Posts Tagged ‘eCommerce’

What Is MAP and Why Manufacturers Need To Enforce It

What Is MAP?

MAP stands for minimum advertised price.  Essentially it’s something that manufacturers can use to enforce their sellers to not advertise their product for a price lower than X amount of dollars.  For example if I am a manufacturer that makes a cell phone, and I have three different stores that sell it.  I can set MAP pricing to $199.99, meaning none of those stores can publicly advertise the phone for less than $199.99.   The Supreme Court has said that utilizing a MAP is legal and does not represent a violation of U.S. antitrust statutes.

How Does MAP Benefit Both Parties?

As long as MAP is strictly enforced, it can be extremely beneficial in my opinion for both the manufacturer and seller.  Lets look at some of the reasons:

  • By maintaining a higher price point, the product retains its value, which in turn is better for the brand image behind it.
  • Enforcing a MAP can allow some of the small business players to compete with the big guys.  For example, if I have a widget that is being sold under a MAP at Mom & Pop Shop as well as Wal Mart…we both know that Wal Mart has the upper hand in terms of purchasing quantity.  Generally increasing quantity purchase means they can also get a lower price, and then use that buying power to lower the retail price, therefore not giving Mom & Pop Shop a chance to even touch the pricing.  If MAP is enforced, both Mom & Pop Shop as well as Wal Mart would sell for the same price, even if Wal Mart may be paying less per widget.  This gives everybody a chance to compete, but as a benefit to Wal Mart for buying more, they make more profit per sale.
  • Price wars will not occur between your sellers, which drives pricing down.  We’ve seen this first-hand, especially in marketplaces like eBay.  10 different sellers on eBay trying to sell a product can turn a profit that was once a healthy margin into literally pennies on the sale.  Sure, this is great for the consumer in terms of price, but imagine the customer service and company behind a sale where they make practically nothing and are hoping for sheer volume just to make a few bucks.  More than likely you are going to get treated like shit, or there will be other negative things like aggressive upsells, selling your information, etc.  Remember, everything comes at a cost.
  • By making all sellers follow the same retail pricing, sellers will need to come up with more creative ways of promoting and selling a product aside from simply marking the price down.  With the higher margins that everybody can make on the product, it will allow for budgets to do such things like offer better customer service.  This again can become a significant method of positive brand image reinforcement for the manufacturer that just wouldn’t happen any other way.
  • By maintaining a MAP, and ensuring their distributors are holding their resellers to a MAP policy, it allows room for wholesale pricing to work.  I can’t tell you how many times I’ve seen a wholesale price, while I could literally find a seller selling for less than that.  The whole business structure behind reselling and wholesale just doesn’t work if pricing isn’t properly enforced.

As I mentioned above, all of the benefits can only be had if the manufacturer (and wholesale distributors) were to ensure that the MAP policy was strictly enforced.  It takes just one seller adjusting their price by 5 cents with no reprecautions from the manufacturer to mess things up.  It’s vital for the manufacturer to not play “favorites” with their bigger sellers.  Manufacturers as a penalty should threaten to freeze sales for a seller if it is found violating MAP, or even go as far as taking legal action against the seller.

Other Concerns and Problems and Notes

There are certain workarounds and situations that should be of concern.

  • It’s much easier for a distributor or wholesaler to not adhere to MAP policy for their resellers.  For example if I am the manufacturer, I sell to a wholesaler, who in turn sells to a store.  As a manufacturer you would need to be adamant about ensuring your distributors are adhering to policy for the stores they are reselling to.  If you find a store selling below MAP, find out who the distributor is if it’s not direct, and threaten the distributor.
  • There are workarounds for getting around an advertised price.  For example I’m sure you’ve seen sites like Amazon who do things like “Click here to see the price in your shopping cart”.  This is a way for sellers to somewhat get around pricing.
  • If you look at it from the manufacturer standpoint, they make the same amount of money regardless of whether or not the seller is making high margins, or pennies on the dollar…they are still buying the product for the same price from you.  So it’s easy for them to not care as long as somebody is buying the product.  They should consider the different factors up-front and if they want to set a MAP policy, be sure to adhere to it going forward.

