The History of Online Shopping

The internet is a fantastic and useful tool. With a click of our mouse we can read today’s news, play an online game and if we wish shop to our hearts content. But when did it all start? What is the history of Online Shopping and what does it mean to shop online?

Online shopping is the process a customer takes to purchase a service or product over the internet. In other words a consumer may at his or her leisure buy from the comfort of their own home products from an online store. This concept was first demonstrated before the World Wide Web was in use with real time transaction processed from a domestic television! The technology used was called Videotext and was first demonstrated in 1979 by M. Aldrick who designed and installed systems in the UK. By 1990 T. Berners-Lee created the first WWW server and browser, and by 1995 Amazon expanded its online shopping experiences.

The history of Online Shopping is amazing. Gone are the days of waiting in traffic and working our way through overcrowded stores. All we need is a computer, bank account, debit or credit card and voila freedom! From books, to cosmetics, clothing and accessories to name a few, shopping online is the answer to the 21st century. Simply find the website that offers the objects of your desire, price and delivery terms and in a matter of a few days your purchase is at your door. The advantages and convenience are obviously predictable as we are offered a broader selection, competitive pricing and a greater access to information in regards to our purchase. Online stores are usually available on a 24 hour basis, and permit consumers to shop at their leisure without any traveling and outside regular business hours!

Another point to take into consideration is that when the internet was first conceived it was not with the ideal that it would change the way we shop. On the contrary the web was created as a tool for communicating, which in time let to the convenience of shopping virtually. The history of online shopping by itself symbolizes the change in our society and has by now become a service used by business and regular shopper all over the world.

Shopping online is easy, fun and secure and has for many taken the place of the Saturday afternoon window shopping at the mail. Still considered as a fairly recent phenomenon, online shopping has without a doubt made the life of countless consumers easier and more convenient. May it be for a home loan, buying car or ordering your weekly groceries, the web has forever changed our outlook on shopping.

The history of online shopping shows to all that a good idea, great presentation, and a desire to offer the best to your customers can make a dream come true. Now considered tried and true, it will be interesting in the next 20 years or so to see where the History on online shopping will take us!

Lessons Learned From An E-Commerce Adventure

It is better to have tried and failed than never to have tried at all; and even more important to learn from your mistakes.

That is what I keep telling myself after having invested the time and cash equivalent to a Harvard MBA in an e-commerce start-up that has stalled and is winding down. Not a happy prospect in light of all the media pre-occupation with e-commerce success stories and the young millionaires watching their IPOs rocket into cyberspace. But the headlines ignore the more frequent stories of new e-commerce businesses that do not hit the stock market jackpot. Many of them either settle into a low-key niche or exhaust their resources and fold.

This is the story of an Internet venture that did not make the headlines, but offers some useful insights for entrepreneurs evaluating their own initiatives. The lessons learned are applicable to your own new venture or to an investment in someone else’s.

In mid-1998 we launched a new company called nxtNet (www.nxtnet.com) with the slogan … “taking you to the next level on the Internet”.

My partner and I both had prior successful entrepreneurial experience in computer products and wanted to start a new venture together. We decided to develop a business that would catch the next wave of e-commerce services for mid-sized companies seeking to do business on the Internet. After long discussions, searches for a unique service offering, and many draft business plans, we developed a market strategy and then chose Intershop Communications as our software development platform. This product had the advantages of being suitable for single or multiple online storefronts, and offered a flexible, economic and comprehensive solution. We committed to the product, staffing, facilities and equipment to start training and development immediately. The two of us provided the time and cash required to get started.

By October 1998, we had an initial product with application as an online storefront for an associated computer business. At the same time, we realized that the application had wide appeal to other computer dealers and could be sold as a multi-user database service and e-commerce resource. We had developed a consolidated catalogue of 85,000 computer products from multiple distributor product databases that allowed rapid search and comparison for product information, pricing, and current sources. Users could access the catalogue from the Internet and find a product by manufacturer, category, and part number, key word or price range and immediately see the alternate sources and prices with links to more technical information, preferred dealer pricing and actual stock levels. Additional features allowed the catalogue to be customized so that any computer reseller could present the database as his own online storefront. This option offered all the search and product information features to his customers, but showed only retail pricing and enabled the online ordering process.

