A-Clue.Com
by Dana Blankenhorn
Volume IV, No. LI
For the Week of December 18, 2000

This Week's Clue: The Need for Transparency

This Week's Clue: The Need for Transparency

SSP (Shameless Self Promotion)

Next Turn of the Search Engine Business

Not Smart, Ju-know?

Clued-in Writers for the Clueless

Clued-in, Clueless

While writing about my online Christmas shopping this week a lot of the problems and remaining opportunities in this space came together in a solution.

I've written before about the need for transparency in markets. In a stock market, buyers and sellers must feel confident they're getting the best possible price at that particular moment and that the other side will not renege on the trade. The same thing is necessary in trading commodities, or industrial goods. It's vital in evaluating and exchanging risks, not just the usual commercial risks, but the risks inherent in producing goods, manufacturing goods, and supplying goods.

As I conducted my own Christmas shopping I realized this is what we're also looking for from b2c Internet commerce - transparency. We want to feel certain we're getting the best price, or at least the best value, but we want more. We want to believe that, if we don't like the deal, we can return what we bought. 

Size and brand give us that assurance, for the most part. That's why all the malls seem to have the same stores - they do have the same stores. Advertising and merchandising and performance come together in an intricate dance for every retailer, creating that elusive measure of transparency known as goodwill. As a result we shop at Wal-Mart, at Sears, and at Home Depot with confidence.

Why isn't that true online - why aren't Wal-Mart and Sears eating the lunch of other online retailers? For one thing it's because scaled fulfillment, and faith in delivery, must be there before we'll trust an online retailer more than once. So far only Amazon has managed this feat - and its lead remains fragile. (Doesn't Sears wish it hadn't closed its catalog operation in the early 90s?) 

The e-tailers tried to use venture capital money to build transparency quickly. They failed for two reasons. Their money ran out of patience, sure, but more important transparency is something that can only be built slowly. Wal-Mart started as one store. It developed its systems for merchandising and fulfillment slowly, carefully, over decades. It built its goodwill with every transaction, and kept re-investing in doing things better. Instead of building the Wal-Mart Corp., in other words, e-tailers would have done better to build a single Wal-Mart. 

What are we left with? We're left with a window of time in which the current mall store leaders may, if they can deliver online fulfillment and customer service, walk away with their market segments. It's an opportunity, not a guarantee, and there are two ways to seize it. 

The obvious way is for retailers to buy e-tailers, or at least their fulfillment and customer service operations. This would provide instant scale, along with instant management headaches. Most aren't doing this at all - instead they're building their operations from scratch, inheriting the headaches without the learning curve.

Another way is to build slowly. You can do this with your store by treating every customer gently, by following-up on all orders, and by encouraging satisfied customers to tell their friends about you. If you operate in this way, you will slowly win new cash and new opportunities to build your business. For a larger store or chain, the solution may lie in a single product within their category.

Take the Razor scooter for example. You can't find a real one this Christmas for love or money. This is where the big store can use its procurement power, its fulfillment power, and its reputation to best effect. Put some signs in the store, offering real Razors when available, focused on the store's URL, then take orders both in the stores and online. Deliver a personalized card with each order, a note from Santa, promising delivery as soon as the elves get their acts together. Then deliver those orders, scaling the back-office as supplies come in. 

Every market niche has its own hot product, its own opportunity for a retailer to become an e-tailer slowly. For a smaller retailer, my advice is that you operate efficiently in the tiniest possible niche. Gain a reputation there, gain leadership there, and then expand that leadership slowly. 

I buy a lot of things from small retailers. I have a favorite drug store, a favorite food store and a favorite bookstore. They're all small and locally owned. I trust the people who work there. They deliver real value, and good information on their stock. You can build such a store. You can grow into leadership. 



SSP (Shameless Self-Promotion)

We're now a syndicate! I've begun self-syndicating the columns and items of A-Clue.Com to Web sites and print publications. The base rate for a Web site is just $100/week - which includes the weekly Clue column, the separate news features, and our most popular feature, Clued-in and Clueless. Your site will be able to publish this content each Monday, the formal date of publication. Drop me a line  for more information. I've also launched a weekly column at WorkZ, aimed at the needs of small business. I hope you check it out.

