eCommerce and

If you’ve ever leased commercial space you’re likely aware that parking spots can be an important concern.  In the past it has been for us.  How many spaces do we get, what lot are they in, is the lot shared, and so forth.  A good lease will answer all of these questions for all tenants involved.  Luckily in our current location the issue isn’t of much concern.  We do share a lot with our neighbor but there is ample space for all employees and visitors.  We’ve never once exhausted the available parking.  

None the less, a few days ago our neighbors decided to paint their business name on a handful of the parking spaces closest to their building.  Bare in mind, closest to their building means 20 steps closer than the furthest available space.  As one of my partners and I stood in the lot chuckling at this discovery we found ourselves thankful that (1) in this soft economy our business is busy enough that we don’t have time to unnecessarily paint parking spaces and (2) we knew all of our employees are graceful enough to gladly walk the extra 20 steps if it made our neighbor’s day a smidge better.  Just a fun share from the life of an entrepreneur.
 

Last night (late last night) we temporarily (very temporarily) took our eCommerce properties down for maintenance. The downtime lasted about two minutes. Since not being down is, obviously, absolutely necessary for a pure play Internet retailer to function at all, staying up is of the utmost importance to success.  In order to gain some perspective as to the cost associated with downtime, this morning we performed an exercise to calculate how much revenue we lose a minute while we're down.  Although that number makes me sick to think about, we had no idea what we were in for today, or how timely our exercise really was.

Amazon.com Goes Down

This morning, while I was researching our competition on Amazon, I was shocked to see that none of the links were working.  I tried best sellers, a different category and then finally the homepage.  It was such a surprise to me that Amazon was down that my first instinct was to think that it was my connection, my computer, or something I typed wrong in the url.  So I asked a colleague to try to connect to Amazon.  Unexpectedly it wasn't me, my connection, or my computer, it really was that Amazon was down.  I can't yet tell how long they went down, however this article was published at 11:02 AM Pacific Standard Time and our team saw that they were back up by 12:11 PM Pacific Standard Time, so maybe an hour or so. 

Om reports that it was two hours:

"A word from Amazon’s spokesperson: 

The Amazon retail site was down for approximately 2 hours earlier today (beginning around 10:25) - and we’re bringing the site back up.

Amazon’s systems are very complex and on rare occasions, despite our best efforts, they may experience problems. We work to minimize any disruption and to get the site back as quickly as possible.

Amazon’s web services were not affected nor were our international sites."

An Unfriendly Error Message

Currently I get a Http/1.1 Service Unavailable which is a fairly generic and unhelpful error when visiting one of the largest ecommerce properties on the Internet. It seems that nothing is being done to update users of the issue or note when the site will be back up. Even though we have two Amazon accounts we sell through, no e-mails or contact has been made mentioning the outages.

Here is a screen shot of the error page.

We wanted to make sure the issues was not location based or an issue on our end so we tested Amazon utilizing a proxy service.  Here is a screen shot of the error page through the proxy service.

Every Minute Amazon Loses $37,947.78 

Since it's infancy, Amazon.com has had it's share of tough times.  The weathering of the dot-com-bomb, perpetual uber lean margins, massive growing competition, an ever growing infrastructure, and now a softening economy, In order to survive, Amazon has been forced to innovate in a myriad of ways.  Everything from longstanding and aggressive free shipping promotions to the Amazon Seller Central Marketplace to Amazon Web Services have helped the retailing giant push forward.  Interestingly, recent metrics have hinted that the mega retailer has swung the pendulum.  Amazon's first quarter results were stronger than expected, thanks in part to strong sales in electronics and general merchandise.  Moreover, Amazon issued a forecast for the current quarter and year that indicates a stronger outlook than Wall Street's current estimates.  During the first quarter, revenues increased 37 percent to $4.13 billion, verses the same period last year.

Jeff Bezos, Amazon.com's CEO, stated that "Our sales growth this quarter was driven by low prices and millions of in-stock items available for immediate shipment."  He added "We're grateful to our customers."

I wonder if what Bezos really meant say was, "Our sales growth this quarter was driven by NOT BEING DOWN.  We're grateful that we AREN'T DOWN."

