eCommerce and

A recent supplier addition provided a strong reminder that the definition of A, B, and C products aren’t always the same from one shipper to the next.

Driving Sales and Meeting Expectations

Generally, and this is what got us in trouble in the first place, manufacturer’s class each unique model number based on some understanding of performance, and the market’s demand for that particular model number. The manufacturer experiences this demand as turns, or total number of units sold in a given period of time.

When adding new product lines, it’s important to clearly communicate reasonable delivery expectations to a potential customer. These expectations can be communicated in a number of ways; in stock, out of stock, quantity on hand, or with lead times to name a few. Customers are then free to make their buying decisions based on their specific project deadlines.

It can be difficult to balance driving sales with communicating availability, especially if the product has an unfavorable lead time.  Don’t shy away from this kind of proactive communication solely for the purpose of increasing sales. Communicated or not, note that every customer has some set expectation for what they consider a reasonable delivery time. Right or wrong if you’re unable to meet this expectation the sale will likely result in a cancellation and likely the subsequent incurred transaction fees. Nothing is gained but a poor customer experience. Framing a customer’s expectation of a reasonable delivery time with availability information serves to curb a potentially out of control cancellation rate.

The A's, B's and C's of Product Classification

As part of a recent supplier addition, we built our availability logic around the suppliers communicated A, B, and C classifications. At the heart of our logic was this understanding that an “A” product should experience greater turns and therefore be stocked accordingly; subsequently “B’s” then “C’s”. In less than four weeks a high cancellation rate was raising its head. In an attempt to positively impact our cancellation rate, a meeting was calendared to sit down with our supplier’s purchasing department. It was quickly pinpointed that a far more complicated definition of A, B, and C was at play. Things such as anticipated turns and current marketing efforts were skewing the historical data from which their classifications were determined. Stocking hadn’t necessarily caught up to these classification efforts.

It was apparent that a more real-time solution needed to be established for determining unallocated on hand as well as next anticipated unallocated delivery dates. Building availability logic around this data should prove accurate, translating into a more positive customer experience with a decreased cancellation rate.

A Couple Key Take Aways 

• Consider communicating availability clearly pre-transaction for a better customer experience. 
• When establishing a new supplier relationship, make sure you’re aware of the internal philosophies that establish classifications from which you’ll build your logic. 
• Attempt to peal back a layer from classifications by seeking real time unallocated availability. 
• Always keep an eye on reporting such as cancellation rates. Look for nuances that will help you bring efficiencies to your processes before a potential issue is out of control.

On PlumberSurplus.com we sell an awful lot of Delta Faucets and from time to time we need to gather images or research product data to make sure that our information is correct and up to date.  This means that we occasionally have to resort to using the manufacturer's website, if one is available, and that's where this story begins.

My Database Team Leader was telling me about an issue he was having in using the Delta Faucet Company website and I offered my assistance to see if I might be able to help figure out the problem. While using their search, I ran into the same issue he did, a screen full of gibberish with no search results or useful information in sight.

Forecasting: A Basic Process for Stabbing in the Dark

Over the last few days I’ve spent some time polishing up our financial forecasts for some interested 3rd parties.  I’m a firm believer in the value of forecasting and planning from the very earliest stages of a venture.  I do all kinds of estimating, budgeting, and forecasting for many reasons.  Sometimes I need an accurate picture of where we are, sometimes I need a conservative picture of where we will likely be in the near term, sometimes I need and exciting picture of where we could be in the longer term.  In any case, the aggregate of the analysis helps provide me with a comprehensive understanding of our business, past, present, and future.  During the refresh process I decided it may be valuable to share some basic thoughts regarding forecasting for a small business.  Although there are very sophisticated methods available to “Engineer MBA’s”, there are some real basics that I think would be beneficial to someone just starting out, and pointed in the right direction.  After all, who really wants to get into linear regression?

In general, as you walk through the accounts in your profit and loss statement you will find that some accounts are what I will call “fixed and known”, at least in the near term.  These accounts may include things like monthly lease payments, general liability premiums, or your annual California LLC fees.  The rest of the accounts are things that are generally tied to a combination of historic reality and a forward looking strategic plan.

