How To Beat Cost-Plus-Zero

Selling stuff on the Internet appears to be taking a troubling direction right now. Fortunately, there’s a flip side to this that presents some great opportunities.

The way I see it, here’s where the trouble lies.

First, a bunch of very aggressive retail sites are now selling at cost-plus-zero or lower.

This turns the Internet into a virtual discount super mall.

“Buy on the Internet today! We’re cheap, cheap, cheap!”

At the same time, the major “portals” like Yahoo are turning into “portailers.” And, of course, when it comes to selling stuff online, the portals do have this small advantage known as “reach.”

In fact, between the top half-dozen, they pretty much reach everybody.

Will the combination of price-slashing on some sites and the reach of the portailers impact on ecommerce as a whole? You betcha!

Will some smaller ecommerce sites wither and fail in the face of this fierce competition? Of course.

So is this the end of smaller and medium-sized, independent ecommerce sites as we know them? I don’t think so.

I think there is a huge, soft underbelly to these new forces in online commerce.

The cost-plus-zero guys are cutting their margins so fine that they just don’t have the resources for some interesting little activities like customer support, relationship building and the like.

The portailers are selling out of the virtual equivalent of automated warehouses and don’t have the history or infrastructure to support a customer-driven retail experience.

While these two, strong competitors have tremendous appeal and reach, I don’t believe they have what it takes to build strong and lasting customer relationships.

Therein lies, I believe, their greatest weakness. They’ve missed out on one element in their business plan: People. Customers. Flesh and blood.

People like to connect. They like to communicate with one another. And within a retailing experience, they like service. You know, that customer service thing.

And the way you deliver service is, in my view, to create an online experience that is “peopled” and that invites interaction between the retailer and the customers.

How do you create these interactive relationships? You use the tools of direct response.

You invite interaction, you request feedback, you initiate response, you demand involvement.

Your advantage is this: Unlike the big guys, you’re tapping into what has built and sustained the Internet right from the beginning — its incredible ability to allow individuals to connect with one another wherever they are.

Then, add in the fact that the Internet is by far the most responsive business medium ever conceived. Click, click.

So you have tens of millions of people who want to connect with one another. And you have an environment that makes that possible with a couple of clicks.

It’s a direct response dream come true.

I don’t think the long-term success of selling stuff online is just about price. I think it’s about creating and sustaining relationships.

So if you’re building a retail site right now and are nervous about cost-plus-zero and portailer competition, make your site about people.

Make it about communicating with people, serving people, talking with people, replying to people, making people happy.

Oh…and try to make a profit early on so that you can weather the storm!

Was this article really about “direct marketing”? Or was it about “customer service”? It was about both. Next week, I’ll be looking at how the concept and practice of direct marketing online differs from its roots offline.

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