Without too much prompting, you can probably quickly think of some companies who have discovered that the very skills they developed in the first place to create a product are in fact just as valuable a marketable commodity as their original product – or maybe more so. Traditionally, such a realization would prompt a company to create a separate corporate identity to market their newly realized valuable expertise.
One of the characteristics of the IT world is the remarkable alacrity with which Internet-based companies shift core competencies. In the accelerated pace of the Web, when it becomes clear that an original plan is not working according to projections or another business model presents itself as offering greater opportunity, many companies adroitly shift into another business gear. Bid.Com International Inc. is a case in point.
The Mississauga-based firm began in 1995, conducting business-to-consumer (B2C) auctions at its Web site, selling computer hardware and software, consumer electronics, toys, games, sporting goods, jewelry, memorabilia and travel and entertainment products. To host these auctions, staff developed now patented Dynamic Pricing software for a declining Dutch model auction that lets consumers hold out for the lowest price. Bid.Com decided in 1999 that advertising, customer acquisition and other costs made their B2C business model non-viable.
“We realized over the past year and a half that we developed a powerful technology that we could apply for a number of different companies,” recalls marketing director Joe Racanelli. “We realized that the (profit) margins for us would be greater if we licensed our technology to other companies rather than operating just as an on-line retailer. It allows us to leverage what we’re very good at, which is helping our clients to make the best use of Dynamic Pricing.”
Now, the company operates as a global application provider of dynamic pricing solutions, in effect licensing the technology they developed for operating their on-line store. Bid.Com offers multiple on-line transaction methods, providing fixed price, traditional auction (Top Bid), real-time declining price (Dutch) auction and reverse auctions (Request for Quotation/Proposal (RFQ/RFP) all within the same package. The modular architecture is said to be compatible with most business-to-business or consumer-based applications, including enterprise resource planning (ERP) and customer relationship management (CRM). Bid.Com also provides fixed price solutions that allow end-users to purchase goods using on-line catalogue formats.
The new business model seems to be taking hold. Bid.Com has about 80 employees in Mississauga and offices in Tampa, Fla., Sacramento, Calif., and Dublin, Ireland. Customers include retailers, wholesalers, distributors and manufacturers of consumer electronics, sports equipment, hand tools and computer equipment. Using secure and easy-to-use technology, end-users are able to place bids on items available for sale through regularly-held auctions on Bid.Com clients’ Web sites.
Industry sectors where organizations have made Bid.Com their on-line sales partner include automotive, heavy machinery, capital markets, electronic media, wireless communications, arts and culture, and retail. Partners include GE Capital, Research In Motion, Rogers New Media, CapGemini, ValueVision International Inc., PricewaterhouseCoopers and The Art Vault. Customers include Megawheels.com Inc., billed as “home” to Canada’s largest on-line automotive database.
For an initial development program, a competitive monthly fee and ongoing transaction fees, Bid.Com will take on an application service provider (ASP) role and host a company’s e-commerce architecture, including the Dynamic Pricing suite.
Bid.Com also markets [email protected] Buyer which similarly lets purchasing professionals broaden the selection criteria beyond price to include any purchasing parameter, for example product availability, post-sales support and certification standards.
“We have been doing Dynamic Pricing for quite a while which in our eyes is on the sell side – auctions, fixed price catalogue, that sort of thing,” says president Jim Moskos. “We added the request for quotation, or the buy side, which gave us coverage on both sides. It’s really the whole life cycle of an asset from when you would buy an asset through a product like [email protected] to ultimately when you would dispose of it through a sell side or auction solution or some other means.”
They often find themselves educating businesses about the benefits of more advanced on-line buying and selling products. Getting better value from suppliers involves streamlining the process of identifying the source who gives the best value the fastest.
“A lot of people in the first wave of on-line procurement recognized that they got real value out of it just by the competitive pressure on the price,” Moskos explains. “There was also the realization that that’s not everything that they are trying to achieve. The real benefit of on-line comes when you can get competitive pressure on price and on the other non-monetary elements that are very important to the whole process.”
Those benefits, according to Bid.Com, include the ability to:
BULLET: generate new revenue streams;
BULLET: extend the value of brands on-line;
BULLET: collect greater returns on the value of surplus assets;
BULLET: reduce the cost of sales;
BULLET: increase savings on procurement expenses; and
BULLET: provide greater access to global markets.
“The first wave of on-line procurement was achieving corporate consolidated buying through some sort of on-line vehicle – but we’re talking a more complex type of procurement,” Moskos continues. “Where it really comes into its own is the big ticket, multi-parameter procurement initiatives that to this point have been a paper-based process.”
Some of those user-set parameters in a request for quotation (RFQ) for a number of machine tools, he suggests, would define how soon an item will ship, the horsepower of a motor and other elements in addition to those related to cost.
Racanelli notes that “a lot of our customers of late have been traditional type organizations who have been around a number of years and just want to introduce the Web into their existing sales and distribution channels.”
