talk about this because I think it is a real opportunity for small business manufacturing companies to sell direct online. It's something that, I think, was initially an option as other distribution channels were available through more traditional routes through distributors and retail storefronts. But the online ecommerce opportunity has never been greater and, I think, may be required for businesses of a certain size or niche. It's certainly an opportunity to establish your unique product and perspective in a way that protects your margins, prevents discounting, and give you a lot of control over how customers perceive and interact with you all the way through to customer service and fulfillment. So it's a good opportunity, but it likely requires new skills and new tools or maybe even some new people on your team. In your experience what are the key ingredients to building an online channel? Page 1 of 7

2 Those ingredients are going to always start with the product and being able to create your own product line that you can have a vision for. So that's the first. Now, being able to take that out into the world to interact with customers, with people using your product, to be able to capture those experiences is going to be essential, too. The third ingredient is to be able to publish those stories, to be able to express that on your online website. The fourth is understanding how to stay lean through the process: how to find ways to automate your marketing and your sales, to make the best out of the sales software tools that are there available in ecommerce today. Then, I think, that fifth ingredient is being able to listen we re talking about things like analytics and measurements to see what's happening in your online shopping experience, and then fold that feedback back into the whole process. It's interesting that your first point is really about having an authentic or unique product to sell. You're starting there rather than with the technological trappings of ecommerce. Tell me more about why you see a unique product as being a foundation for ecommerce. Well, I think the ecommerce experience is sort of unique versus other shopping experiences because of its capacity to allow instant comparison. Maybe we're moving towards a kind of instant comparison with people walking down grocery store aisles with their smartphone and checking prices at the neighboring grocery store. Maybe that's where it goes with instant comparison. But online there's certainly this ability to compare at just a few clicks. So we have products that are the same but sold by different merchants leading down this perilous path of discounting and finding the cheapest price. Being able to step away from that kind of a game is really creating a reserve for those who can say that you can't buy this product anywhere else. This is something that is unique to our ecommerce store, and it comes with our company's unique perspective on how it was made, why it was made, and how it's used. So, to defend against declining margins, and to really distinguish yourself in a world of instant global comparison shopping, I think, is a fundamental reason for starting with a unique product line. Yeah, that resonates pretty strongly with me. I'm aware of a company that was an early player in ecommerce in a particular niche of the consumer electronics world, and they established themselves as being true experts. Early on they sold other people's products, larger manufacturers products were sold through their site, and they attracted a lot of attention from consumers. But one of the great ironies is that people would come to their site, take advantage of their content and the reports and their comparisons, even call customer service and get advice, Page 2 of 7

3 and then go buy the product on Amazon. The company has had to rethink its strategy and is thinking about getting back into the manufacturing world where they're manufacturing a product that's unique to them. Yeah, I think having that ability to be the source for where your customers know they can go and find things is the kind of advantage that can parlay itself into a whole line of products and a whole sustainable business. But with ecommerce we also have the opportunity to have a great sifting through of all kinds of niche providers. There are conveniences to shopping in person at a large retail store with great selection, but a similar experience is just a few clicks away online. There's an opportunity to go to that one provider, that one supplier of a very unique product. So even if your product line is not massive, there's still the ability to thrive online, provided the fact that your products are unique. In your view, what is does it take to really create a unique product? What's the source of that authenticity and uniqueness? Well, so often it comes from personal experience, and these kinds of experiences shape where we think things matter. So, in the case of one adventure travel company that worked with me for a long time, the basis of their idea of how bags should be sewn and created came from their experience in the Navy, where they were riggers creating parachutes. So they have parleyed that experience of sewing parachutes into sewing all kinds of products bags in particular. That becomes part of their statement of quality, saying if we know how to keep people alive descending through the air in a parachute with every fit and stitch mattering, life or death, we certainly can handle the stitching and take that level of quality to the construction of these bags for others. So, those kinds of personal experiences become part of story telling experience through the website. It become the genesis for all kinds of product ideas. But it also becomes the point around which you can say, we go to a certain extreme this way, and sometimes those extremities of product construction are what makes it unique. The authenticity comes about because it's those combination of things that are extreme in a sense. You can express extreme quality, whether it's chocolate in its cocoa content or in its fabric construction. So that's, I think, a real common place from where authenticity comes from. So it's been said in a variety of different ways that having a difference in your product in and of itself is insufficient, that the difference really has to be dramatic to help people change their view and change their behaviors and buy your product rather than somebody else's. Tell me about the company that was built from the experience as Navy riggers, how that really translated into a dramatic difference that was believable by consumers. How'd they go about that? Page 3 of 7

