Nightmare on eStreet

By Esther Schindler & Ben Elgin, Sm@rt Reseller

It all sounds great on paper, but e-commerce can haunt you for years to come. Watch your step. All it takes is one e-commerce goof to shut down your business.   And that same goof however minor can haunt your reputation as an e-business reseller forever.

Just ask Jim Ames. In 1998, Ames was running J3, an aspiring reseller that sold niche software on the Web. Today, J3 is out of business. Ames is out of work. And now he's thinking of suing his former Web host, Infodial.

Who's to blame here? Ames claims Infodial is at fault. On its own Web site, Infodial assures customers it can handle "unlimited databases." Unfortunately, Ames took those assurances to mean that Infodial could handle database access in any form. He wrote a search for the J3 site that required visitors to look through every field in 46,000 database records sequentially. Problem was as Ames learned after the fact Infodial was using Microsoft Access, so sequential searches of that magnitude often "timed out" before the visitor found whatever product he was looking for. Ames lost customers as a result. Naturally, he argues Infodial is responsible since it had promised unlimited capability.

In turn, Infodial points the finger at Ames, saying it bent over backwards, provided him with HTML coding help, coped with his frequent design changes and even suggested he bring in a technical consultant. What ultimately caused J3's downfall was the fact that Ames inexplicably took down J3's existing site while a new, improved version was still in development. As a result, J3's remaining customers couldn't buy from the company at all, an almost sure prelude to bankruptcy.

This is the kind of e-commerce horror story that makes lawyers rich and gives resellers goose bumps, and it is hardly unique.  Consider that in recent months, eBay, the online auction company, suffered a server outage, halting all business; several of the online brokerage firms, including Schwab and E*Trade, have had their sites go down in the middle of the trading day; Onsale accidentally sold $5,200 hard-drive packages for a mere $238; and Buy.com customers have complained that the company bills their credit cards even if a product is out of stock or discontinued. And remember the Victoria's Secret Web site fashion show during the Super Bowl, when few visitors could access the site because of massive traffic jams? That was great publicity, but it didn't help Victoria's Secret sell lingerie.

For technology-solutions providers that develop online commercial sites for their customers, such occurrences can prove disastrous.  Those that have experienced such glitches have learned firsthand that the road to riches in the e-commerce business sometimes takes dangerous detours. Unwary resellers that don't take the necessary precautions, or learn to sidestep the pitfalls awaiting them, are putting themselves in harm's way.

What should you be on the lookout for? Here are five scenarios that are most likely to lead to project delays, lost contracts and other horrors that can make an innocent reseller run screaming into the night.

1. Don't Spook Your Customers

One key pitfall is a disconnect between reseller expectations and those of their customers, who often don't understand an e-commerce site's complexity. Nor do they have a view of costs.  "They want Amazon.com for $15,000," quips David Pulver, president of Web Emporium, an e-business solutions provider.

A customer of another e-commerce outfit, Cephas Inc., wanted the company to make a number of simple changes and "just move this over there," says Kurt Seybold, Cephas's director of client services. But when the "simple" change cost $10,000, says Seybold, the customer felt ripped off.

Nor do customers understand the time required to get a site up and running. According to Leo Imperial, PSINet's product manager for Internet Commerce, customers often believe they can have a functioning e-commerce site in a week, or even in a day, and are unaware of the relationships that need to be established between Web developer, ISP, merchant bank, payment system, and so on.  That's especially true of do-it-yourself and small-business customers, Imperial says.

Caught up in building mind share and peddling their wares, vendors must shoulder a major share of responsibility for creating unrealistic customer expectations. Indeed, vendors often leave VARs with the unpleasant task of bringing clients back to reality.  Doug Pelletier, president of Trifecta Technologies, points to IBM in particular, which ran an ad featuring e-commerce solutions starting at $1,595. The media spot, part of Big Blue's e-commerce media blitz, may feature a solution with a core product at that price, but the end-to-end solution being touted in the ad should cost well over $100,000, says Pelletier.