Let's do some rough math see what Amazon.com might be losing during every minute of downtime.  Amazon expects to generate between $19.1 billion and $20 billion in revenue this year.  Wall Street's projections are on the lower end of that spectrum, at $19.3 billion.  Let's go the optimistic route and say that Bezos will figure out how to reach $20 billion.

($20,000,000,000 projected annual revenue / 366 days in a leap year) / 1,440 minutes in a day = $37,947.7838 Amazon loses every minute of down time

My stomach just fell out of my stomach.

Now, of course, this math is a bit dirty.  They might not reach their projected revenue high.  They obviously sell more during certain times of the day, week, month, and year.  They generate a significant portion of their revenue during the run up to the holidays.  Their international sites may not have been affected.  They generate revenue via other channels, such as Amazon Web Services, that might not have gone down.  Many, many unknown variables could affect this math.  However, we do know this, the number is big.

Let's see how much they lost, assuming they were down for only one hour (Om's post indicates two hours) using the math above.

$37,947.78 Amazon loses every minute of down time x 60 minutes in an hour = $2,276,866.80 lost due to this morning's downtime

Holy freaking crap!  My stomach already fell out.  Nothing is left to fall out.

Let's say it was only half of that.  It's still seven figures.  Wow.  In the word's of Tommy Boy, "[Tommy running into a glass wall] Ow, That's gonna leave a mark."

I don't know what takes Amazon.com down for an hour, but I hope it was something big and something new.  I think our downtimes are inexcusable and our revenue per minute pales in comparison to Amazon's.  Around the Gordian Project we're always talking about scalability.  One of the issues we think about is as pertains to scaling is, if we find a hole, a bleeder, an inefficiency, and we don't plug, bandage, or efficient-ize it, and then we grow, how does that issue or problem scale with the company.  If the hole grows at least linearly with the growth of the company, then we could be in trouble, depending on the size of the issue, relative to the size of the company.

For whatever reason Amazon.com went down today, I wonder if they went down for the same reason when they were just a "tributary".  If so, maybe back then, when the company was smaller, the dollars lost didn't seem so extraordinary, and as such, the issue one that didn't make the top of the "plug, bandage, or efficient-ize" list.  Now that the company has grown up, the issues relative size, although maybe not bigger as a percentage of the size of the company, means that the dollars lost have much more of an impact.

Maybe Wall Streets more conservative revenue estimates had issues like this built into them.

As Goes Amazon, So Goes Ecommerce... 

Retailers can and do use Amazon's marketplace as their sole internet sales channel or as an additional sales channel to their own website. Amazon's brand and traffic drive sales for the less known retailers and in return Amazon takes a commission of the sale.  Obviously sales were not coming in like they normally do via our Amazon marketplaces.  I would hate to think what we would do if Amazon was our one and only way of selling products on the internet.  Not only did this issue cause Amazon to lose money but it also caused tons of other retailers to lose money, including us.

Alas, the company, "remains the leader among e-tailers" according to the American Customer Satisfaction Index's fourth-quarter 2007 survey.  This shouldn't surprise anyone considering the numbers referenced above.  I guess the bigger they are, the harder they fall.  Not that we would mind having the problem of generating $37,947.78 per minute...

A Great, but Simple Promotion

When you are in business to sell products online, you may be after such things as more sales, increased internet traffic, and online communities touting your site as a great deal and encouraging people to buy from you. And usually these are good things. But as we found out recently, sometimes you have to be careful about what you wish for. An example of this is the Omaha Steaks promotion that we had just initiated, a promotion that had been highly successful and was well-received.  A little too well-received, actually, and that caused a few tense hours over a recent weekend.

Our Omaha Steaks promotion was simple: when you make a purchase from us, we’ll send you a gift certificate in the form of a coupon code for $20 off your Omaha Steaks order, which we sent along in the order confirmation email. We had partnered with Omaha Steaks, purveyors of fine steaks and other food products, to provide this great value to our customers. This seemed to be a great promotion, and all was running smoothly until it got SlickDeal-ed.

Deal Wars: When Slickdeals Strikes Back!

