educational

A Look at E-tailing

Stephen Yagielowicz
Whether you're an established retailer seeking to extend your brand online, a web-based operator seeking to diversify revenue streams or an entrepreneur looking for a suitable business model, opportunities abound in the world of online retail, or "e-tail."

Unlike subscription sales, video-on-demand or other web traffic monetization strategies, e-tail involves the offering of physical goods for sale; and is driven, and limited by, many of the same factors facing traditional retailers.

One of the major differences between traditional brick-and-mortar retail and e-tailing is the tactile nature of traditional retail, which is sadly missing from its online counterpart. The problems you face as a store-owner — including inventory and stocking costs, providing floor space, staffing and more — are the benefits that the customer sees you as having over catalog and online sales outlets. Your customer wants to walk into a well-stocked store, wander the aisles, and pick up items, feeling their weight and eyeing their packaging. If the customer has a question, he or she need only turn to the nearest helpful staff member for service or advice.

However, these strengths are also the traditional retailer's weaknesses: e-tailers, especially those that drop-ship directly from the distributors, have an enormous advantage in being able to offer nearly unlimited variety, and to be able to do so with little warehousing overhead. Floor space, while expensive, can be a comparable expense to operating a website, but staffing issues can be complicated, with online operations being able to eliminate many of the positions (such as register clerks) that traditional retailers will rely upon; providing even further infrastructural savings.

The key then to having a successful e-tailing operation is to bring forth those advantages that the traditional retail world offers, into the digital realm. While you'll never be able to offer the customer the ability to hold and examine your wares beforehand, establishing liberal return policies can ease many buyers' concerns over the quality of your products. This is much less of an issue for operators selling DVDs and the like than it is for those offering other tangible goods, such as custom leather wear, for example, where the brand or level of quality are unknown.

DVDs are in fact a perfect example of a product that can be better sold online than off. Offline, the customer is able to hold the package in his or her hand, view the front and back covers, and sometimes, see a trailer. He or she can also ask the clerk where to find it on the shelf and what the clerk thought of it, though the clerk likely hasn't ever seen it.

Online, the customer is able to do the same: view the front and back covers, see several trailers and still shots, read descriptions and reviews, then have it delivered directly to his or her door, for a competitive price, and without ever having left the house or endured embarrassment over walking up to the girl at the counter, carrying all six episodes of "Dirt Hole Dykes."

Enhanced search and directory features, easy terms and checkout policies, as well as the aforementioned reviews and ancillary information, will make the lack of staffing fairly inconsequential, while online customer support can easily be provided via chat or phone; in-house or through your billing company.

Finally, the unlimited selection and often lower prices will more than make up for any other concerns the customer may have over choosing a virtual store rather than his local smut shack. Of course, offering an unlimited selection has its downside, too.

It might sound silly, but sometimes, having too many choices is as bad as having too few, and maybe even worse. For example, a customer at the local smut shack might have a few hundred choices in front of him. Even if he doesn't find exactly what he wants, he's still likely to make a purchase, since he's already there at the store and he has to accept that this limited selection is what he has to choose from.

The customer shopping online, however, realizes that he does have an unlimited selection, and if he can't find what he wants on your site, he'll easily surf elsewhere. But even if he doesn't look elsewhere, he might be overwhelmed by all of your offerings, deciding that with so many titles to choose from, he just can't make up his mind, and so he clicks away without making a purchase. This is where niche-targeted storefronts may have a serious advantage over some of the mega-stores.

Even if the customer does make a product choice, your battle to make a sale hasn't ended. As bad as having an empty shopping cart is, having an abandoned one is worse. And more common — this is when a prospect found something that he or she liked and wanted to buy, selected it for inclusion in your site's shopping cart and then clicked away without ever completing the purchase.

Finding what changed the prospect's mind is the challenge faced by all e-tailers: Was it a surprise that you had high shipping and handling charges? Was there a problem with the script setup or database? Was there a problem with the usability of the checkout cycle? Did the customer just change his mind? The list of questions and issues is endless and getting all the factors that are under your control is difficult.

One item beyond your control is the looming threat of an Internet sales tax: states that are dependent on sales taxes are losing far too much money to e-tail, and are demanding that something be done. Many e-tail operators enjoyed the double benefit of receiving a lot of business from sales-tax-imposing state residents, while being able to add a few points to their bottom line by not having to pay the tax.

With individual states establishing their own tax codes, the burden on operators to have to maintain records and pay sales taxes to any number of money-hungry jurisdictions is hard to overstate. Add in any of the popular "porn tax" initiatives now underway, and you have a recipe for tougher financial times.

Finally, as with any business, competition is a key factor for e-tailers, and isn't just an issue of dealing with external influences; sometimes the problems are internal ones. Not unlike the online adult affiliate market, e-tailers might find themselves in competition with their best customers, making for some occasional balancing acts.

There are huge upsides to adult e-tailing plus a few challenges, and it will take a sophisticated operator to truly succeed in this arena, with all of the demands it entails. Others may see better opportunities in being affiliated with an established e-tail program.

Regardless of where you fit on the scale, there's a world of opportunity awaiting you in adult e-tailing.

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