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e-Biz lessons

Online business and e-commerce are soaring, but it’s still a challenge to launch and grow an e-business — as two local startups explain.

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From the pages of In Business magazine.

It shouldn’t really come as a surprise that online business is big business these days.

How big?

According to AdWeek, in 2014 more than $1.2 million in revenue was generated by e-commerce every 30 seconds.

You read that right — $1.2 million every half a minute. Nearly $1 million of that came from desktop sales, while $269,683 was generated via mobile purchases, a number that has only grown in the past two years.

Where’s that money coming from? A total of $684,669 was spent on credit, debit, prepaid, and store cards, while $516,504 came in the form of alternative payments.

In that same 30 seconds, Amazon accounted for almost $100,000 all by itself; eBay did $74,423 in business, and Apple processed $17,803. Social media got in on the fun, too. Facebook ($5,483), Pinterest ($4,504), and Twitter ($4,308) each generated sizeable sales every 30 seconds.

In 2016, the money continues to pour in.

The Census Bureau of the U.S. Department of Commerce notes the estimate of American retail e-commerce sales for the first quarter of 2016, adjusted for seasonal variation but not for price changes, was $92.8 billion, an increase of 3.7% from the fourth quarter of 2015. Total retail sales for the first quarter of 2016, in-store and online combined, were estimated at $1,183.9 billion, a decrease of 0.2% from the fourth quarter of 2015.

The first quarter 2016 e-commerce estimate increased 15.2% from the first quarter of 2015 while total retail sales increased 2.2% in the same period, according to the Census Bureau. E-commerce sales in the first quarter of 2016 accounted for 7.8% of total sales.

InternetRetailer.com reports that the upward trend in e-commerce sales won’t end anytime soon.

By 2018, the web will account for 11% of total retail sales, the online e-commerce tracker notes. U.S. e-retail sales are expected to be upwards of $414 billion in just two more years.

Sucharita Mulpuru, an analyst for Forrester Research Inc., an independent technology and market research company, told InternetRetailer.com back in 2014 that increased mobile device shopping by consumers is what’s largely propelling the e-commerce growth. According to Mulpuru, younger generations are also more likely to spend a larger share of their retail dollars on the web. In fact, of the 69% of U.S. adults who regularly buy online, as much as 16% of their purchases are generated on the web.

Mulpuru also says aggressive marketing, pricing, and customer acquisition strategies by e-retailers will only bolster online retail growth.

With that much money going around, it’s no wonder so many small businesses, startups, and entrepreneurs are opting to run their businesses online rather than through a traditional brick-and-mortar storefront.

Of course, just because people are spending more money online doesn’t guarantee instant or sustained business success.

Rapid growth in e-commerce does pose challenges for online retailers. Mulpuru notes that e-retailers can’t ignore site performance and execution, as online-savvy consumers won’t hesitate to look elsewhere if they have a bad digital experience with a company.

Making it work

For Linda Remeschatis, owner and president of Verona-based Wisconsinmade.com, an e-commerce specialty food and gift store, getting in on the ground floor of the e-retail revolution seems to have helped.

Wisconsinmade.com launched in November 1999 and never operated as anything but an online business. The company has grown significantly in the past 17 years. “We began with just 35 products and now present over 2,000 items made in Wisconsin,” notes Remeschatis. Additionally, Wisconsinmade has more than 24,000 newsletter subscribers and 75,000 Facebook fans.

“Our focus is on products produced by the artisans here in Wisconsin,” Remeschatis says. “The food, art, books, music, and items for your home and garden are all made by local artisans.”

Had the company decided to open a true retail storefront, it would have been a duplication of what its artisan partners already do, she explains.

With an online model for artisans, Wisconsinmade.com carved a niche.

“Many of the small artisans we started with already had a physical location. We offered them the opportunity to broaden their markets beyond a small regional presence.”

By filling a void in the market, Wisconsinmade created a niche for itself, something online retail experts agree is key to sustaining e-commerce success, especially now that consumers have almost limitless online retail options available to them.

Amazon, for instance, has broadened its product line beyond the books it started with, explains Remeschatis, so e-retailers must provide a product or service consumers can’t get anywhere else if they want to survive in today’s online marketplace.

An inherent advantage online stores possess over their physical peers is that they’re open 24/7/365, and not just to local shoppers. “The shopper finds this very convenient,” says Remeschatis. “Traffic, parking, checkout lines are no longer an issue, and gifts can be sent directly to the recipient. No need to box them up and take them to the post office.”

Of course, some customers still prefer to see and touch products prior to purchase, and competing with that tangibility is always at the forefront for online retailers, Remeschatis notes. “We use a number of marketing channels to reach out to customers but the most powerful is still the word-of-mouth referrals from our satisfied customers. Customer service includes the convenience of prompt delivery of the specific products they are looking for and eliminating some of the day-to-day claims on everyone’s time.”

One area where Remeschatis doesn’t see a big difference between online and brick-and-mortar retailers is operating costs.

“Online businesses incur costs that are not incurred by physical stores and vice versa. While the cost structures may be different, I do not believe in total they are materially different.”

(Continued)

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