Your Thoughts & Opinions

I’d like to openly ask both store owners as well as manufacturers to respond in the comments (feel free to do so anonymously) about what your thoughts and experiences are.  Am I out of line here?  I can see that this may be less concern in a brick-n-mortar outlet, but online I believe it’s extremely crucial.  Are there other advantages and disadvantages I haven’t thought of?

Starting A New Web Project: TweakMag

I’m pretty excited, I’ve hopefully found what I call my “Dillsmack”. For those who don’t know who Dillsmack is, his real name is David Dellanave, and he has been the other half of projects with Shoemoney (Jeremy Shoemaker) such as AuctionAds. Not having somebody like this at my disposal has always been a big problem of mine in my opinion. While I feel that I can design and market well, when it comes to true programming, it doesn’t stick. I could outsource various projects, but I want somebody I can trust that I could feel comfortable giving up a portion of the business so they have the same sort of drive I have for it to succeed. With that said, I’d like to welcome “Mubs” to the team.

With this in mind, we’ve quickly took on our first project, TweakMag:

Tweak Mag Launching Soon

As you can see from the launching soon graphic, the site will be one that specifically targets modifying (“tweaking”) the new Magento eCommerce platform. Magento doesn’t even have a version that should be used in production yet, but there is a ton of hype surrounding the new open source product. We want take advantage of this at an early stage in order to build a strong audience before the real following comes…at least that’s what we’re counting on!

The Process

I’ve personally run into a lot of personal issues and concerns about eCommerce platforms (and blogged about it here), so I started to closely follow the Magento development. I quickly realized that this would be the answer to a lot of problems I had, and I wanted to somehow utilize this early “hunch”. I came up with a concept for providing information on modifying the software, but there was some specific things I wanted to do that I knew weren’t going to work exactly the way I wanted unless I brought in a developer. At this point I ended up finding Mubs (Thanks Travis!), and I ran the idea by him. He thought it was a good one as well, and wanted to be a part of the project.

At this point we decided to get on the phone and brainstorm what was possible to have on the site, then weed out what was not needed, and then prioritize what was left over. Since we are counting on the site being successful due to early hype, it’s important for us to launch quickly. From the list of six content features we wanted to put on the site, we cut this down in half to three for the launch.

Aside from the timing benefit, we cut down a lot of the features for now just because there isn’t a ton of modifying going on just yet. Magento (aka Varien) is in an aggressive timeline for development, so especially at this stage, there is a lot of changing in the code. People are still modifying though, and it’s a great sign for the potential success of TweakMag!

Monetization

We plan on monetizing in a few ways. Obviously we’ll have your standard ads, probably starting off with something like Google AdSense and Text-Link-Ads. We also have some great ideas using some affiliate/referral programs, but integrating it into important content that users will like. This is the best method, and hopefully the most effective…especially when new users start doing some research as Magento continues its development.

Keep Updated

Stay tuned, we’re trying to launch as quick as possible!? If you want an e-mail when we launch, enter it in the form on TweakMag.com. I have a couple other ideas for projects with Mubs, so I hope this is the first of many successful ventures with him.

How Should I Take Things To The Next Level With Resale?

I’ve been contemplating whether or not to take ActiveTuning to another level of eCommerce or not. For those that don’t know what ActiveTuning really is, it’s one of the company’s that I won. We manufacture aftermarket car parts, and specialize in Nissan and Infiniti vehicles. We literally make the parts that we sell in-house, from fiberglass grilles, to auxiliary input audio plugs. I was lucky enough to partner up with a mastermind in manufacturing and product design. On top of the parts we manufacture, we have also offered just a few select products that we resell. The products that we chose to resell have been pretty uncommon parts that allows us to have a decent price margin on (from what I’ve seen on other common aftermarket parts).

