Marketing: e-commerce isn't right for everyone
J Hudson & Co, a small Birmingham whistle-maker with £3.5 million turnover and 52 staff, has been trading since 1860. For just one year, it has also been experimenting with a web site catalogue for its Acme Whistles (Acme) range on the internet, the results of which have 'amazed' managing director Simon Topman. Bulk orders started coming in from Thailand and Canada from distributors he had never heard of. Individuals suddenly started to contact the company direct, asking for single items (which was a pain, because Hudson trades through a network of retailers). And then, more subtle things began to happen.
School teachers, who previously bought a single whistle, started buying more - referee whistles for their whole school, for example. Distributors found that customers who had browsed the Acme web site were demanding items they didn't stock, forcing them to add more Acme products to their catalogues. Furthermore, as web inquiries started streaming in, J Hudson was able to refer would-be customers to the nearest local agent, thereby adding value to its distributors in a way it never could in the past.
The company has even discovered the joys of impulse selling. People browse the web site for fun and can download the actual sound of the whistle, whether the traditional British bobby's whistle, a duck or silent dog caller or a marine alarm. Once they do, notes Topman, 'more than half of our respondents end up saying "By the way, I would like that one too"'.
But is the company a perfect example of a brave new world of internet trading as foreseen by techie gurus? The pundits claim that the internet is opening an era of business characterised by the 'death of distance'.
By creating a web site, even the smallest company can gain global stature and presence, they claim, by selling direct to customers worldwide, bypassing the huge barriers to entry erected by the numerous subsidiaries, agents and marketing budgets of multinationals. Indeed, dealing direct with a customer in Thailand at the cost of a phone call throws the balance of advantage in terms of costs and flexibility towards the smaller company, they suggest.
Like most hype, this is about 20% true.
E-commerce is not for everyone. Companies trading on the internet must be prepared to change radically the way they do business, warns Kevin Pepper, a technology adviser for Business Link Birmingham and secretary of CUBIT, the Club of Users of Business Internet Technology. 'It is no good having a web site if you can't instantly respond to, say, 100 e-mail queries a day, or fulfil orders speedily and cost effectively.'
E-commerce is not really suited to products requiring high levels of after-sales service. It's much more appropriate for products that are easy to use and seldom go wrong. But these categories are uniquely sensitive to price competition. Acme's major competitors are Chinese manufacturers, for example, which could mean competition for ever more with the lowest cost producers from the lowest cost countries.
Another major challenge is trust. Buying something from somebody on the other side of the world who you have never heard of requires a leap of faith that most serious, big-budget buyers are not prepared to take. Brand-building then becomes all the more important - an area where bigger companies still have the advantage.
In other words, no matter how small or specialist, every successful business needs a robust reputation and strong trading relationships. The internet doesn't change that. It merely opens up new opportunities to extend and deepen them. J Hudson is not doing well because it decided to try e-commerce but because Acme has the right characteristics for e-commerce. While the company offers low-risk, low-maintenance products, it also offers a powerful brand. 'You may laugh,' says Topman, 'but among specialists, we are the IBM of whistles.' Its long-established distributor network covering 137 countries also helps.
In other words, it is already a global brand of a sort. The internet is simply helping it to become even more so.
Alan Mitchell was editor of Marketing and now works as a freelance journalist.