4 Well, I think about a company that had a product business that was not in bags or travel, but it had a sewing basis. They were sewing essential equipment for weight lifting wraps for knees and so forth. That was something that didn't really necessarily align with the founder s personal passion for travel. So as members of the company went about traveling, hunting, or just seeing different parts of the world, they found themselves with the skills to make their own bags and found that they were pretty, well, uncompromising when it came to how they wanted them to perform. So it came from a personal experience of traveling and creating their own products for themselves that someone said, "You know, I want one of those, too." That's, of course, how products and companies sometimes have their start is friends ask for one, and then it leads from one thing to another, to a whole series of businesses. That reminds me of a story of a woman named Mette Cephers. Early in her career she spent several seasons working in Antarctica. She started knitting mittens and hats for her colleagues in Antarctica. In her case, personal experience and an extreme environment combined into an interesting product. Yeah, and I think that a lot of times, if I would speak to those who are selling other people's products today but want to be more successful in their ecommerce efforts, finding ways to create their own product is where it starts. So,, can you give us an example of a manufacturing company that you think has done a particularly good job of leveraging their passion and their unique product into online success? Yeah, I think there's different kinds of ways of leveraging that personal passion into a product and turn that into an ecommerce business. So I guess I'd want to say that it doesn't necessarily have to come from some great inspiration or personal triumph that you go through that is a genesis for the product. Those can certainly be great ways to come up and develop that unique authentic product to sell online. Let s talk about a couple different ways of thinking or coming across those product ideas. I think there's a great example that does sort of follow the model of going through a personal triumph. There's an exercise equipment company called Primal 7 that had the basis of its product, the founder had been an NFL football player, and had been injured broken his back. It was the classic sort of story of, you know, almost dying through the pain and obesity and the suffering that came from a great injury. He found that he needed to get himself back in shape. Page 4 of 7

5 He was able to develop a product that looks sort of like gymnastics rings but has unique qualities. The uniqueness came from he had no strength after this injury. So there are these bands that support, that make the product different than many other pieces of exercise equipment in that it sort of assumed you have no strength and gives you support. As your strength grows, the product gives you less and less and less support. And it's all refined in this very sort of simplified, efficient exercise package. That's a case where you really have the story of lying on your back with a broken back to come back to full health and vitality, full range of motion, and sort of becoming your own best case study. It's that personal triumph, which is in some ways celebrated and maybe what we commonly think about where a product idea could come from. There's some other ones that companies can find themselves taking advantage of that aren't nearly as dramatic or inspiring. There's another example of that. There's a company, a family business, that s been in the wood working business for 30 years. This is one where they had been supplying parts and pieces to an ecommerce retailer who was selling doors online and found that, all of a sudden, the orders stopped. They picked up the phone to say, "Hey, what happened to your business?" and their customer had just gone out of business. The ecommerce company had been somewhat good on sales and not so good on all the other things that make a business run. They closed up shop overnight. Here is a case where a company that didn't necessarily have its own products or its own ecommerce business was able to say, "You know what? We have all the expertise. We've been in this industry. We've been making parts and supplying this ecommerce retailer. Why don't we make it ourselves and sell it directly?" And so there's a case where they took out the middle man, not necessarily planning on it that way but it sort of fell into their lap, and they were able to recognize all the advantages that could accrue to them when they start to sell direct and be able to make their own products and build up that ecommerce sales channel. They're in some ways new to that business, but with 30 years of experience in wood working and all the kind of parts and pieces that go along with milling wood, that's a great basis from which to develop and create products. It's a great basis from which they can express their credibility to any would-be shopper who can come across and see that, "Hey, here's a company with such experience that the quality of products could be assumed and have a certain confidence in." It's just a different kind of way of getting yourself into the ecommerce business, but just as valid and a good basis from which to build that authentic product. Page 5 of 7