There are a few issues that have drastically hindered any sort of large growth:

  1. Both my partner and I have full-time jobs, but unfortunately my partners is quite a bit more intensive and requires much more of his time.
    • This is a major issue because Mike does the majority of product development. No new products means no more money, no innovation, less excitement and hype on the company, etc. This all affects bottom line sales as well as future growth.
  2. We’ve kept production of certain things like fiberglass manufacturing outsourced to local companies, when we have the knowledge and capability to do this 100% in-house. What we don’t have is the time and resources without some sort of investment or capital to allow us to go at it full-time. By outsourcing these things, it increases the cost to make the product, which obviously gets pushed to the customer. Since the cost to develop is high, we have to raise our prices pretty high. This reduces sales, but even worse, it cuts into profit margins. It sucks when you have a $300 part that you’re barely making any money on.
  3. Mike and I live pretty far away from each other. I live in Virginia, while Mike lives in Wisconsin. This hinders us quite a bit, you never realize how productive you can be for a business like this when you’re closer to each other. Mike’s job is actually moving him to Virginia over the next 6 months. He’ll be living about 1.5-3 hours away from me, still far, but much better than 13 hours like it is now.

For these reasons I have always considered getting into more resale as an optional route to take the business. I’d still like to do manufacturing as it has some real huge benefits:

  1. They are normally higher profit margin
  2. They offer exclusivity. You can only get the parts that we make from us. That gets people to our website, and essentially can help upsell other parts.
  3. Branding opportunity. Having our own products help build our brand name, which brings more customers and more sales to both the manufacturing and resale parts of the business.

At this point I’ve gone as far as setting up relationships with several wholesale distributors as well as directly with manufacturers in order to be able to get access to good pricing on reselling parts. I’ve got the ability to carry parts from over 250 different brands like HKS, Stillen, Volk, HRE, NOS, Greddy, and many many more. For right now I’ve set it up so that our customers can see the brands we carry, and can just e-mail us directly for a price quote. The process now is once I get an e-mail, I have to contact our distributors, and wait for a quote and availability from them. It’s a pretty unstreamlined and slow process that I don’t like. So with reselling parts I’ve come across a ton of concerns:

  1. This is a very competitive market in terms of pricing. Sometimes I’ve seen prices online lower than what I can get a part for at a wholesale discount. This means profit margins are slim, which also means it will take a lot of sales in order to make any money.
  2. It seems that the best pricing are direct relationships with manufacturers, but this usually requires a large buy-in to get the best pricing. Something we don’t have the capability of doing.
  3. Since we sometimes cannot get the absolute best pricing, we’ll make up for it in customer service. I’d personally prefer to order a part from a reputable company that I can count on over some no-namer with a crappy website.
  4. I have concerns about product returns. We’ll see how this works out over time, but I hope that it’s not a losing formula, and that customers don’t take advantage of us.
  5. Especially at first, we will not have an inventory of products. This will of course mean there will be some delays from our end to a customers end as a product either gets drop-shipped to our customer once ordered (ok time), or goes to our distributors, then to our customer (not good time).

At this point I’ve decided that I’d like to at least try and add the resale route to the business, but now I have a few options as to which direction to take it:

  1. Keep it the way it is now where a customer can e-mail us for quotes.
  2. Choose select products to actually promote and sell as products on our website.
  3. While we can get products for any cars, it may make more sense to specialize and create a niche in specific makes and or even models to sell products to. This way we’re more knowledgeable in what we’re selling, and can make it easier to advertise and promote specific things.

I’m really leaning towards option 3, but I’m torn between keeping the company specializing in Nissan/Infiniti or take it further and add some new specific cars that we would also specialize in. For example we’d still specialize in Nissan/Infiniti, but we’d also specialize in Toyota Supra’s, Subaru STI’s, Mitsubishi Evolutions, etc. We would choose certain cars that are generally known for a strong aftermarket community, and work off of those. The only things I’m contemplating with this is that one, for those cars there is a lot of competition, and two, one of the reasons we’ve gotten as successful as we are now is because we’ve really specialized in cars that don’t have a large aftermarket following. By specializing in cars that don’t have a large aftermarket following, we’ve been able to corner the market.

