Ideas In Action | E-Commerce SEO

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Ideas In Action

(PRWEB) September 26, 2000

Superior Ideas Hamstrung By Inferior Marketing

Here?s a paradox. The United States is indisputably at the forefront of the personal computer and Internet revolutions, and yet 100 million U.S. adults today do not own a personal computer. Moreover, 197 million U.S. adults have never made an online purchase.

And, despite an increasingly computerized U.S. business environment overall, just over half of the roughly 40 million small office/home office (SOHO) businesses have Internet access, according to IDC, a leading provider of technology analysis.

Economics are one factor, but not an overriding one. Nor is access to product a major obstacle. At least one outlet selling PCs is within driving distance of most small towns and inner cities. The primary hurdle, according to research performed by entrepreneurs Andrew Harris and Martin Slagter, is fear of the unknown. Many small business owners still perceive using the Internet and e-commerce for online purchasing, inventory tracking or marketing as dauntingly complex and mysterious.

Retail Blues

A recent study by Pitney Bowes Inc. and Yankelovich Partners found that keeping up with new technology is the number-one concern of small business owners. Staying up-to-date is a struggle for 46 percent of them, and 67 percent feel they are not suffi-ciently tech savvy.

Compounding the problem, according to Harris and Slagter?s research, is the fact that the large number and dispersed nature of SOHOs make them difficult to reach through traditional marketing and retail channels.

Also, technology product vendors are frustrated by their inability to communicate the value of products to small businesses via retail stores. ?Retail outlets aren?t a good educational channel,? Harris explains, noting that retail customer satisfaction is generally low, leading to return rates of 10 to 15 percent or higher on hardware and software.

?It creates margin pressure for retailers, resulting in a vicious cycle,? says Slagter, the company?s president. ?Deteriorating margins prevent retailers from hiring more and better salespeople, and the lack of knowledgeable salespeople constrains sales. Consequently, both the vendor and the consumer are placed in a disadvantageous situation.?

Every consumer who is discouraged from purchasing a computer may mean one less business or family who will access the Internet and make online purchases. ?The ripple effect and its impact on people?s lives and the economy can be significant,? Slagter notes. Indeed, a recent e-commerce survey by The Economist (February 26, 2000) suggests that individuals without access to online discount shopping and Internet information will increasingly be penalized economically.

Helping Small Businesses

and Consumers Buy with Confidence Andrew Harris and Martin Slagter founded Handtech.com, Inc. to help sell computer hardware, software and services one-on-one to individual consumers and small businesses. The company enables technology and Internet vendors to successfully reach potential customers representing a 0 billion market.

Handtech.com?s sales force structure mimics that of companies like Amway and Mary Kay Cosmetics. Sales in the field are conducted by independent technology consultants, who visit small businesses and consumers? homes to offer purchasing assistance, installation, instruction and on-going support. The consultants receive financial incentives from Handtech to create teams under their management by bringing others onboard. Harris, the CEO, points out that Handtech needs to keep expanding its consultant network to address the enormous size of its market. Home-based computer users alone account for 50 percent of all information technology spending.

Slagter maintains that technologically savvy corporations are already well-served by manufacturers? direct sales forces and resellers. However, there are a vast number of small businesses that make up what he refers to as the ?need help majority.?

They are Handtech.com?s primary market, while consumers buying products for personal use are an important additional market.

One measure of proof that the Handtech approach appears to be working is that product returns, at less than two percent, are well under the industry average.

A Successful Business Model

Another indication of the company?s success is its growth. Handtech.com now has 100 employees in its Austin, TX headquarters, supporting a growing sales force of over 12,100 technology consultants.

In the last fiscal quarter of 1999, Handtech.com experienced a 64 percent increase over the prior quarter and a 304 percent increase over the comparable quarter one year ago. Quarterly revenues have risen at an average sequential rate of 40 percent for the past eight consecutive quarters. More than 30 percent of the company?s revenues in the latest quarter were from repeat customers, and business customers account for 40 percent of nearly every quarter?s revenues.

