E’commerce – Are You A Tech or Consumer Products Company?

“Is it live or is it Memorex?” – from a classic commercial aired in the 1970’s

We continue to see a proliferation of e ‘commerce startup companies that believe they are part of what is broadly referred to as the tech space.  When describing themselves, they tend to focus on their “secret sauce”; perhaps an algorithm that uses big data to more efficiently determine either buying habits or needs that drive demand to “their marketplace.” A good friend of ours had a saying that “education is wasted on the young.” No truer words were ever spoken about this space. With the emphasis on tools, techniques and the manipulation of data, one can understand the case for saying your e ‘commerce business is a tech company. Many conversations seem to focus on having the better mousetrap versus satisfying customer needs. This quandary brought to mind the classic commercial noted above. So is e ‘commerce tech or consumer products? Let me offer some observations from my experience:

First and foremost, an e ‘commerce model is at its heart a consumer products model. That model has many components including the ever daunting logistics of dealing with consumers and products. More than any other model, your success will be determined by your execution. It is important to “go to school” on this aspect of your marketplace and learn from others who have gone before you. While the tools may enable you to overcome some of the barriers to success, it is the consumer and their needs that will determine the ultimate success of your business.

Next, like it or not this model is more administratively complex so plan for a higher level of administrative costs. Please do not try to compare your operational needs with those of tech companies such as ones offering Software As A Service.  Logistics, inventory and accounting will take a great deal more time and money and having someone on your team has who has relevant experience is critical.

Product is hard and people are fussy. You need to make the hard decisions on balancing returns, credits and complaints with good business sense. Keep in mind that today, solid quality customer service is table stakes in this game. We can thank the likes of Zappos and Amazon for setting the height on that bar.

Do not get hung up on being all things to all people. Products come in a number of shapes, sizes and colors. The standard multiplier effect can turn a simple business into an inventory nightmare. Work on SKU discipline from the beginning and take quick action if your predictive model is not working.

Finally, nexus is not your friend or a cool new car model. It means you are doing business in another state giving you the opportunity to have the privilege of paying both sales and income taxes in a number of jurisdictions. Carefully plan your “expansion” with the right professionals.

The good news is there are plenty of experienced people in the consumer products space. As the saying goes “everything old is new again.” Your technology enabled  consumer products company can be a success with the right team and approach.

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