With this information in mind I think it may be best to continue to specialize in just Nissan/Infiniti, but add an entire line of parts that are not manufactured by us. We’ll still offer parts that people can request pricing on for other cars, but we won’t actively promote specific parts outside of what we specialize in.

Knowing all of this information, what are your opinions?? Do you think I’m making the correct decision, or should I try something else?? Got a better idea then anything I’ve mentioned?? Let me know.

Now I just need a better production solution for an eCommerce platform!

Two Upcoming eCommerce Platforms Worth Watching: Magento & StoreSuite

eCommerce logosThere are two upcoming eCommerce platforms that I’ve been closely watching development of, and you should be too. Their names are Magento and StoreSuite Shopping Cart Software. Both are currently in development, and not available for download yet. There is a major difference between the two, Magento is a free open-source solution while StoreSuite will have to be purchased. There are obviously pros and cons to each option, some of those being the following:

  • Open source allows it to be further enhanced by the community
  • Open source is free
  • A paid solution comes with personalized technical support, therefore more likely being a more stable solution

Both solutions look very promising as possible options to replace my open source osCommerce solution that I’m running on ActiveTuning. Both StoreSuite and Magento have blogs where you can actively track the latest updates, screencasts, sneak peeks, and news. You can even post your feedback to help point the development in the right direction:

User feedback and company experience has been critical to the development of both applications! Magento has been in development since April, and StoreSuite since July. Since Magento has been in the works for a while longer, there is normally a ton of comments on each blog post they make with opinions, suggestions, feedback, and more. Magento is built by a company named Varien, which is a web development/design firm based out of Los Angeles. The benefit of this is they have a ton of experience in development, a team of good people, and they are also designers. This is great because it seems like other platforms are built be people that only develop, but can’t design. StoreSuite also has a strong background. It is built by a software development firm by the name of Interspire based out of Australia. They’ve built a few different successful online applications and sold millions of dollars worth of them.

I’m not sure yet when we can expect StoreSuite, but Magento will be releasing a beta 1 (preview) any day now (promised by August 31st). Since neither have a version yet for download, I have to base my opinions on what is posted on their sites and blogs.

From initial opinion, StoreSuite looks to be a great install and use right out of the box solution. Mitch created a real-time drag and drop “design mode” which allows you to make all of your design changes through the actual site interface. The best way to explain this is to have you watch the screencast. This is great for people that don’t want to get down and dirty in code just to make simple design changes. StoreSuite also promises a lot of features which help cross-promote markets and generate more sales, such as a smart list of recommended products in a customers shopping cart.

Screenshot of Interspire

Magento is the eCommerce platform I’m the most excited about to be honest. It looks to be a very very powerful solution with a great team backing it. There are a plethora of features, with a roadmap that gets better and better all the way through Q1 2008. Varien is ensuring to build this with all around goodness, from a powerful backend powered by Zend, to a slick design/easy to use interface, to the highest SEO optimizations and standards. There are so many details that they looked at and are offering solutions for, that you really need to go to their blog and read through all of the posts and feedback to get the best idea of what you can expect. One of the cool features I like is the ability to have a category be a landing page, where you can make it anything you want. This essentially allows you to break out of the eCommerce platform and build the look and feel how you want it.

Screenshot of Magento

As I mentioned before, we can expect to see a Magento preview any day now…which I will then make another post with my comments and opinions. I’ll be installing a copy of StoreSuite when it comes out as well, so look for further opinions in the near future. In the meantime, check out the websites for both companies, read their blogs, subscribe to their RSS feeds, and let me know your opinions!

How Do eCommerce Sites Handle Multiple Ship From Locations?

I’ve been closely following the release of a new open source eCommerce platform called Magento. This month we should be expecting the first beta release, and there are many people excited to try it out. Magento has a blog that normally touches on certain features they are working on, and I chimed in a couple times with my insight.

One thing that I’ve always had a problem with on eCommerce platforms is how to handle multiple ship from locations. It seems that no packages out there deal with this concern, and quite frankly, I’m surprise it’s not a bigger issue than it is.