The company?s success hasn?t gone unnoticed: Handtech.com was named one of Computer Retail Week?s Top 10 Retailer Innovators in 1998. CIO magazine named Handtech.com to both its Top 50 e-commerce sites list and its Top 50 Intranet sites for 1999.

Nevertheless, the potential of Harris and Slagter?s vision was not apparent to everyone when the duo first sought venture capital. Most investors failed to comprehend the business model, which was difficult to pigeonhole. Harris recounts, ?Eventually we were connected to Spencer Trask through word of mouth. They quickly understood both the market need and the value of our solution.? Spencer Trask raised .75 million to support the new venture during its first two years. Federated Department Stores provided a second round of financing, and now owns 37 percent of Handtech.com.

Penetrating a Vast Marketplace

Handtech.com sells 15,000 technology-related products and services developed by large vendors like Microsoft, as well as smaller, less well-known vendors. Customers can purchase items through their personal technology consultant or buy directly from an online catalog. Handtech.com places the order with the vendor and tracks it to ensure delivery. The company never handles actual merchandise.

Handtech.com?s technology consultants hail from all walks of life, although most are involved in a technology-related industry, full- or part-time. To assist them in building their business, the consultants can access Internet-based training, management and marketing programs through the company?s website. Using these online tools, a consultant must master the intricacies of each manufacturer?s products, software, warranties, etc., before taking a test and being certified by the manufacturers to represent their products.

Other online tools available to consultants through Handtech. com include an electronic customer database, peer communication and product tracking. Nearly 20 percent of the 12,100 consultants visit the Team Center on a daily basis, viewing an average of 13 pages per visit. The extensive amount of online material available to consultants is indicative of the essential role they play in Handtech.com?s operations.

According to Harris, ?Our research shows that the less technologically knowledgeable people are, the more they turn to friends, family and colleagues for advice. In effect, we match community-based, technologically savvy sales people with consumers in a neighborly, non-threatening manner, without premium prices.?

Federated Department Stores doesn?t sell computers or related products, but provides a major marketing benefit to Handtech. com. The chain has a 90-million-person household database and sends out more than 500 million direct marketing pieces each year via its Fingerhut subsidiary. Via this direct mail program, Handtech.com?s capabilities are communicated to end-users as well as to prospective consultants.

Handholding Equals Sales

?What separates Handtech.com from other marketers of technology products and services is the high degree of handholding the technology consultants provide to their consumers,? says Nathan Morton, company chairman. ?The personal guidance, instruction and on-call support facilitates the customer?s buy decision, enabling Handtech.com to be an increasingly vital link between consumers and vendors.?

As an example, 50 percent of the people who downloaded product from an online postage vendor were unable to properly use it to purchase postage via the Internet. Handtech.com technology consultants are visiting small businesses to provide personal instruction, which will result in markedly increased revenue for vendors.

While every purchase comes with access to a technology consultant in the customer?s community, prices remain competitive. Vendors absorb the consulting costs because Handtech.com?s premium service tends to make customer acquisition dramatically less expensive and creates repeat customers.

?The market is rushing towards us at the moment,? says Harris. ?More and more technology companies want to reach out to the home-based and small business markets, and we have a solution to greatly expand their customer base.?

Identifying the ?Sweet Spot?

Andrew Harris and Martin Slagter, Handtech.com?s CEO and president, respectively, weren?t neophytes in the technology market. Harris is the former president of Dell International and senior vice president of Dell Computer Corporation. He joined Dell when the company was a million business and helped its international arm achieve .4 billion in revenues in more than 100 countries. Slagter is the former president of Dell Europe, where he helped to build Dell UK into one of the top 70 companies in the United Kingdom. Prior to joining Dell, Slagter was European Channel manager for Rank Xerox?s European headquarters.

?It?s enormously complex to put something like this in place,? Harris says. ?We?ve succeeded in large part because we attracted a management team with very broad experience. Other companies have tried, but it?s hard to get the balance right.?

?From the start, we?ve known that our ?sweet spot? would be anyone who needs assistance and isn?t in a large corporation with an onsite help staff,? adds Slagter. ?We did our research. We had the right model. It was then a matter of executing correctly and convincing investors like Spencer Trask and Federated Department Stores to back us.?

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