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IQ Analysis: E-com for the Little Guy

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Outsourced e-commerce support stokes small business. By Sloane Lucas
These days, every online tchotchke seller wants to be Amazon.com. While that may not be possible, there's a growing group of companies that will at least help them try, offering tools that allow smaller e-commerce players to outsource everything from their payment systems to customer support. If they can't be Amazon.com, at least they can act like they are.
Certainly, outsourced support is not new to the online industry, but Net veterans are seeing increased demand due to the current e-commerce boom.
"It allows smaller companies to work with larger companies that have the infrastructure, which allows them to go from small to big very quickly," says Ken Orton, chief e-business strategist for San Francisco-based consultancy Cognitiative.
Nancy Goldberg, senior vice president of sales for CyberCash, agrees. "There are a lot of people rushing in to provide that kind of support," she says. Reston, Va.-based CyberCash has been providing e-commerce payment systems since its founding in 1994.
"When Cybercash started out, merchants had to build their own," says Goldberg. "Now you can buy all the tools as software, pre-packed, or have them pre-bundled, or bundle them yourself."
The basic pieces to e-commerce are relatively standard, says Goldberg. Companies need a Web site, some kind of virtual storefront, the ability to accept payment, and a fulfillment process to handle shipping, tracking and customer support.
Major technology players such as IBM are bundling small business solutions products as well. On May 4, the Armonk, N.Y.-based company introduced its Small Business Program, which packages a customized Web link, hardware and software, e-business tools, and technology service and support programs into the service.
"IBM is really tying to put a lot more resources toward making our products and solutions relevant to smaller businesses," says Bill Pence, director of development for Internet media for IBM's Internet Division.
On the local level, companies like Englewood, Colo.-based US West Dex, the print and online directory publishing arm of US West, are targeting mom and pop shops and other small businesses in its region, which encompasses 14 states across the West and Midwest. The company had been offering its InfoPage to advertisers, a lone page that links to the uswestdex.com directory site.
Jeff Tarr, vice president and general manager of Dex's Internet Group, found an increased demand from small business for more elaborate Web sites. But, says Tarr, "They don't want to do it themselves." And so, in April, US West Dex began offering a more extensive Web site service, with packages as low as $29.95 a month.
The challenge for small companies, says Tarr, is to drive traffic, which is difficult with no marketing budget. To make even the lowest priced Web site package more effective, each is bundled with at least one link to the directory site. The company maintains a staff of copywriters and graphic designers to craft banner ads as well, which are served locally via both New York-based DoubleClick and Flycast, San Francisco.
But while such resources are immeasurably helpful to small sites, there is a downside. "The problem [with outsourcing] is that you get a pretty generic offering," explains Orton. He believes that firms need to give their site their own look and feel, send their own marketing messages, and control both the content and service side.
The solution could be as easy as a download. In June, IBM launches its HotMedia 2.0, an upgraded version of its plug-in Java tool, available free on the Web. Its new features include Mac compatibility, streaming audio and 360-degree imaging.
The tool's benefit goes beyond being a freebie; it lets users create everything from banner ads to graphics without additional tools.
"We're trying to enable the thousands of small- to medium-sized businesses moving to the Web to do things inexpensively, quickly and easily," says IBM's Pence.
At least one Internet startup is positioning itself to help smaller companies employ the latest online marketing craze: e-mail campaigns.
The company, responsys.com, is touting a subscriber-based direct marketing service, starting at $2,000 a month, which allows clients to log on to a site and, from there, generate e-mailings, track responses and even generate a response to a response, opening up a dialog with potential customers.
Responsys.com's target is companies "that are not Amazon.com that want to be Amazon.com" in their categories, says Atri Chatterjee, vice president of marketing for the Santa Clara, Calif.-based company, which was founded in April 1997. The company already counts Netscape, Network Associates, software company Release and Mother Nature, a vitamin and supplement marketer, among its clients.
CyberCash is exploiting another niche in the online direct marketing industry: the one-click purchase. In late 1998 the company launched its InstaBuy system, which allows shoppers to pre-register payment and shipping information once, and then shop on any merchant site hooked up to the system simply by clicking on the InstaBuy logo.
The benefit to smaller sites is not only easier shopping, but instant e-commerce credibility that they might not have on their own. Some large e-commerce providers have signed up for the service as well; credit card issuer First USA adopted the system, rebranded it as VersaPay, and helped sign up Cyberian Outpost, iVillage, CBS MarketWatch, and Borders, among other sites.
CyberCash is promoting the service to consumers via a TV, print and online campaign from Atlanta-based agency Donino, White & Partners. TV spots broke in early April; other media follow this month.
On the tech support end, companies like Canton, Mass.-based Stream, which have long offered outsourced customer and technology support, are rushing to establish themselves as an ideal choice to help wayward Web surfers navigate a merchant's site. In March, the company launched Emediate, a bundle of online services including self-help, e-mail, and of course, real-time chat.
Elaine Wilmore, director of segment marketing overseeing the Internet market for Stream, explains, "[Emediate] allows a company to focus on their core competency." Other benefits include better quality of service and lower cost.
She insists that doing it on the cheap just isn't an option. "You could go out and hire a customer service person for $12 an hour, but we have a complete infrastructure in place where we provide training."
The race to corner some segment of the market looks to get fierce, says Wilmore, who, like other outsourcers, is bracing for an onslaught of competitors. "I think that there are a lot of companies that were customer service oriented that will become competitors, just because the [e-commerce] space is so huge."
It's a buyer's market. ƒ