It's probably impossible to provide too much customer education.   PSINet gives customers a 21-step guide to setting up a site. Seybold advises an educate-while-you-sell strategy: In a complex e-commerce sale, he suggests that the customer bring in an outside technical adviser. The adviser can assure the customer that you know what you're talking about, thereby establishing your credibility. Also, address potential problems during contract negotiations. Seybold will sign fixed-rate contracts for the portions of the job under Cephas's control, but on less tractable areas, such as project management, creative and cutting-edge technology, he says, "If they go over the estimate on these hours, it's on the clock."

Establishing realistic expectations also applies to your business partners. Define who's responsible for software upgrades, CGI  script problems and other outages. If roles aren't documented, the customer's site may be down while the site developer and ISP wrangle. Set expectations correctly for the site visitor, too; if the credit-card transaction isn't processed as part of the e-commerce transaction, make sure it's clear to the end user.

2. Who Are You Really Dealing With?

In traditional deals, you know who gets the sales pitch, and which people you must keep happy. In providing e-commerce solutions, however, the customer might be the marketing department, the IT department or a combination of the two. Because customers often haven't established internal site responsibilities, you stand a good chance of getting caught in their internal politics.

Find out who the decision maker is, up front if you can. Working with one client, Rich Cannon, president of Renais- sance Interactive Inc., went through three prototype phases before the 10 responsible people 10, mind you signed off.

Then, he discovered that another department manager, uninvolved in development meetings, had to approve the site, and "he wanted to nitpick the copy."

Marketing and IT have different cultures, just as legacy IT batch-mode people and dynamically oriented Web developers have philosophical clashes. These differences frequently cause friction between customer departments and trouble with the individuals you serve. (And if they're squabbling, you can't bill them until they resolve their problems.) Typically, marketing departments want to "get creative" with the  site, even though they may lack Web skills; IT staff will insist that their Web-ignorant policies be applied to a site built for selling products. You'll often find yourself needing to explain why something artistic won't work because of interoperability issues.

3. Boo! Gotcha!

Companies are putting their entire corporate identities online, but they're doing it with new, immature tools, using site-requirement estimating methodologies that are little better than waving a wet finger in the wind. When a commerce site lacks the horsepower to manage the traffic, the customer's entire business is at risk.

In building a site, it's easy to be distracted by operating-system religious wars, or development platform choices driven by a customer's personal certification strategy. However, most resellers agree that any of the standard vendors' tools are workable if you have the capabilities and skills to customize them. The real technology gotchas are hidden much deeper, generally in infrastructure and bandwidth requirements.

Probably the most public recent e-commerce failure was the aforementioned Victoria's Secret site, which advertised an online "fashion show" during the Super Bowl. The site couldn't handle the traffic, and the company and IBM Global Services the site's designer were embarrassed. Several site developers roll their eyes at the incident, saying it was inevitable. Web Emporium's Pulver points out that the site could have been tested in smaller TV markets, weeks earlier. Richard Owen, VP of Online Worldwide for Dell Computer, says he'd never have permitted the marketing department to stage such an event. Even if the event succeeded, Victoria's Secret would have a site scaled for the Super Bowl and it would never need that capacity again.

Instead, build in scalability and redundancy, and be ready to turn them on at a moment's notice. Because e-commerce sites rely on client-server databases, database optimizations are key.  Investigate the paths that site users take, and streamline for those purposes. Site searches take longest to process, so you can reduce site load and improve customer service by presenting information the user is most apt to look for.

But don't rely solely on technical tools. Last year, when we wrote about Cephas's design of Wolferman's e-commerce site, Seybold already had estimated his customer's Christmas sales. Although Wolferman's 1998 sales were six times the business it had in 1997, Seybold was within $5,000 of the figure he'd projected. His trick? Seybold estimates traffic and site requirements based on the marketing plan. Where will the site be marketed? What's the expected click-through rate, and the conversion rate from browser to buyer? One resource he relies on is @plan, a subscription site with demographics and purchase statistics for about 40,000 Internet users. It's expensive, he says, but worth the price.