What Is Multiple Ship From Locations?

The idea behind this is that an eCommerce store has either multiple locations/warehouses or they have more than one supplier that drop ships to their customers. In my case, I have multiple locations for my automotive manufacturing business, ActiveTuning. Some of our parts are made with my business partner in Wisconsin, and some of the parts are made on my end here in Virginia. On top of that, we do have relationships in place with some suppliers that can drop ship to our customers.

So where is the problem with this? When 99% of our business is done online, an important part of the eCommerce platform is being able to provide accurate pricing for shipping, not only for our sake, but also for our customers. We don’t want to overcharge our customers just as much as we don’t want to lose money shipping a product to our customer. For ActiveTuning we use a heavily modified version of osCommerce for our platform, but the way it calculates shipping is based on the zip code of our main store location…which is in Wisconsin. So when there are parts that are supposed to ship from me in Virginia, the eCommerce software is quoting customers for shipping prices based out of Wisconsin. This is a potential major problem because something that may cost a lot to ship, I could lose out majorly on. On top of all this, I’m really thinking about getting into more resale, which means I need drop shipping to be a possibility. How do I manage shipping prices for my online customers if a product may ship from Texas, but it’s quoting from Wisconsin. If it’s something like an exhaust system that may cost $50-$100 to ship, I could lose money.

In this day and age I would think many eCommerce stores have multiple suppliers that drop ship, so I’m wondering how they handle the whole shipping situation. If anybody has any insight, please enlighten me!

A Solution?

The only solution that I can think of is for the eCommerce platform to support multiple locations on the administration side of things. Then each product can allow you to choose the location in which it ships from. Then the checkout portion needs to be smart enough to realize if a customer is ordering multiple products that are shipping from separate locations to understand that it will be multiple packages and charge accordingly.

This seems pretty complex, but maybe it has been done? Maybe there is a better solution?

Prediction: The Future Of eCommerce Is Smaller Niche-Specific Sites

My prediction for the future of eCommerce is that we’ll be shopping at more niche-specific sites that concentrate on certain smaller markets. This is bad news for sites like Amazon, which try and sell everything and anything. I think all of it comes down to product experience and knowledge.

In the real world, it’s difficult to have a storefront for lets say a shop that specifically deals with only Honda dirt bikes. In a local market, there is more than likely not anywhere near enough of a market to sustain and keep a business afloat.

From a customer-perspective, I have a Honda CRF230 dirtbike that I need some parts for. I don’t know too much about the bike, and what’s out there. It’s not so easy to just go on Amazon and search for parts, I really don’t know what I need, what’s out there, what’s the best, etc. My local Honda dirt bike shop specializes in my bike, and knows exactly what I need for it. I have a much better experience, and I continue to be a loyal customer to that shop.

Enter eCommerce, where 10 years ago somebody who wanted a storefront to specialize in Honda dirt bikes would not last a month…they can now open up shop, have the entire world be their “local” market, and do so on a much cheaper budget.

This works out great from both a business and a customer level. The business knows the complete ins and outs of the products that they sell. This can better help them sell, market, and up sell their products. A customer can now go to the business and get the answers and solutions they are looking for, and not get bombarded with a billion other products that they could care less about.

When I was first launching ActiveTuning with my business partner, we talked very many times about the type of market we wanted to develop products for. We could have just done parts for any manufacturer, but we really wanted to know as much as we could about specific cars, and use that information to better sell our products. We decided to stick with just parts for Nissan and Infiniti vehicles. Even more sub-classified, we wanted to put an emphasis on some of the cars that were generally neglected by the aftermarket (Ex: Nissan Altima, Nissan Maxima) and become the company to deal with for those cars.

We chose our niche, and I feel we’ve definitely been successful in it, and made the right choice to stay so targeted. As time goes, I think we’ll see more and more of the super-niche sites that specialize in something very specific. With that in mind, a company can one-up on me and specialize in just the Nissan Altima for example, but the market may be too narrow. One has to identify how “low-level” they can go and still be successful.

This same concept can also be used for blogging successfully. Pick your niche and stick with it.

