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Rocky's Pizza Parlor - On or Off the Net?I was at a trade show a couple of weeks ago, and fell into a discussion with a visitor regarding the impact of the Internet on small businesses. His concern was that small businesses just aren't getting "webized" fast enough, and the ones that do, aren't doing a good enough job of ecommerce (online ordering and payment, etc.) For illustration purposes, I'll use Rocky's Speederific Pizza Parlor as our model. The question was, how much investment should Rocky make in ecommerce, and how quickly should he make it? My friend's argument was that Rocky had better get on the Net fast or he's gonna get his clock cleaned by the other guys in town, including Bill Winkle's and Peabody's. They're going to be offering online ordering and payment really soon and Rocky is going to miss out. I, on the other hand, argued that Rocky shouldn't move that quickly, particularly since Bill Winkle and Peabody aren't on the Net now. There is a benefit and a price to pay for being out in front. You don't necessarily win and you don't necessarily lose. Let's look at this in more detail. Aside from simply being on the cutting edge, with all of the hassle that implies, there are other problems with businesses like Rocky's moving too quickly into ecommerce. The first problem is simply that it costs so bloody much! Setting up an ecommerce site that would be highly customized to allow ordering of Rocky's pizza, particularly the "fuzzy tail special" that Rocky offers, would be very costly. While the software and services costs are coming down, we're talking about an enormous amount of Rocky's time dealing with getting this going. And Rocky needs to continue to pay attention to his business. Secondly, we need to consider the ongoing costs of ecommerce. Rocky will probably have to make a bigger investment in his computers, deal with interfacing the ecommerce system with his accounting system and order management, hire at least one additional person who will support his ecommerce system, and make a big investment in marketing to promote the fact that he now offers online ordering. Rocky may have the best pizza in town, but Frostbite Falls is not that big of a town. Before Rocky proceeds he should do some serious analysis of the payback on his excursion onto the Web. Luckily for Rocky, he hired me as his consultant. My advice to him was to set up a basic web page. This site would have a design that echoed his other literature, contact information, coupons, and a menu that could be printed out and faxed in as an order. We'd even set up an email list so that Rocky can stay in touch with his customers. Rocky would promote his URL in his newly printed menus, on his boxes, in his newspaper and cable TV advertising, etc. We would watch the hits that his web page got. At some point, we'd do some marketing research to see if his customers liked the web page, and if they would like it to be more interactive, allowing them to order and pay online. We'd also try to figure out how much incremental business he'd gain from making his page more interactive. THEN, we'd try to figure out the financial justification of adding ecommerce. We'd try to figure out if he'd actually get more business and if it would be enough to justify the investment. One of the things I'd really wonder about is just how many people Rocky is going to add to his customer list because of ecommerce. Consider how people order now. Would YOU order a pizza on the Web? Kate and I order a LOT of pizza. I'm not sure that I would start using another pizza place just because they offered online ordering, unless they did a lot of marketing to get my attention. Now, while we're doing this careful study, Bill Winkle might hurry and put his ecommerce site up right away. And, because Bill DIDN'T go through this careful process, he might close in 6 months because of the costs of the system and the diversion of his attention from running his business. The benefits of setting up a basic, simple web page can be either great or indifferent. The costs of setting up that basic page aren't very high, so the risk is low. But the costs of stepping up to ecommerce can be enormous and the payback to the company, in terms of increased margin, is hardly a good bet. Don't be fooled by the rush to ecommerce. Many are tripping all over themselves collecting money from eager investors who'll buy anything that has "dot.com" in its name. But many will also be fading away in a few years, when people find out that you just can't sell wet moose antlers over the Internet. Be wise. Treat this as the important business decision it is. Don't fall in love with the Web, and risk your business's future without careful thought and analysis.
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