Slickdeals.net is a great site for sharing, finding, and aggregating deals. I am a frequent visitor of the site, and have made some great buys based on deals I’ve found there. Slickdeal-ers tend to be a savvy bunch who really know how to game the system. They are a great source of information about products, pricing, and great buys.

So when a Slickdeal-er made a purchase from our site and instantly got their free $20 Omaha Steaks gift card in their order confirmation email, a light went on. They posted this great deal onto SlickDeals.net and pretty soon the frenzy began. The Slickdealers searched our site, found the cheapest item they could with free shipping, and began placing orders. One guy even placed over 60 orders! Being the sophisticated online retailer that we are, we allow customers to easily cancel orders that haven’t shipped. Since this happened on a Saturday, customers were able to place orders, receive their coupon codes instantly via email, then cancel their orders and repeat the process over and over again.

While we are all for good deals, we felt it wasn’t fair to our promotion partner to give away these gift certificates to fraudulent consumers whose only goal was to sell them on eBay. So after some discussion, we decided the best course of action would be to send out the coupon code after we knew the order wouldn’t be cancelled rather than instantly. Our terms of use stated that the offer was only good on non-cancelled orders, so those who placed orders then cancelled were not sent the coupon code.

Lessons Learned

This was a great lesson for us in the value of community sites as well as their potential dangers. While we loved the idea of our site getting a lot of notice and exposure, we also learned that we have to protect ourselves from situations that can spiral out of control. Rest assured, while our next promotion or deal may be a “slick deal”, we will take measures to prevent an incident like this from occurring again.

Third party software is like a box of chocolates. Once you buy them, they quickly get stale and can get quite messy.

OK, so this isn’t always the case. However, often you can have buyer’s remorse when it comes to buying software or a service from a vendor. Of course it’s all roses during the courtship phase; they tell you how much better and cheaper they are then their competitors, how reliable they are, and how we’ll see tremendous growth by using their product. It’s almost like it’s their job to sell us something.

Of course we do our research, including price comparisons, competitor research, and cost/benefit analysis, but in the end you really do have to make a decision without first hand experience. Sometimes these vendors work out great, and we get more than we bargained for and that leads to a great experience for all involved. But sometimes things aren’t all they are cracked up to be, and you could end up with something you can’t fully utilize, something that doesn’t work like it is supposed to, or something that flat out is a waste of money.

So for all vendors and potential vendors out there, here are a few suggestions that the decision makers want out of a partner.

• Get to the point - My time is valuable. Don’t waste my time with glossy presentations that offer little real data I need to make an informed decision. Give me useful facts. 


• Don’t belittle your competitors - Rest assured we have or will research them and they are going to say the same things about you. Feel free to point out solid differences that apply to our situation, but don’t get petty. 


• Deliver as promised - Often the salesperson’s job is to get the sale and it is someone else’s job to deliver. If you are willing to say it, put it in writing. We have been burned before and don’t care for your “I’m pretty sure we can do that” or “It should be no problem”. I may like you and I may trust you, but forgive me if I don’t take your word for it. 


• Keep us informed - Have a scheduled downtime? Tell us in advance. Making a major upgrade? Gee, that would have been nice to know yesterday. You’d be surprised how forgiving we are if we are kept in the loop. A major problem discussed in advance is better than a minor one that surprises us. 


• Work with us - Value us as a current customer or risk losing us at the end of our contract. We may not be your biggest client, but we have needs too. Be flexible when you can. A minor sticking point on your end could make a major difference to us. 


• Be supportive - Specifically with your technical support. Have a clear, concise way for us to get answers to our questions. Don’t put us in the support ticket loop and wait for us to call three times before you escalate it. We don’t want to waste your time or ours.
  

Fortunately, we have many outstanding third party partners that we love to tout.  Hopefully a peek into the mind on other side of the equation can be of use to those of you who are or hope to be vendors to eCommerce companies.

What’s in a name? err, well, what’s in changing a name?

If you’ve been living in a cave you may not be aware that we recently launched OutdoorPros.com.  Ok, given the budget for our PR blitz you may get a pass on being up to speed with our new site.  There’s lots to discuss related to the strategy behind this new venture and the execution of our plan, but I’d like to boil this post down to one of the more practical aspects of this step in our growth.