He cites Concord, Ont.customer Merchant Exchange as an example of a brick and mortar organization who wanted to introduce Web-based activities into their day-to-day operation. Through merchantsexchange.com, they bring wholesalers and distributors together to buy goods that will be resold in a retail environment that boasts 14 million customers available per day.
“A lot of our customers have achieved success in traditional industry but are looking to leverage expertise that they have through a tool that fits their business model,” adds Moskos.
Bid.Com quotes Keenan Vision, a San Francisco-based research firm, as calling the Dynamic Pricing model one of the fastest-growing segments in the e-commerce marketplace. Keenan estimates that by 2004, Dynamic Pricing could account for 40 per cent of all transactions on-line.
Will many of those involve Canadian firms? Racanelli reports they have had a surge of interest from Canadian-based companies lately. “Canada may be coming into the game a little later,” he says, “but they are certainly breaking into business-to-business activity just as much as U.S. and other parts of the world.”
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Shifting to click and order
The history of Bid.Com International Inc. as an on-line retailer is an advantage to current clients seeking their e-commerce expertise. The company has known first-hand the challenges their customers now face. Here are their tips on how to merchandise product effectively on the Internet, how to fulfill orders properly and in a timely manner, how to attract customers’ interest; foster excitement and create an interesting environment for people.
Marketing — “The old days of putting up a Web site and expecting customers to come there hasn’t happened,” says Joe Racanelli, director of marketing. “Ensuring traffic to your site is a big challenge to a lot of organizations who want to build a Web presence. I think the more successful ones realize that as much marketing in the traditional sense can be required for on-line activities.”
Fulfillment — “Traditional companies have well-developed mechanisms for fulfillment of their product,” says president Jim Moskos. “It may be as simple as you going into a Future Shop, buying a computer and walking away with it. If you buy stuff off the Web and you’re situated all over the country, to fulfill that order requires a little different thinking. Do you ship it from the nearest store or the central warehouse? How do you deal with inventory levels? There’s a lot of stuff that has to be thought through.”
“If you’re a traditional brick and mortar institution, you may already have that in place,” Racanelli continues. “A lot of organizations in the traditional sense are able to leverage some of their existing infrastructure in an on-line presence and be successful.”
Moskos and Racanelli find that companies who already have a catalogue presence enjoy an easy transition to the Web since much the same processes are needed to employ, fulfill and manage an on-line system.
Integration — “The days of treating on-line activities as separate and away from the company’s existing operations are gone,” stresses Racanelli. “Now one set of activities complements the other. You may go into a store and see their URL plastered on the walls. I think there’s a need for companies to leverage both sets of activities.”
Moskos refers to General Electric CEO Jack Welch’s statement that there’s no such thing as e-business; there’s just business. “I think it’s very interesting that we had the first wave of just dot.coms and now we have what people refer to as ‘the revenge of the dinosaur’ when you get the traditional brick and mortar companies deciding ‘we have to be in that business as well and all our business processes should recognize the existence of the Internet as another potential vehicle.'”
Commitment — “(Success on-line) is really a cultural issue within the company,” says Moskos. “They have to recognize the power of this new medium and embrace it and aggressively pursue it. A half-hearted venture into the Web is not going to gain anybody anything. There is definitely a cultural consideration most companies have to deal with.”
Boundaries — Racanelli points out that companies engaging in e-commerce have to define the boundaries of their customer base. “Are you going to fulfill an order from Japan?” he hypothesizes. “Even if it is the worldwide Web, there are certain constraints a company has (in order) to ensure its customers’ experience is pleasant – so people do come back, continue using your service and buying your product.”
Merchandising — “A subsection of your product (base) that does well on the Internet may not be the same product that you’d sell in your store downtown in Toronto,” says Moskos. He says their experience has indicated that certain price points, merchandise types and presentations work better than others on the Web.
Convenience — One of the greatest weaknesses of many Web sites is a complex user interface, adds Racanelli. “The more clicks you have, the more likely you’re going to lose your customer,” he warns. “You have to ensure (your shoppers) that the shopping experience you provide to your customers is easy and straight forward so that they are not inundated with requests for too much information or too many clicks.”
He recalls Forrester Research firm’s estimate that 66 per cent of on-line shopping carts never get shipped out. Imagine two thirds of the shopping carts in your local grocery store filled with goods and just waiting there because nobody bothered to check them out!
“The reason for that is that the information is not straight-forward in terms of what’s being requested or asked of the customer — or it is too complicated,” he explains. “People want simple things. The challenge is how do you make sure you have a simple site yet robust enough that you provide all the requirements needed to have a successful business?”
Moskos says what is really important is to make sure you have appealing merchandise and the site is designed so the customer is able to drive to the “purchase event” quickly and without a lot of cumbersome technology or navigation getting in the way.
“If you get the customer to the point where they are ready to make a decision to purchase, from that point forward it should be as simple as possible for them to finish that transaction,” he stresses. “Many sites make it very difficult to go through that process. (Shoppers) have to enter too much information. There are too many steps to enter the information. Too long a wait. Things like that get in the way.”
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