Start with the “Fixed and Known” 

I suggest tackling the more obvious “fixed and known” accounts first.  For example, if you’re in the highest LLC fee tier then the fee isn’t going to change until it’s finally ruled unconstitutional and goes away.  Then you get a big refund check, assuming you’ve filed the right paperwork, and you can go buy a Range Rover.  Anyway, knock those easy ones out first.  Careful though, even some of these “easy” ones may need a little extra thought...  If you’re sure your office space and lease terms will accommodate your planning horizon then plug in the number.  However, if you plan to grow or move within the period, you’ll need to estimate the new “fixed and known” lease payment numbers starting at that point.  If your office space use is very flexible you may even forecast based on headcount and a standard square footage per employee.  In any case, with a little thought and consideration of your future plans you’ll be able to knock these out fairly quickly. 

Forecasting the Unknowns 

On to the tougher ones!  The revenue forecast may be the most challenging and important forecast of all.  Many times other accounts are driven by the revenue forecast.  For example, if your margin is a steady 35%, your cost of goods sold will likely be forecast at 65% of revenue, assuming the absence of early payment discounts.  The revenue forecast should incorporate your historic performance as well as future plans.  You can look at simple sales dollars, customer acquisition, order generation, average ticket, market trends, growth rate when you did X vs. Y in the past, etc.  Hypothetically speaking you may say that in 2006 you focused on “product offering breath and depth” initiative which generated 35% growth in order count.  In 2009 you plan to focus on that initiative again, while also implementing an up-sell program to increase average order by 5%.  You can use these numbers, with a 2008 actual, to build a 2009 forecast.  Likewise, if your plan includes less sales growth focused initiatives in 2010 you may forecast less growth in that year. 

Performance, Present Condition and Future Plans 

This past performance, present condition, future plans thinking is the cycle you need to go through for each account.  Using transaction fees as an example… A) In the past our volume was lower and our rates were higher. B) Recently we had our rates reviewed and lowered based on our increased volume. C) Next year we plan to implement a payment service that carries a lower average rate than the services we offer today.  If you can estimate the percentage of transactions that will use the new service based on some past marker you can easily forecast the transaction fees through your planning horizon by applying the current rate to a portion of your revenue forecast and the new rate to the remainder of your revenue forecast.  How about 3rd party vendors that don’t have fixed contracts… A) How many seats with which vendors have you used at past revenue levels?  B) How many are you using at current revenue levels?  C) Do you plan to fundamentally change seats/revenue dollar in the future?  Maybe you exchange revenue levels with customer service rep count, which is based on a staffing plan pegged back to revenue.  In either case, revenue is driving its way through to give relative reference for A, B, C, and the forecast.

In this way you’ll go through each account: A, B, C, forecast.  Historic data, current actuals, and a strategic plan is all you need.  And, well, a spreadsheet.  Hope this provides some help and motivation to get started with your forecasting early!

This week’s variety is fun because it is full of images, and as studies have shown as the text increases visit time decreases.

• Google is updating its logo daily in honor of the Olympics.  These are the logos that have graced us so far:
  

• Paying attention to social networks can pay off for the retailer and the social butterflies.
• What if we could create linkbait before it happens?  Visa, in a sense, did it with their latest commercial.
• What are you trying to offer that your competition isn’t?  Seth Godin helps us take a look at the intangibles.
• SearchEngineLand.com reported on a new tool called Wordle this week.  What it does is create a customizable tag cloud of the most prominent words in a text or url.  So I took the liberty of seeing what our eCommerce and Entrepreneurship tag cloud would look like:

Recently a fellow coworker sent me a blog about multi channel selling which was basically a "pro niche" piece.

"A highly effective strategy in ecommerce is multiple channel selling. This involves having several niche websites targeting different demographics, displaying specific product ranges. This allows you to create completely focused websites with a high sales conversion rate."

While I understand the niche v. mega site argument (and I also may have my mind set on which I like best both from a customer and retailer perspective) I thought this was an interesting article which highlighted all of the great things about niche websites and none of the bad. I know people say they are great because of the niche SEO value, the ability to really hone in on your marketing campaigns and the ability to focus on a particular product niche. And I agree, those are some great reasons to sell via niche websites. However, I see even more reasons to avoid buying or selling via a niche website. Developing niche SEO campaigns and polishing marketing strategies can be done on a large scale, in a similar fashion to that of niche retailers, by focusing on categories and product types.