When our plans to launch into a new industry began to take shape my mind quickly began running through some of the ancillary components of the effort.  Sure, we needed to build the site, establish supply, prepare marketing campaigns, and so forth, but we also needed to decide how to organize our business entity, finances, accounting, and banking around two, at that time distinct, businesses.

Long story short, we ultimately decided to create a parent company to house our various website businesses.  This decision combined with other factors has thrust us into the throws of upgrading our accounting system, changing banks, and establishing financial and operational reporting and metrics at the parent and child organizational levels.

Wow, that’s a long intro to present a few tips I hope are helpful if you find yourself in a position to change your business name.  You see, in the midst of all these dominoes, one task was to change our name and form the parent/child entities.

Our business machine has been chugging along for a while now and when I dove into our files titled “business formation”, “operating agreement”, “meeting minutes”, “business license”, etc. I quickly found myself in a pile of paperwork.  After having plowed my way through, with much help from fellow blogger Ellen, we nursed our paper cuts and got the process completed.  So, without further ado, here are the steps/tidbits presented in the order we attacked the change:

1. Make sure you can secure the necessary domain names and do so.  This is obvious to the online community by now.  If you can’t get the domain names, and I’m not talking about some slightly off version of them, pick a different name. 


2. Depending on the type of business entity you have, ours is an LLC, it may be wise to document the meeting minutes when members voted to accept the motion to change the company name.  Along these lines, this would be a good time to challenge your business type given that the new name may represent significant changes.  It may be time to grow out of that sole proprietor status and into a single member LLC, or an S-Corp.  Consult your attorney and accountant; we certainly did before deciding to stick with the LLC. 


3. Consider updating any Operating Agreement or Partnership Agreement you may have.  We were able to add a simple addendum to make the name change.  It’s a simple process and can keep the flow of changes well documented and straight forward. 


4. And the fun part… here is an overview of some agencies we dealt with to make the change, as a California LLC:
   
   • We filed with the Secretary of State to change the name of the LLC to the new parent company name.
   • We were able to keep our existing Federal Employer Identification Number (EIN) but needed to change the name.
   • We were able to keep our existing State Employer Identification Number (SEIN) with the Employment Development Department (EDD) but needed to change the name.
   • We filed for Fictitious Business Names, or DBA’s, in the name of the parent company and the two sites we currently operate with the new parent company as the registrant.
   • We filed for a business license in each Fictitious Business Name.
   • We updated our seller’s permit with the Board of Equalization.
     


5. Finally, plan a fun afternoon of errands.  The county building, the city building, the post office, some shady underground newspaper company that writes your credit card number on a post-it with a crayon, and you are done!
   

One of the more interesting adventures I have had at work recently has been setting up and managing our six (yes count them six) new interns. While we have had internship programs at our company in the past, it has never been at this scale.  Previous programs were simply for benefit of the students who wanted to learn and gain experience, and to support local universities.  This is by far the most interns we have had at one time. I am a big fan of internships, having completed two of them myself when I was in college.  I think they can provide a great deal of real world experience and they look good on a resume, not to mention they provide inexpensive labor to the company.

The first issue that will arise in putting together an internship program is actually getting interns. Sometimes posters around a college campus or a spot at the local job board is simply not enough. Lucky for us we have Tim, one of our managing partners, who happens to teach part time for a local University. This provides our company with a great avenue to spread the word and wrangle interns for our company.

The second issue is making sure potential interns understand the value proposition and what kind of internship your company offers. This starts with the company itself and the development of the program. It's important for interns to gain something besides a note on their resume. Interns can be integrated into many aspects of a businesses and provide cheap or free labor in return for real world experience, industry knowledge and sometimes college credit. All of which can be leveraged as great value propositions when trying to attract interns.

