Expanding to E-Commerce Sales.

There are a lot of opportunities for us to market our products online. With the advent of the dot com boom in the late 90s, the E-commerce industry has experienced a huge expansion due to a number of factors. The major advantage of marketing online is the reduction in operating expenses. Another major advantage of marketing online is that we are able to expand our market base into international markets, therefore this means that there is major opportunity to acquire new customers. We currently have our products in retails stores throughout the United States, however online marketing can give us the opportunity to have our products end up on the shelves of consumers in India or Africa, thus potentially increasing our market share. We can opt to create our own e-commerce web site to market our products, however since we have only been in business for 3 years, it would be best to partner with an online distributor with a solid reputation and background. I recommend that we start by applying to become a vendor with the Home Shopping Network (HSN). With regards to an online marketing strategy, the utilization of search engine optimization (SEO) has lowered the cost of customer acquisition. SEO is a very crucial part of online marketing strategies, as it will give us the opportunity to attract the specific type of consumer that we are looking for at a minimal cost.

INTRODUCTION:

Our Company "FISHBAITSRUS" has been in business for the past 3 years. We've managed to open and operate 2 stores within Massachusetts and one store in Maine. As common with most businesses, the first year of business proved to be the most difficult as we faced a lot of challenges and competition. We survived through the great recession of 2008 and were able to pull through an extended period of low sales. The year 2010 marked the turning point for us as we saw a steady increase in sales quarter after quarter and we also enjoyed an influx and increase in return customers. We were able to open a second store in Massachusetts in 2011 and recently opened our 3rd store in Maine. All our stores have been experiencing a steady increase in sales for the past year.

A lot of companies have expanded to online sales for a variety of reasons. For one the success of companies like Amazon and HSN has proved that the formula works. Moving to online sales offers a host of benefits such as a possible reduction in operation costs, the ability to move into international markets without having to open expensive foreign storefronts, and reduced costs in advertising. Trends indicate that online shopping is on the rise and I believe that it is time for us to take advantage of this market.

I.E -COMMERCE OPPORTUNIES:

a) FINDINGS:

As observed through operating our physical storefronts, there are numerous costs involved with running a brick and mortar operation. These operating expenses include rent, leasing fees, maintenance costs, taxes, insurances, utilities, landscaping, pest control, trash removal, office equipment and supplies costs, etc. A lot of these expenses can be reduced or even eliminated by utilizing e-commerce opportunities. In fact the advent of online stores has posed a serious threat on brick and mortar operations. The formerly popular book store Borders recently announced that they would be going out of business. It is believed that Borders could no longer keep up with the stiff competition from online retailer Amazon. Blockbusters is also facing the same fate that Borders succumbed to as they filed for bankruptcy in 2010 and have been acquired by another company. Online DVD rental services such as Netflix are believed to be the reason why Blockbusters is struggling. Over the past 10 years, e-commerce retail sales have grown more than 20% annually and retail sales have only grown by 2.9%. (Begany, 2011) This stresses the importance of why we should create a strong online presence.

Technological advancements have made online shopping more prevalent and easily accessible to the masses. Pew Internet Research recently reported that almost half of all Americans own a smartphone and ComScore is reporting that 86 million Americans are using their smartphones to make purchases online. (Savitz, 2013) There are a lot of companies whose success has a lot to do with e-commerce and there are also companies who are opting to take advantage of this opportunity. Amazon.com was founded in 1994 and their headquarters is located in Seattle, Washington. Amazon is currently the world's largest online retailer. (Bui, 2012) There are various reasons as to why Amazon is very successful. One of the major reasons for their success is that they are able to reduce operations costs by foregoing expensive physical storefronts. Amazon started up by having only 2 distribution centers (fulfillment centers) throughout the United States. Due to Amazon's rapid expansion, they have added 8 fulfillment centers to total 10 fulfillment centers through the United States. If we adopt this model, we can potentially move a significant portion of our sales online instead of having to open up additional physical storefronts. According to the Wall Street Journal, the average lease rates in U.S. malls was approximately $38.77 per square-foot in the year 2011. (Hudson, 2011)

b) ANALYSIS:

We are currently paying on average approximately $15 per square foot to rent our commercial spaces. This totals a yearly expense of $30,000 for our three store location. This huge expense can be significantly reduced or eliminated by utilizing e-commerce to sell a significant portion of our products. If we can eliminate renting a physical commercial space, we can also eliminate other operating expenses such as utilities and look into further savings by closing down existing storefronts.

The entry into the e-commerce world does involve some costs; however they are minimal when compared to the cost of operating a brick and mortar storefront. There are three major costs considerations when it comes to the creation and operation of an e-commerce web site. These costs include the cost of processing financial transactions/ensuring the security of the web site, the cost of hosting the web site and finally the cost of advertising.

A shopping cart solution and a merchant bank account are needed to process online payments. The cost per transaction for this type of service averages at 1% to 5% of the transaction total. We already a incur a similar cost with our physical store as we currently utilize "First Data" for merchant credit card processing for our Visa, MasterCard, Discover, American Express, Diners Club customers. We pay on average 2.50% for each transaction authorized.

The secure socket layer (SSL) was created by Netscape to ensure for the security of transactions between browsers and web servers. This is very important as it will serve as a secure link between our web site and our visitor's web browser to ensure that credit card information and other sensitive data are secure. There are "do it yourself" SSL guides and professional services that on average start at $9.99 per month.

An e-commerce web site needs a location and this can be likened to the renting of a commercial space for a brick and mortar store. This is why the use of a web hosting service will prove to be crucial for the implementation of an e-commerce site as it will allow the web site to be accessible via the World Wide Web. We essentially will need to "lease" internet space and can do so from a variety of web hosts. The average cost for web hosting services for small businesses range from $500 -$2,000 per year. Most services have tools and free template designs that will allow one to build their own web site efficiently and at minimal cost. Renting a physical store front is no doubt 100 times more expensive.

The marketing and advertising aspect cannot be ignored when it comes to operating a successful e-commerce business. We have name recognition in the states which we have our stores, however we will need to develop an effective online marketing strategy to acquire online customers. Online marketing and advertising rates are relatively cheaper when compared to the local advertising rates which we are accustomed to paying and there are numerous opportunities for online advertising. (Further details will be discussed later.)

c) RECOMMENDATION:

The entry into the e-commerce world is neither difficult nor expensive as we already incur similar costs in the operation of our brick and mortar storefronts. A minimal financial investment will be needed to create, host and market an e-commerce web site for FISHBAITSRUS. The creation of a web site is the first step towards utilizing e-commerce opportunities and it is recommended that we embark on this.

II. THE SUCCESS OF HSN:

a) FINDINGS:

The Home Shopping Network (HSN) was created in 1982 and was originally created as a televised sales pitch for consumer goods and services. HSN became the first national shopping network in July 1, 1985 and sells a variety of products ranging from electronics to furniture, jewelry and beauty products. HSN

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