I would even go so far as to say that I think that SEO, in particular, can go much further for larger sites.  I say this because a larger site can draw more links, have more authority within an industry and create a community built around an entire market instead of a niche. My next step in the conversation or thought process then usually turns to the ability to cross sell, up sell and convert repeat buyers which is much harder and far less effective on a niche website.  Think about it, how much harder would it be to convince a consumer to buy just one more barstool on a website that only sells barstools, as opposed to a website that sells outdoor furniture who can then up sell on the matching tables, chairs, accessories, and more?

The next thing that goes through my mind, or the next thing I would bring up in a conversation regarding niche v. vertical is operating costs.  Depending on the retailer's level of technological prowess, I also like to bring up the level of overhead with operating several websites v. one. Don't let me convince you, though; several retailers are moving away from niche websites. The Gap recently combined their web properties so that shoppers can simply visit the gap website and shop at all of their stores by means of one shopping cart. There are also several mega sites like, Amazon, QVC, etc. which continue to do well. So, while I lean on the anti-niche selling side of the fence, I believe it can be done in a scalable and profitable fashion. However, both as a buyer and seller, I prefer the larger non-niche sites.

This also brings up a nomenclature issue. I would consider "multi-channel selling" to be either selling through different means (i.e. as a physical store, catalog and online) or through different marketing channels such as shopping engines, marketplaces, and search engine marketing. So the verbiage of the article is also confusing in and of itself. I might consider the means through which products are listed and categorized on a site a "selling channel", but I would probably classify niche websites as a "selling strategy" based upon how the business has decided to sell online.

A while back I was perusing through a brick-and-mortar Staples and I saw this.  The "Beauty Bamboo Ceramic" priced at $9.99.

What caught my eye wasn't the beautiful foliage or the simple ceramic pot.  What turned my head was the "FOR SALE" sign in ALL CAPS affixed to the plants branch.

Even though the plant was in the middle of Staples (the largest office supplies retailer on the planet), on a rack chock full of fake plants, in the middle of the furniture section, and product names and prices were clearly posted in association with the plants, someone (maybe the manufacturer?) saw fit to make sure everyone knew that these plants were "FOR SALE".

I wonder how many people are walking through Staples and notice this plant thinking "Man, this is such a great fake plant on this entire rack full of fake plants in the middle of the furniture section with all these price signs everywhere.  I sure wish it was for sale, instead of just decorating Staples.  OH CRAP!  Look at that sign.  It is FOR SALE!  EUREKA!".

What if we had to do this in eCommerce?  What if on product detail pages we had to display a banner shouting "FOR SALE" in order to make sure customers understood that our products were, indeed, for sale.  Shoot, do we?

One would hope that any sophisticated internet retailer presents itself in such a manner so that customers understand when they are looking at a product that happens to be... FOR SALE.

The 2008 Summer Olympics started today; opening ceremonies have already taken place in China, but will not be available for viewing on T.V. in America until this evening.  Did you know that the Olympic Rings is the world’s most recognized symbol?