A First Look At The Next Generation Of The osCommerce Software

osCommerce LogoAll of the buzz on the internet lately has been all about blogging and making money through advertising. That’s not the only way to make money, eCommerce is still alive and kicking! One of my companies, ActiveTuning, sells aftermarket parts for Nissan and Infiniti that we manufacture. Practically 100% of our sales are done online through our eCommerce platform. It’s a part-time gig for both my partner and I, yet we still manage to pull in 6-figures for gross sales. I designed and developed the website on my own, so there was no cost to building it. The eCommerce platform used is an open-source solution called osCommerce. I have heavily modified it to fit our needs, and even still there are many things I would like to change to make things better and more efficient…but it works. It has handled thousands of customers and thousands of orders without a hitch.

osCommerce has been in development for a very long time, especially the upcoming version 3.0…a drastic improvement over todays outdated version. The developers just recently released a public alpha version (version 3.0 alpha 4), which allows us to get a sneak peak at what the final version 3 will look like. I installed it on a local test server to see what some of the changes are, and I was very impressed. The usability of the administration interface is so much better, but there are still many improvements needed. Many of the improvements that I can think of, are on the roadmap for future alpha releases before the final version is announced. Among the “must-need” features that need to be added in my opinion:

These are all features that are listed to be implemented before the final release. There are still some major features I feel are not included but need to be:

  • Needs support for tracking #’s in a customers order status
  • Better support/customization for your standard shipping modules (USPS, UPS FedEx, DHL)
  • Better support/customization for your standard payment modules (Google Checkout, PayPal Pro, etc)
  • Ability to edit orders in the administration interface
  • Ability do add new orders in the administration interface
  • Option for customer to agree to statement when ordering certain products (for example a liability agreement)
  • Better methods for supporting products that offer free shipping
  • Better support for customizing products weight. For example many shipping companies deal with dimensional weight, not just regular weight. Also some sort of per-product override for weight classes.
  • Better reports
  • One click access to orders. Currently you click a line item, it then reloads the page and highlights it, then you can click into it.

Although there is a lot left to do in my opinion, they are on the right track. Here are some screenshots of some of the new improvements so far:

osCommerce 3.0 alpha 4 installation
The new installation interface. This is a huge improvement over the old interface, and makes installation much simpler.

osCommerce 3.0 alpha 4 index screenshot
This is your standard product page

osCommerce 3.0 alpha 4 administration login screen
The administration now supports user access levels. This is a major feature that should been added in the first version! We’ll see in another screenshot that we can now create users and give them access to certain areas of the administration.

osCommerce 3.0 alpha 4 admin main page
This is the new “welcome screen” for the administration. Also a huge improvement over the old version. It provides easy access to commonly accessed information.

osCommerce 3.0 alpha 4 admin main page with dropdown
The new menu system provides a clean and easy to use dropdown. This is a 200% improvement in usability.

osCommerce 3.0 alpha 4 adminstration access levels
Here is the feature that allows you to provide certain levels of access to specific users.

osCommerce 3.0 alpha 4 enter new customer
You can now enter a new customer into the system manually. In the old version you would have to register somebody through the actual frontend of the eCommerce site. Not very professional.

osCommerce 3.0 alpha 4 orders
Here is the new order page. It is now nicely organized through the use of tabs which don’t require a refresh on the page…so it’s fast.

osCommerce 3.0 alpha 4 templates
A new template system will allow for much easier customizations to your store. Frontend code is also being updated to be XHTML compliant, rather than an outdated table layout.

osCommerce 3.0 alpha 4 services
A new services section lets you turn on and off various features with ease. This is huge for me, because I had to literally take off all features manually on the version I use.

osCommerce 3.0 alpha 4 product edit
Here is the new add product page. Like viewing an order, everything is organized through tabs. An HTML editor is now an option.

I’m very excited as we get closer and closer to a final version. I hope that more of the features which I feel need to be added will be.

If you use osCommerce for your eCommerce solution, how do you feel about it? If you use something else, tell us about it, and any downfalls you’ve had.