Mom & Pop Internet Business Thrives After Dot Com Bomb-Part I
Bill & Christi Rowe have been saving for retirement for years.
While they have been investing in their retirement, they have
been investing in their retirement business. In 1999, they
started Shop Bag End Celtic Jewelry Gifts, a Celtic
jewelry shop on the Internet with online credit card processing,
shopping carts, and a professional looking web site.
Year by year, the business has grown. There have been some ups
and downs. "We have survived a recession, the dot com bust, the
9/11 terrorist attacks and subsequent loss of consumer
confidence (that is, loss of business), and two wars," says
Bill.
We asked the Rowes what tips they have for entrepreneurs who
want a home based business that has a good chance at
success.
A Passionate Focus
"The first thing we looked at was whether our shop would sell
goods or services, and to pick something you are passionate
about. We also recommend a narrow focus so that you, as a small
business owner, may compete with the big guys," said Bill. "In
our case, we both have Celtic parents and family, Scottish for
Christi and Cornish for me. Celtic jewelry designs have great
visual appeal and have existed for thousands of years. They are
not a fad."
"If Bill tells me that the business is slow, I tell him not to
worry," says Christi. "After all, this Celtic jewelry will keep.
This stuff will not go out of style."
Bill adds, "Finding and filling a niche with a narrow focus it
crucial. It is better to be zoned in on one subject and do it
well rather than try to have a little of this, a little of that,
and not much of anything, especially with the competition one
has on the Internet. I saw one web site that just sold clown
shoes, not clown noses, not clown wigs, not clown makeup. I was
impressed with that. Celtic jewelry was an ideal match for us,
but others will need to find their focus."
An Appropriate Theme
"We had to come up with a name and a theme for our Celtic
jewelry web site, and for that we went with our passion for J RR
Tolkien and chose Bag End, home to Bilbo and Frodo Baggins, and
to Sam Gamgee of The Hobbitand The Lord of the
Rings," says Bill. "Our idea was that Sam, being the last
owner of Bag End, was ready to set his affairs in order. He
decided to forestall any squabbles his children might have over
diving things and decides it is better to sell the many
treasures he had picked up in his adventures for cash. He
sets up a trust and starts Shop Bag End to sell his
prized possessions for his children's benefit. We spent some
time researching and came up with The Bad End Trust on our web
site, complete with the required number of Hobbit names and
shire reckoning dates appropriate to the time. We had quite a
bit of fun with it. Tolkien was influenced by Celtic names and
legends as well as the Scandinavian and Teutonic myth material.
So to us and to our customers, it is easy to believe that these
ancient Celtic jewelry designs might have come from Middle Earth
and the time of the Shire."
Inventory or Drop Ship?
The next thing that the Rowes considered was whether or not to
carry inventory. "In 1999, there was a lot of talk about having
a catalog of items that you did not have on hand and have the
maker drop ship when you got an order. I found some problems
with that," says Bill. "For one, the cost of the items appeared
to be higher. For another, there would be quite a bit of time
for the third party to fulfill an order. And finally, what if a
customer bought some Celtic jewelry from two or more vendors?
The customer would get two or more packages, at different times.
So, I decided that we would carry inventory and do our own
fulfillment. We would be able to buy at better prices and we
would be able ship very quickly."
The Rowes do carry a small number of pieces of Celtic jewelry
that have gemstone options. "It would be too expensive to carry
each stone for each piece," says Bill. "That vendor is here in
California, so we can order from them and they will ship right
away and we will get the piece the next day. We call these
Special Orders. It's almost a drop ship, but it is still
shipped to us, and we send out the complete order."
Select Quality Vendors
The Rowes examined a lot of Celtic jewelry sites and picked
things that they liked and found the vendors that supplied what
they wanted to sell. "We were fortunate to find all good people
in our various vendors. We have a personal relationship with
almost all of our vendors," says Christi. "That means that we
can often get faster treatment in case a customer needs
something in a hurry."
Credit Cards?
The Rowes also considered how their Celtic jewelry web site
would work in general terms. "There were plenty of commerce
sites then that did not offer online credit card payment," says
Bill. "They might have had offline credit card payment where a
customer could call in, or accept checks and money orders only.
We believed strongly to give our customers the most choices
possible, so that meant online and offline credit card payments,
fax, telephone, and mail orders. For the business, we got a
toll-free number for orders, a must have even then."
Web Site Specifics
The next big hurdle was primarily technical: How to get a
professional web site that offered online credit card payment.
After searching for a good ecommerce software package, the Rowes
decided on Miva Merchant, that was used on over 300,000
ecommerce web sites at that time. "We picked that system because
it was a database system that allowed us to enter the
information once for each Celtic jewelry product and have each
product in one or more categories," says Bill. We spent some
time to devise appropriate categories for our Celtic jewelry
that were appropriate and allowed our customers to find their
piece of Celtic jewelry easily."
"The system is also modular and allows third party developers to
write useful extensions to the basic software, a feature that
the Rowes have used to advantage. "We have Amazon dot Com
features such as 'People who bought this also bought these',
most popular products for the entire shop and for each category,
product ratings by customers, customer coupons, and so on."
The Rowes then selected a merchant web site host that
specialized in Miva Merchant. The Rowes went to their bank and
applied for a merchant account linked to their business checking
account. Then the Rowes had to find a credit card acquiring
company and an online credit card transaction service that
worked with both Miva Merchant and with their bank. "This was,
by far, the most complex, most nail-biting part of the
endeavor," says Bill. "We needed for a customer to be able to
pick the Celtic jewelry he or she wanted to purchase form our
online catalog, put in their shopping basket, and be able to
checkout."
"Once the name, address, shipping, and credit card information
was entered by the customer, the software sends that information
to the credit card transaction service. This service then looks
up the company that issues the credit card, and sends it the
request for the purchase. The credit card company replies with a
yes or no, and the service returns the answer to the merchant
software which then completes the order. This process between
many independent parties must go through smoothly and
efficiently within a few seconds."
"Then, when we are ready to ship, we capture the charge and the
acquiring bank goes to the credit card company to settle the
transaction in about two days with an eventual transfer of
funds, less fees, to our business checking account. Everything
must work correctly."
Credit Card Precautions
The Rowes also decided, for credit card security, that each
order would merely be an authorization, not a charge. "At that
time, many people had their orders come through as charges,"
says Bill. "But, that meant if there was abuse or fraud by the
'customer', or there was a problem with the order, the charge
was already made. We decided to take an extra step and err on
the side of caution by having orders first come through as
authorizations. Then, if there were no problems with the order,
we 'captured' the authorization as a charge when we were ready
to ship."
The Rowes have had to learn a lot about online fraud with credit
card orders. "All of our orders are 'card not present' orders,
similar to mail orders. We never see the purchaser, the credit
card, or the card signature. We have to rely on the verification
of the credit card billing address, and now the three or four
digit card verification value. Our policy is to ship orders with
verified credit card billing addresses and to enquire and look
into those that are not verified at the first go. We have had a
rash of fraudulent orders from certain parts of the world that
use stolen credit cards. Woe to anyone who falls prey to their
traps because you will loose you product, your shipping costs,
and have your credit card payment cancelled, and pay a fine. The
credit card companies protect the consumer by making the
merchants pay. It's as simple as that."
End of Part I -- See Part II