• For those of you that are as excited about the Olympics as I am you can catch an estimated 2,000 hours of online footage via the NBC Olympics site.  If there is a particular event that you are looking to see that won’t be broadcast domestically, Leo Laporte, the “Tech Guy”,  will be giving out websites that are broadcasting events both legally and illegally on his radio show tomorrow.  To listen on demand visit this link. 
• If you have followed our blog or speakers at conferences you have probably heard us talk about hiring “shining stars” or “analytical aces”, these are the top notch employees that help to grow the company and vigorously love their jobs.  We may have an advantage at this since one of our fearless leaders is a professor at a University and is able to give semester long interviews to students without them even knowing it, but what about the rest of eCommerce?  Harry Joiner, specializes in recruiting and filling online marketing executive slots, he says “If the candidate senses online is an afterthought [to the hiring company], then they are not going to work there. It’s essential the company sees ecommerce as a pie-enlarging value proposition, not just a pie-rearranging proposition. Because at the end of the day, “A” players want to go where they are going to matter.”  If you tend to agree with him, then I would suggest reading this interview with Joiner by Alan Rimm-Kaufman. 
• Dan Kaminsky of IOActive Inc, a security consultant firm based in Seattle, discovered an internet security flaw that has the ability to affect emails.  According to the article when Kaminsky spoke at this week’s Black Hat Conference in Las Vegas, the room was packed and had people sitting on the floor to hear what he was going to reveal about the security hole.  Most vendors and many providers have fixed the issue, but some have not, which could leave some at risk.  According to Kaminsky “The industry has rallied like we've never seen the industry rally before”.  For those of you who aren’t so technical (myself included), some of our fellow blogger nerds provided some insight about the security risk:
  From Jordon: “It works kind of like a man in the middle attack, where the attacker can respond to a DNS request before the actual DNS server.  When DNS isn’t using port randomization it’s only responds on port 53 which it makes it easy to intercept the response because you know what port it is on.  If port randomization is enabled then the response can come back on any of over 65 thousand ports making it harder to respond on the correct port. 
  So you would think that the odds are over 1 in 65,000 to make the attack work, except the attacker can respond quicker than the DNS server, say like a hundred times.  So then the odds of getting a correct response becomes 1 in 650, which is much more reasonable.  Port randomization helps but doesn’t completely solve the problem.  So they had to fix some code and other stuff that I don’t completely understand yet.”
  From Zach: “Yea that sounds right, when I was reading about it last week several people said it had to do with some DNS configurations not randomizing correctly. Instead of the ports being random they might be linear or have some kind of predictable pattern so if you can figure that out then you know where to point the attacks.”
• 38% of female blog writers make their online purchasing decisions based on information they have found in a blog according to a BlogHer/Compass Partners study.  This may be an untapped area for internet retailers as the study also shows that 35% of all women in the US participate in the “blogosphere”. 
• Avinash Kaushik of Occam’s razor posted on using Google Trends for competitive analysis.  It’s a great post, but be sure you are prepared before you try to take on this task, Avinash explains “Doing competitive intelligence analysis without knowing enough context about your competitive space, your general ecosystem, is like going to play a football game naked. Won’t lead to a great outcome for you (even if you paid a ton of money for your players - tools :)).”  For those of you who feel you are prepared for the task the post is highly informative.
   

So, usually I'm the guy who is doing his best to champion the cheaper technology solution. Even though the iPhone 3G is not the cheapest cell phone solution, I was so excited that this device was worth every penny and I had to share...

So, I’ve been using my new iPhone 3G for nearly 3 weeks now…I am a believer.  

I remember when I got my first, first-generation TiVo.  I tried to explain to friends, family, and colleagues why it was so amazing and invaluable. I got the standard response; mostly, “I don’t watch that much TV.” This is a terrible reason not to get a TiVo. You watch TV so much more efficiently and the experience of watching TV goes through a paradigm shift that makes one never desire to watch TV in any other way. This is how I feel about the new iPhone 3G. Not since TiVo has a piece of technology so enriched my life and fundamentally changed the way I do stuff.

So, it’s a phone…so what?!  

True. It is a phone. However, it also breaks whatever has tethered you to your phone, phonebook, map, photo album, radio, TV, clock, flashlight, newspaper, calendar, game console, …the list goes on.

What’s more, it isn’t just that the iPhone 3G does all of this, it’s that it does it in a way that changes the way you feel about what you’ve previously experienced with each of the features and tools.  It’s not only that I have everything in one place; it’s that the experience for each of the features is usually fluid, intuitive, and frankly somewhat sexy. Also, my experience of browsing over 3G has been very positive. One of the managing partners here at Gordian Project has a first-gen iPhone and told me before I got one that browsing certain sites on the web (such as flash based sites) isn't always practical on the iPhone. I have found this to be the case when on the Edge network, which boasts an experience like dial-up. However, 3G has been more like a low-end DSL connection. I have been very impressed.

How did you justify the cost?

True, the iPhone 3G costs a bit more money than the standard phone. Similarly, TiVo costs a bit more than someone just watching regular TV. But, the additional cost of the iPhone, like TiVo, is eclipsed by its tremendous value. Here are 10 reasons that the iPhone has so much value for me:  

1. I didn’t have to buy an iPod. 
2. I didn’t have to buy a TomTom. 
3. I will save money by having SlickDeals.net notifications right at my fingertips.
4. I didn’t have to buy a Light Saber.
5. I don’t have to rush home or to the office if there is an online emergency; I can work remotely if needed.
6. I can clear unread posts in Google Reader during my commute (I usually don’t drive in my carpool).
7. I never waste time waiting in lines.
8. Gen Y’ers won’t make fun of me anymore for my antiquated brick.
9. Every time someone mentions something that sounds interesting, I don’t have to try to remember it or write it down…I can just look for that something.  
10. I quit smoking (cold turkey) the moment I got an iPhone 3G.
    