4. Watch Your Step

For most businesses, e-commerce is a new phenomenon.  Although customers understand that the internet changes how their business operates, they're not ready to disrupt the status quo. Anxious to compete in "internet time," they rush their businesses to the web, frequently making plenty of mistakes along the way.

One major bugaboo here is a lack of integration between the e-commerce site and the customer's legacy business systems.  According to e-commerce integrators of all sizes, the number of companies ponying up the dough for a thoroughly integrated Web commerce system is a drastic minority. After all, this is the most expensive piece of the e-commerce puzzle.

Unfortunately, online vendors that initially go with a non-integrated makeshift solution may have to trash the whole system when they finally need a large-scale, integrated outfit. We asked Richard Owen what he'd change, given the opportunity to design Dell's site again. "I'd build a Web-commerce solution on the front of my legacy system," he says. That would have taken longer up front, he adds, but would have minimized problems later on.  "E-commerce is like buying a puppy. It's going to grow up into a big dog."

It may go against customer expectations, but successful sites start small and grow gradually. Consider a three-stage approach: Get the site up, then redo it to apply what you learned in the initial phase, and finally get it to work right. That process lets you solve the technical problems before the crowds arrive. Until the third phase is complete, only do test marketing though that can be 9 to 18 months from the start of the project. Customers will balk, but most disasters result from rushing in too fast, or from doing an incomplete job. Pulver offers an example of a mail-order firm that put a subset of products online, thinking they were "testing the waters," but visitors were annoyed when they couldn't buy what they saw in the catalog.

You also have to help the customer cope with a changing business model, and assume that its Web strategies will change while you're working on the site. During the process, it's easy for customers to get distracted by what their competition is doing. For instance, one site developer described a luxury-travel customer that tried to build a budget-travel site. It lacked expertise in that market but made an ill-fated jump into the budget sector, simply because another business was successful in that area.

5. Ghost Of A Chance

Once the content is in hand, and the site is up , then what? Who updates the site's content? Kiawah Island Resort initially paid about $10,000 for its e-commerce site. However, the customer had no way to change the site, and had to go back to the developer for even tiny modifications. Renaissance Interactive redid the design to better match the company's services, and changed some promotion strategies. Rich Cannon also set up the resort with content management software (Microsoft FrontPage, in this case), and created a customized form that e-mailed information to a central company database. While doing so, Kiawah discovered that a key reservation form had been going to an e-mail ID that didn't even exist! The resort hotel's site went from one lead a month to as many as 100 leads per week.

Customers often fail to establish a process to manage the business their site generates, and they have no tracking system to watch the online store's inventory, sales performance, etc. You can encourage customers to follow the example of REI, a Web Emporium customer that's assigned a store manager to the e-commerce site "just like all the other REI stores."

Remember, too, that initially, you'll have to incorporate the customer's data into the site. Expect disasters. Cannon points out that, "Materials acquisition is the most difficult part of the process.  It combines all the vagaries of ad agencies with all the vagaries of technology." Acquiring artwork can take months, often because no one thought to get a photographer's sign-off on electronic rights. If you want the project to continue to move forward, be ready to commit a person to acquiring the site content.

And, when you get it, the data is apt to be in a crummy format that takes much longer to process than you'd envisioned. Or it's in a format that was fine for the company's internal needs (such as SKU numbers) but inappropriate for its customers.

Finally, few resellers today are setting up e-commerce sites and then walking away even if that's what they intended. Unless you give the customer a pile of HTML and flee the country, the customer will rely on you for an ongoing solution. The good news is that you can continue to make money from this continued relationship; the bad news is that if you don't do it well, your errors can put him and perhaps yourself out of business.

If you screw it up, you don't stand a ghost of a chance.

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