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Also, please pass this along to friends and urge them to join our list. And don't forget our new e-mail address . My Clues come from daily writing for ClickZ. I write monthly for Crain's B2B, and Boardwatch. I've just started writing regularly for WorkZ  and my monthly column will launch next year in Publish Magazine. I have written for Internet Content and Advertising Age  as well. Yes, I'm very busy, but you can still buy my book.

Remember that it's journalism that keeps the Clues coming...


Takes on the News

Next Turn of the Search Engine Business

The search engine business turns out to be more complex than first imagined.

Yahoo, Excite and Lycos thought that search was just one service in a larger "portal." Netscape's Open Directory and LookSmart thought human editors could do the job. Inktomi and Google figured it was all in the algorithm.

It turns out that the search engine business is in a state of continual evolution. Algorithms change, spiders change, techniques change, but business models also change.

The two leading search engines of 2001 illustrate this well. Both Moreover  and Net2One  illustrate that time-to-market for data is as important as the search algorithm used to find that data. Both specialize in news stories. Both have been around for a while. Both are only now achieving notice.

With notice, they're also facing threats. The biggest, and stupidest, comes from copyright owners who fear people will access stories through links rather than directly, and this somehow puts their business models at risk. Nothing could be further from the truth. I already get my news from an index that does the same things Moreover does  but that doesn't make me less valuable to news sites. It makes me more valuable.

Not Smart, Ju-know?

Juno Online Services has lately become the poster child for the aggressive ISP. While other free ISPs have been shutting their doors, Juno has been moving from free service to paid service. It has taken a heavy TV ad schedule and lined up to offer broadband services via cable and satellite , two paths most ISPs would find impossible to follow. The company has been aggressively grabbing other failed ISPs' subscribers and hosing those subscribers through "marketing" agreements with companies like Walt Rimes' TargitMail .

I think the other shoe will drop soon, that Juno will fail. At its most recent price the whole company is worth just $57.4 million . The company has yet to turn a profit and in its most recent year lost more than twice its present market equity. Juno is trying to make the transition from a free e-mail service to a paid broadband ISP, but there's little evidence it has the customer service capability to do that.

Perhaps Juno will be worth more dead than alive. Its failure would put the lie to the efforts of cable and satellite providers to claim they're "open," even while they're hiding the details of connection agreements and seeking to charge extraordinary sums to other ISPs for the privilege of negotiating with them. First mover advantage has always been worthless, and that has never been truer than in this case.

Clued-in Writers for the Clueless

Name brand publishers, like big market baseball teams, have a continuing opportunity to seize leadership by buying the best talent available. This is true no matter how Clueless the publishers may be. It's especially true at a time like this, when journalists fear unemployment more than they yearn for autonomy.

What this means is that some great Web journalism is now coming out from organizations that are Clueless about the Internet. Forbes , for instance, is dumber than George W. Bush (and that's dumb), but they're got an ace in the hole with David Simons.

The New Yorker (yes, the New Yorker) has also been building a stable of Clued-in writers to replace Ken Auletta, a media writer who really understood nothing. James Surowiecki (who I've mentioned before ) has turned out consistently fine essays with "The Financial Page." But the magazine has also built a strong bench, young staff writers who understand not only the Internet but, more important, story-telling as well. If the company had a Clue about how to exploit them it could become dangerous.

The Clue here is that other publications can do this as well. Great talent is available at popular prices - seize the day.

Clued-in, Clueless

Clued-in is Larry Chase , publisher of Web Digest for Marketers. Larry has been around so long, and has done so well in his niche, that many have forgotten he was here before any of us. He'll also probably be here after all of us have left. What brings him to my attention today is a recent issue of WDFM in which he noted that the companies whose people spin the hardest are usually the first to go belly-up. It was just another brilliant observation from the master.

Clueless are the Online Journalism Awards . The winners all engaged in the kind of headline-grabbing nonsense found among winners of the offline awards. In fact, they could have been the same. None of the winners used the medium to anywhere near its potential, or even tried.


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