The product offering quickly received positive feedback and strong indications of support from all the participants – resellers, distributors, and manufacturers. It was a comprehensive, powerful, and effective tool for buying and selling at all levels within the Canadian computer distribution channel. Resellers recognized the value in an online resource to save time and effort. Distributors and manufacturers saw the opportunity to promote their products, and major publishers in the industry wanted to offer complementary online services to their subscribers and advertisers. How could we fail with all this enthusiasm and support?

While the potential for success clearly existed, everybody had the same questions and reservations – “Who is there now?” “How many are using it?” and “I don’t want to pay until it’s bigger”.

Reasonable objections we thought, so we added features and content for free. We promoted the product with free trials and low cost subscriptions for reseller access. Then we coaxed, persuaded, sold hard, and made deals. The “contra” became the standard for obtaining press coverage, free ads, mailing lists and promotion in exchange for free participation and future consideration. Activity on the Web site and catalogue grew to 3000 visitors per month with over 800 subscribers and the distributor list increased from three to twelve.

But revenue remained near zero as most reseller subscribers declined to pay for the service. Reasons were “it should be free – let the advertisers pay”, “I don’t use it enough”, “there are lower cost options”, or “we built our own solution”. The audience did not grow fast enough even after we offered it for free, to satisfy the advertisers and content providers. Without persistent and conspicuous sales and marketing efforts, all the participants quickly lost interest. Meanwhile the costs of database maintenance, ongoing development, site hosting, Internet access, sales, marketing, and administration were increasing.

Clearly the old entrepreneurial model of controlling costs and growing revenue was not going to apply. We had to realign our profile to show how zero revenue and high initial costs could still lead to significant investment returns like other well-known Internet ventures. So from early 1999 we started an aggressive search for financing, estimating our requirements at $500,000 to $1,500,000 over the next two years before achieving positive cash flow. More business plans, spreadsheets, and glossy presentations to demonstrate future valuations up to $20 million, even $40 million.

We knocked on many doors, from banks to government agencies, from angel investors to venture capital, from stock promoters to business consultants, and again received lots of encouragement, but no financing. So the founding partners were faced with a continuing cash drain, no relief in sight, and the limits of their own resources rapidly approaching. It was time to put the project on hold. Strategic partners or investors might still be developed to proceed with the project, but the ongoing expenditures were stopped in late 1999.

So what are the lessons learned? We already knew that nothing ventured, nothing gained. We now also knew that big successes in the new economy require big investments. Entrepreneurs may start small, but large investments will be required from new sources to achieve significant success. And no one will put significant money into a venture unless it is the only remaining requirement.

The concept, product, development, marketing and staffing all have to be in place before an investor will provide the final ingredient – his cash. Exceptions are likely only where the management team has already succeeded in the same arena, or the investor himself can deliver the missing elements, such as customers or management skills. No investor is going to take the chance that the entrepreneur with a good concept or product will also be able to deliver the required management and marketing skills to succeed, after he has the cash.

Next time we will know better. And there are side benefits from this expensive learning experience. I can now admit that with the knowledge gained through our association with Intershop Communications, I was confident enough to make an investment in their stock on the German Neue Markt at 65 Euros last year. It went over 400 Euros last month and is still rising with their rapid growth and the prospect of a NASDAQ listing this year. Almost enough to recover my investment in nxtNet.

So the most important lesson is that education in the new economy is essential, and not free, but it can lead to success outside the original plan. Learn, be aware, and be aggressively opportunistic.

Porter’s Five Forces Model And Internet Competition

According to Porter’s Five Forces Model, in my opinion, competition has increased overall as a result of the internet and e-Commerce. The internet and IT has made it possible to both focus on the top and bottom lines and market share is expanded and costs are cut. Many products and services exist just online, major companies have gone online to successfully augment the brick and mortar corporations, and the playing field is all the way to edges of cyberspace, wherever that is. We will further evaluate this stepping through all five forces.

Buyer power is higher when buyers have more choices. Businesses are forced to add value to their products and services to get loyalty. Many loyalty programs include excellent services that customers demand on-line. Customers want to solve their problems and many times they are more successful on-line than on-phone. Also, we see internet savvy businesses springing up offering more valuable goods and services at lower costs. Now with the advent of eBay, many people are assuming roles as drop shippers. Individuals can have a thriving business selling goods of larger companies without having to carry inventory.

