The era when we all believed fortunes were to be made on the web is over. The dotcom crash of 2000 saw off many over-ambitious e-commerce ventures, and received wisdom these days is that the websites most likely to make a proÞt are those linked to established bricks-and-mortar businesses. But is it still possible for a beginner to set up a successful web-only business?
Dr Ian Alcock, a Cheltenham GP, certainly thinks so. Cotswold Aromatherapy (www.aromatherapy.uk.com), the business he runs with his wife Julia, was launched on the web in May 2002. In the Þrst month it took £74. Eighteen months later it's taking £10,000 to £12,000 a month. "It's gone mad," says Alcock. "We're struggling to manage."
Alcock started small with, he says, "no business training, no advice, no outside help". Having identiÞed a potential market for essential oils and herbal remedy kits, he taught himself web design from a book and created the site himself, using Actinic Catalog and Macromedia Dreamweaver. Initially, he bought tiny quantities of aromatherapy oils from larger retailers and sold them on at a small profit. The next step was to find wholesalers.
"We spent a few long nights trawling the internet, trying to find hints and glimpses of who the suppliers were." Once he had that information, he was able to buy the oils in bulk very cheaply and undercut other retailers; essential oils from Cotswold Aromatherapy cost about a third of those from rival Neal's Yard.
The experts, however, are still cautious about the possibilities offered by the web. "The get quick rich model is dead and gone," says Michael Bayler, digital branding consultant and co-author of Promiscuous Customers: Invisible Brands. Bayler says the best opportunities are in "alternative" products "where a small but relatively robust community is served with a niche offer." Phil Flaxton, CEO of InterForum, an independent organisation offering advice on e-commerce, is even more wary. "Unless you can think of something truly innovative, you're going to have a tough time." Before you set up a website, you have to do your market research, says Flaxton, and draw up a business plan, just as you would for a conventional business. "If you're starting a business online, you need to know what the national competition is and possibly even the international competition because you're operating in a global market." Bayler describes the web as a "punishing environment in which to trade," and argues you have to be offering a service that clearly differentiates you from your competitors.
On the other hand, the risks involved in setting up an e-commerce website are arguably smaller than those of establishing a bricks-and-mortar business. The Alcocks were able to ease themselves in gently; between them, even now, they only spend about six hours a day on the business - Julia also looks after the couple's two small children, while Ian still has a full-time job as a GP. Overheads are small as the business is run from home. "An aromatherapy business Þts into a very small space," says Alcock.
Once you're trading online, the critical question is how to Þnd and retain customers. For the Alcocks, the turning point came when they decided to use pay-per-click advertising so that a search on "aromatherapy" on the main search engines brings up an advert for their site. The advertising would have been ineffective, however, without a high level of customer service - these days, a high proportion of their business comes from repeat custom. The Alcocks despatch orders straight away, and answer all emails personally. This commitment to customer service is essential, says Bayler. "People's expectations of service are far, far higher in this environment. They are very unforgiving of failure to deliver on promise."
According to Bayler, the really difÞcult part comes when you try to expand your business. "The major problem is that almost any business on the web lays itself open to commodity." In other words, bigger, more experienced competitors look at what you're doing and copy it. They usually have a large existing customer base and are able to undercut your prices. The way to resist this, says Bayler, is to offer something the competitor can't copy - expertise, for example, or an added service.
The Alcocks are quietly conÞdent that their business can continue to grow. Recently they have begun to sell to retail outlets, and have taken on a part-time employee. Their plan now is that within a year they'll be able to move to dedicated business premises and Ian will be able to give up his day job. For a couple who, 18 months ago, knew nothing about running a business, that's not bad going.
The Alcocks tips for success
· You must have a good product
· Put customer care first
· Undercut the competition
· Use pay-per-click advertising
