Taking Your Business to the Net

If you're getting sick of the same old business ideas, then it's time to go online. The robust e-commerce market is hotter than ever, and it just may be the cure for what ails you.

According to any given expert, e-commerce sites have grabbed the same share of retail sales it took catalog companies nearly a century to achieve. While business and technology market-research analysts like Jupitermedia admit online sales account for a relatively modest piece of the retail market at roughly 2 percent, the medium has become invaluable for researching purchases. By 2008, Jupitermedia predicts 30 percent of all retail sales will be influenced by the time consumers spend online.

Another proof point: For the fourth quarter of 2004-retail's biggest season-eMarketer, a source for research, data and analysis on e-business, anticipated a 27.4 percent year-over-year jump in online sales to more than $22.3 billion, excluding travel or auction transactions. If you're wondering just how much more potential exists, online auction powerhouse eBay facilitated $8.3 billion in goods traded in the third quarter of 2004, according to a recent financial report.

Jeffrey Grau, senior analyst for eMarketer, cites the "democratization of the retail world" as a primary impetus. For one thing, he says, the online buyer is morphing away from the original stereotype: an upper-middle-class male in his late 20s or early 30s. "It's going much more mainstream," Grau notes. "You're finding that more ethnic minorities are going online. [People in] more rural areas are going online."

From the entrepreneur's perspective, e-commerce dramatically increases the number of customers you can reach. Exclusive research performed by Ipsos-Insight on behalf of PayPal, the online payments division of eBay, found that 72 percent of companies doing business online cited higher sales as a positive outcome of their decision to launch a website. Another 65 percent said they found e-commerce had served to boost their profits.

And the future looks even brighter. Forrester Research, an independent technology research company, projects online sales will reach $316 billion by 2010, or 12 percent of all retail sales; it predicts that by that time, 77 percent of U.S. households will have regular online access, with 40 percent buying online. Forrester estimates most shopping categories will post compound annual growth of between 10 and 20 percent during that period. Certain segments are in line for above-average growth, including tools, hardware, garden supplies and flowers, as consumers shift from ordering over the phone to using online methods.

And then, there's salt.

Salt Gestalt

With a database of 10,000 customers and an anticipated $4 million in 2005 sales, 3-year-old SaltWorks Inc. of Redmond, Washington, bills itself as the world's leading company focused exclusively on sea salt-and we're talking both brick-and-mortar stores and the cyberspace variety.

For 39-year-old founder Mark Zoske, the choice to set up shop on the internet was a no-brainer, although he was worried about fronting the $50,000 to $100,000 it can take just to design a site. But his partner, Naomi Novotny, 34, says it became clear early on that focusing on an e-commerce operation was necessary. "It's our main advantage. We are really the only salt company that specializes in sea salt. There is a credibility level. We are out on the web; our competitors just aren't out there," Novotny says. "It seems like big suppliers of raw material aren't up to speed technology-wise."

SaltWorks sells everything from shakers of gourmet sea salt to 44,000-pound containers it acquires on behalf of the bigger spice companies.

"If it's a niche and it's spread out all over the world, then some portion of every town has some potential customers. There are some products you just can't sell any other way," says Matthew Roche, co-CEO and president of Offermatica, a San Francisco company that advises websites about how to convert visitors into buyers. "E-commerce is the anti-Wal-Mart," Roche quips.

Certainly, you wouldn't find the Salish Alderwood Smoked Salt that was recently featured on the SaltWorks site at your local grocery store. Both Novotny and Zoske had some previous experience in starting a business, so they split the startup tasks. Novotny negotiated tight relationships with sea-salt farmers in Belgium, France and Israel-often entering into exclusive deals to ensure supply-while Zoske boned up on technology.

Early on, SaltWorks located the server for its website at a local company, sharing the costs with other companies using the same hardware. But with more than 3,000 visitors per day, Zoske says, his site began hogging the server's capacity more quickly than he had anticipated. So SaltWorks bought its own server, although it still hires an outside firm to keep it up and running. To design the site's visual identity and transaction features, Zoske retained an on-staff development expert. The software behind the site includes Microsoft SQL Server (a recent upgrade from the company's original Access database); Microsoft's ASP.NET software for developing websites; Macromedia Dreamweaver and Macromedia Flash, which were used for creating animations and other visual content; and graphics-editing software including Adobe Photoshop.

Although he could have hired an outside designer-costing anywhere from $50 to $200 per hour every time the site needed an update-Zoske went with a staff expert because he needed to update the site often with new information, especially for its extensive salt reference guide. That guide, in fact, is used by SaltWorks in marketing activities to entice visitors to the site. Says Zoske, "We hoped that once they felt like they got something for nothing, maybe they would do some shopping."

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This article was originally published in the January 2005 print edition of Entrepreneur with the headline: E-Tail Therapy.

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