Supplier power is higher when buyers have fewer choices from whom to buy. As mentioned earlier, drop shipping has increased the amount of suppliers available. All an individual has to do is form and agreement to sell products for the company. The company takes care of all the logistics. The same is true of associates programs that Amazon.com and Google.com offer. Associates allow a webmaster to earn money by recommending products from others. This increases supplier offerings.

Threat of substitute products or services is high when there are many product alternatives. This is different than having many suppliers. Examples of alternatives are exchanging brand names, substituting credit card capabilities, and looking at better values from cheaper sources. The internet allows this with the “global economy”. I can substitute my product by purchasing from companies overseas where labor, services and products are cheaper, but of comparable quality.

Threat of new entrants is high when it is easy for new competition to enter the market. Well, what have we been talking about? Now, small operations can open shop with less than $10.00 per month and make a lot of money. As inventive as people are, there are always opportunities to do improve a product or service or just create and sell something new. Recently, many new entrants have made even more money authoring Ebooks that tell others how to do what they did. Rivalry among competitors is high when competition is more intense within industries.

On-line book stores and catalog companies are an excellent example. Amazon.com and Barnesandnoble.com are very competitive. However, there are many also smaller niche affiliate bookstores that when combined take a great deal of market share. They offer even more competition. However, both major bookstores have used IT to create value for their customers. These values include associates programs, ease of payment and shipping and many, many others.

The internet offers avenues of competition to existing companies and opportunities for start ups. Now businesses can enter the market on-line with few barriers to entry. Porter’s Five Forces Model can help demonstrate the attractiveness of starting your on-line business. A business person should use the model to identify competition, make a plan, and implement the process.

Successful Investing – Helping Investors Avoid Common Investment Mistakes

The Top Mistakes made by Investors

In my dozen plus years of advising individuals and businesses I have found a number of common mistakes that have derailed even the best laid financial plans. I thought by sharing them I might be able to help others sidestep the pitfalls and the negative impact they can have on your portfolio and long-term financial plans.

1. Failing to establish a time horizon and investing accordingly -

If you have expenses that need to be funded in 3 years or less, you should not be investing the cash for them in the stock market or other risky investments. These monies should be carved out of your investment portfolio (the money earmarked for long-term investing) and invested appropriately in liquid assets such as money market funds or term-certain fixed income offerings. If the money is not going to be needed for 3 years or more, an investment plan should be established based upon specific a time horizon and risk tolerance for these funds.

2. Failing to thoroughly diversify your portfolio -

Many investors know about the concept of diversification and think that by owning different investments, they are diversified. Diversification of an investment portfolio makes good sense on an intuitive level. However, it wasn’t until Harry Markowitz published his model of portfolio selection that this concept became a formalized part of sound investment practice and formed the basis of today’s Modern Portfolio Theory. Beyond this basic concept of diversification, the key to Markowitz’s premise is the revelation that the risk of any investment can be reduced and/or performance increased by forming a portfolio of diverse and non-correlated assets. That is, it is important not just to seek a diversity of asset types, but also to seek assets that have low or near-zero correlations to one another. It’s not about owning different investments; it’s about owning different, non-correlated investments.

3. Letting potential tax implications rule your investment decisions –

Many investors delay selling an investment that has done well regardless of how good or bad the future looks for the holding. Their response is, “I will have to pay taxes if I sell.” By not selling, they set themselves up for not having to pay taxes at all – usually because the investment starts on a decline and their concern switches from “having to pay taxes” to one of “hoping for a turnaround.” Don’t be afraid to take some profits off the table. While taxes are an unpleasant result of investing, I prefer to look at them as a positive sign as it indicates you are making money and your investment plan is working.

4. Buying a stock based upon a “hot tip” -

Too many investors listen to a friend’s advice because he or she always seems to have the next “great” money making idea. They don’t take the time to assess the idea personally and jump in because it’s only a few thousand dollars they are investing. Unfortunately this is not investing – it’s gambling. If you want to gamble, go to Vegas and at least get free drinks, dinner, a show and a room for the risks you are taking. Any investment that is being considered for your portfolio should be thoroughly researched and have passed a comprehensive financial screening scrutiny.