The idea to quit smoking came to me when I was trying to convince my wife that I absolutely had to have the new iPhone. The fact that the iPhone may actually save my life is what sold her.

 
I probably wouldn’t do all that stuff with it… 
 
OK. So maybe you aren’t a “power user”. However, like TiVo, I can’t think of a single profile or demographic that wouldn’t be able to use the iPhone to improve their lives. Everywhere you go, you’re fully connected. If someone could figure out Flash on iPhone’s Safari and if AT&T would allow users to make the iPhone an access point, this device would be near perfect. Of all the technology I have consumed, the iPhone 3G is easily my favorite device so far.

Small, fast growing companies thrive off of nimble, entrepreneurial, growth infested staff at all levels.  The thought is that eventually, you will be able to fill from underneath, as the company grows-up and develops a strong upper management team.  But finding the turning point between hiring for ideas and hiring for tasks is challenging; and there is a point. 

The small business e-commerce entrepreneur must understand that even when hiring for entry level positions, it is better to hire the analytical ace then the taskmaster.   For example, just because someone might say they want to start their own company someday when interviewing for an entry level position, doesn’t mean they won’t be an excellent employee for the two years they do spend with your company, and by no means should it be an immediate turn off.  Yes they might leave in a year or two, but it is better to hire employees that can grow the company with their ideas and complete the tasks, then worker bees that complete the tasks but require additional management. 

The truth is that both the “taskmaster” and the “analytical ace” suffer turn over and it has just as much to do with the nature of the position as it does the nature of the employee.  Finding the tipping point when your company is huge enough, and I mean huge enough, to support worker bees is a fine science.  However, judging this pinnacle could make or break your growth and efficiency.  Especially in this down economy, when investments should be even more calculated and on target, it is better to invest in someone who can grow you, rather than save a few dollars on someone that can sustain you. 

• Amazon announced new payment services in two flavors - Checkout by Amazon and Amazon Simple Pay. Frankly I am excited to see what Amazon can bring to this already crowded space (PayPal, Google Checkout, eBillme and many more). Read the thoughts of Linda Bustos and Scot Wingo on the new service.
• I will not make mention of that new search engine and be another one of the 24,928 posts about Cuil. DANG IT.
• Write your own blog? Want to take a vacation this summer? Lisa Barone at Bruceclay is using guest bloggers to cover while she's on vacation. I leave next week for my vacation but luckily I found a blogging service called Posterous which you might be able to use. You can email just about anything to the system and it will post it your blog, pretty slick.
• Say, speaking of taking vacation like Lisa, and the fact that I also live just a couple miles from our office, I was wondering what else I might have in common with some popular bloggers. Please help me find matches for the following or create one for me, I'll take care of the first one.
  • Live less than 3 miles from work - Lisa Barone, Bruceclay.com
  • Is left-handed - ?
  • Was born in the November -  ?
  • Has never experienced a tornado (since I've done the whole earthquake thing) - ?
• I've planned and routed my whole trip using Google Maps. Earlier this week it appeared that Google was testing new features for Maps. As of today it looks like they may have rolled back certain ones, but I'm happy that one feature they rolled back and kept is the ability to reorder your multiple desitinations. I do appreciate the "avoid tolls" feature, that should save me $20 by avoiding bay area bridges!
• Microsoft's Live Search page got a makeover. If you are familiar with Easter Eggs on DVDs, then you'll enjoy finding the hidden hot spots on the page.
• SES San Jose is coming up soon. It's already August?! It doesn't look like I'll be going (not that I have something better to do), but please don't postpone your honeymoon to attend like this guy.
• I lost all my Scrabulous games on Facebook! If you enjoyed this game as much as I did, be sure to add wordscraper, the replacement that was built by Scrabulous developers Rajat and Jayant Agarwalla.
• I love Firefox 3 more everyday. I found a new favorite Firefox 3 plugin this week that refreshes webpages at customizable intervals. No more pounding the F5 key during a Woot-Off (I mean to review our orders tab without having to always keep logging in). My top 3 Firefox add-on's I can't live with out at work are; ReloadEvery, Screengrab!, and Live HTTP Headers. Zach suggests Search Status, Session Manager, and Web Developer for SEO-minded folks.
• Ask yourself, am I a Guru or an Expert?
• My random fact of the day is dedicated to Matt, our Development Manager, who's been looking to adopt a dog. Los Angeles' top dog is the chihuahua according to the LA Times.