It's important to also give some thought as to what jobs or projects might be best suited for interns in your business. Some jobs might require too much experience, knowledge or training and others might be to simple or mundane. In our latest internship program, we are training our interns in several aspects of search, marketing, data, content creation and management. We then let them create content for our websites learning centers while teaching them why content creation is important.  Finally, we are tracking their progress. They will also be helping with other SEO, marketing and product data related projects as the need arises and as they express interest in different areas of our business. They have already begun some of their work on both the PlumberSurplus.com Learning Center and the OutdoorPros.com Learning Center with work on our Knife Buying Guide and BlackHawk Videos.  They have also started on manufacturer descriptions such as Gerber Knives and Moen and they will continue to fill out both of those content rich areas of our websites.

A couple of areas to be mindful of for an internship program is management and se tup. If possible it can be a good idea to spread out your interns throughout multiple departments making it so that one person does not bear the brunt of the management or organization. If that is not something that you want to do, getting them to come in at the same time or on the same days can also help. Getting everything setup for the interns ahead of time, such as the list of projects, any paperwork, training and computers can be key so that time is not wasted and your interns can start off on a good foot at your business.

While the interns still have several weeks to go, everything seems to be going well and they are expressing interest and getting excited about many aspects of our business. In closing, remember to never forget that an internship program can also be a great recruiting tool, not only are they great for all of the items mentioned above but they go far beyond the standard interview so that the company gets a better idea of a persons work ethic and personality for potential future hire.

I come from what I call the “Entitlement Generation”.  We’re a group of people who operate under the pretence that we should be able to have everything we want and desire, right now.  That dream house our parents worked a career for, fully furnished of course, that car only made possible through a 10 year loan, an “activities” lifestyle for our kids, etc.  And of course, no financial worries.  We can argue that it’s subconscious or that it was instilled by our parents, but the reality of the existence of entitlement mentality, and its effects, is no less.  Now before I get into a rant, let me take it to the business arena.  As a business owner I intuitively know that my partners and I are constantly balancing some intangible equation that includes wants, desires, opportunities, requirements, resources, etc.  There are many variables and we work almost more as conductors than mathematicians to orchestrate a balanced equation.

Recently my two partners and I sat down to discuss the state of our business, our plans, finances, and future.  We’ve come through many challenges over the last three or four years and have found ourselves with an eCommerce company that is steaming along.  As the variables in our equation grow in complexity and number I come to wonder if we are entitled to everything we are pushing so hard to make balance.  I suggested we go through an exercise, a super simple one, to try to get a grasp of the key variables we are trying to orchestrate into some sort of balance.  We sat in front of a whiteboard and wrote down everything we wanted for our business in green and everything we didn’t want for our business in red.  Some items were practical and operational, some were philosophical or spiritual.  

Here are a few examples of the items we included:

• We want no inventory. 
• We want negligible debt. 
• We want strong enough cash flow and reserves to support working capital, superb growth, consistent income, and no sleepless nights.
• We want “fresh out of college” employees with super potential and motivation so they can grow with and propel the company.
• We want our employees to produce the results of seasoned professionals. 
• We want to assume that we, the partners, are not also entry level employees who are growing with the company.  After all, we’re owners, there’s a blue pill we take that provides a couple extra decades of experience.  
• We want to remain wholly owned by the partners. 
• We want to pay well with Google-esq perks and benefits. 
• We want an exciting, entrepreneurial, challenging, and fun work environment. 
• We want to fight on all fronts and capture all the available opportunity, all the time. 
• We want to roll everything we do out in an easy, scalable, error free way.  100% quality, 100% of the time, done by 3:00PM today.  Quality and quantity.

There were several more and with the board full we sat back and stared for a minute.  It didn’t take long to spot the inconsistencies.  Entitlement had certainly crept in somewhere along the way.  Do we want experienced employees or college grads?  There are pros and cons to both and maybe a mix is best.  Do we want to provide time to be entrepreneurial or do we want it done by 3:00PM?  How are we going to fund either or all in a stable way?  These questions get us back to this philosophical equation and the concept of entitlement.  It may sound uber-simple but I recommend any small business owner take a little time to go through this exercise, particularly if there are partners who may have differing opinions, priorities, etc.  It may provide an epiphany, and it may simply create more questions, but in any case you will end up with a better picture of the variables you are working with.  And then the really scary exercise; take this to your personal life.  What are you assuming you are entitled to?