5. Attempting to time the market -

Waiting an extra day, week, or month to try and buy in at the “right price” just doesn’t work. No one can predict the future. If they could they most likely wouldn’t be sharing this knowledge with you for free. Successful investors use time, patience and a disciplined approach to increase the likelihood of maximizing their investment returns – not trying to time the market. If you have done the research and the investment is sound and meets your criteria then buy it, regardless of timing.

6. Failing to regularly reevaluate your investments -

Over time all investment styles, strategies and types fall out of favor. So, like timing the market, it becomes virtually impossible to know what is going to be “hot” in the next bull market and what isn’t. For this reason it is always prudent to stay up-to-date on your investments to insure they are still the same investment that you originally purchased (segment drift and manager changes can be one reason they may have changed). If your investments consist solely of mutual funds then an annual review is a good place to start.

7. Basing investment decisions on emotion -

Maybe the stock market is going through a bad time because of a short-term geo-political or economic event. Stay calm and make an educated, well thought out decisions about what, if anything, to do. Assess whether the event will affect the economy long-term or if it’s just a short-term blip. The best move is often no move at all. If it is a short term incident, many times the smart, prudent investor will make additional investments because the current decline provides them with an excellent buying opportunity. The key to successful investing is to have a disciplined strategy and to stick with it.

8. Cashing out gains and dividends rather than reinvesting -

Once you’ve realized gains or had distributions and dividends paid out, insure they are reinvested back into your portfolio. If you pull out your capital gains, dividends and interest, your money won’t compound as quickly, thereby leaving you with a smaller chunk of change down the line. Letting your investments compound is one of the major tenets of successful investing.

9. Owning too much employer stock -

Many people get over-weighted in employer stock because of options and stock purchase plans made available in today’s competitive compensation packages. While these are great supplements to their annual salary they can put an employee in a position of having too much money invested in their employer’s stock. Additionally, it is quite common for people to invest in “what they know” and what do you know better than the company you work for? To compound the problem many people will add more employer stock to their 401k holdings and individual brokerage accounts. Not only does this create a diversification problem in their portfolio but it also subjects them to excessive single stock risk. A good rule of thumb to follow is to insure that no more than 5-10% of your entire investment portfolio is in any one single stock. If you find yourself in this situation the importance of creating a well thought out reduction strategy cannot be overstated.

10. Following the herd -

The most successful of all investors are moving in the opposite direction of what everyone else is doing. They buy when most are selling and sell when everyone else is buying. By following this simple plan you can preserve your capital and potentially sidestep the next bubble (can anyone remember real estate, internet stocks, and technology growth funds?).

11. Not investing at all –

Somehow in today’s society that Mocha Cappuccino Latte seems to take precedence over saving for the long-term. We are a society who wishes to satisfy the “here and now” rather than the securing our future. The important fact here is that those two are not mutually exclusive. In fact, BALANCE is the key in any long-term endeavor, but by always keeping an eye on the end goal you can make sure it is not out of mind while satiating the here and now.

12. Investing without a plan -

Investing without a plan and lacking the discipline to follow it is a sure way to lower your chances of success. The chances of obtaining any long term goal can be greatly enhanced by creating a strategy, following it and regularly reviewing it frequently enough so it reflects any changes that have taken place since implementation. Many investors start off with a small amount of money and start putting it to work without a plan. As time progresses they find they have a mish-mash of investments in their portfolio with no clear strategy or direction. It’s never too early to invest but it’s even better to invest early with a plan.

13. Taking too little risk -

Some people don’t want to take any risk and cannot stand the volatility involved with risky investments. While it may seem like you are keeping your money safe and secure by not taking risk, it is more than likely you are not because of inflation. If your time horizon is greater than 5 years it is recommended that you have no less than 25-30% in growth investments (i.e. stocks) in your portfolio to ward off the effects of inflation. The actual percentage to own is dependent upon many factors including but not limited to age, time horizon before money is needed, current financial situation, etc. A good general rule of thumb to use as a starting point for the percentage of equity you may include in your portfolio is “120 – your age.”