6 Have you had any experience with companies that have gone through the transformation process of not having a particular distinctive product into one that really does well in an ecommerce environment? Sometimes the product isn't necessarily what you think it is. What I mean by that is if we're talking about a travel bag or exercise equipment then, yeah, you could say, that those are the products. But sometimes it can be more of an experience more than just the product itself, and that is the case for a company that was selling jewelry. Jewelry is extraordinarily competitive. There's all price points from the cheapest to the most exclusive. The company found that selling jewelry online was just incredibly hard, such tough competition and not a lot of distinction to the product. So, after great dismay at failed attempts, the company actually decided, "You know, we've got all this inventory. We're just not going to make this business work. It's just a failure." So they went out and bought a new domain name, put the word "liquidation" in the domain name and tried to sell off their stock and pay back the investors. In that case, they found themselves with liquidation branding with a different price point a whole different experience. They found their sales racing through the inventory and at a level that actually made some profit. So they turned it around and said, "You know, let's buy some more inventory or let's make some more," they are manufacturing it themselves, and still kept selling through that liquidation domain name on the website. They found that they were able to, through the close-out concept, introduce other kinds of shopping than just add to your shopping cart and purchase: things like auctions, things like reverse auctions. One of the most successful experiences they've had is being able to put a product on sale and then have the price go down the more people that buy it. So if they have a 100 pieces of jewelry, it's one style, the price might start at $80 for the first. But if you sell 75 of the 100, the price might come down to $50. Or if all 100 are sold, the price comes down to $42. It becomes this experience where people are anxiously awaiting how low the price will go and pass it to their friends, and if you buy more than one the price gets even lower. So what ends up happening is, in this reverse auction context, there's this drama of what the final charge will be and so no one's credit cards are actually billed until the end when the final price is determined for all buyers of this particular style. So, yes, there's an ecommerce shipment of a product in a box that shows up a few days later. But I think they found that their product is really this sort of dramatic Page 6 of 7

7 and somewhat tense but exciting experience of bargaining and shopping. In that environment, everyone feel like they've won a deal. So their product is almost the experience, the entertainment of getting the deal, less about the product itself, which I think is just kind of an interesting way of making, has become now four or five years later, a sustainable ecommerce business. I guess what I'm hearing from you today about the elements that contribute to successful, sustainable, direct to consumer ecommerce relate to the fact that the internet makes it possible for us as consumers to very quickly, very easily scan the world of consumer products. Through search engines and other mechanisms, we can find the niche that really appeals to us. Because of that ease of search and comparison capability, it really behooves us to create something distinctive. Because if we don't have anything distinctive, we find ourselves in the world of commodity selling. If we're small, we're likely by definition not going to have the economies and scale and scope to be able to compete with the likes of Amazon, for example. Am I hearing that right? Yes, I think so. To the extent that Amazon is creating its own brand of products, is a sign that that has to be done for even the smallest merchants. Competing with online marketplaces or just selling someone else's products is not a way to make anything that's going to be either profitable or sustainable for the long term. That doesn t mean you can t fake it for a while. But if we're talking about really thriving online, to be able to distinguish yourself, the product, around which there's a story and an experience that your customers can come and get excited about, that's going to be essential for any kind of online sales. In our next episode, and I are going to dig deeper into the second ingredient of successful online sales the need to interact. Until then, on behalf of Human Scale Business and the E-business Coach, thanks for listening. Page 7 of 7