Brick VS Click

Ok, just a quick lowdown on the pros and cons of going online vs offline (for retail startups) from personal experience. Since the heady days of the IT boom, a lot of retail experimentation have been carried out for the online arena and several success stories were written in the process. However, it is my my opinion that having an online retail site is still kinda over-rated these days and that there are some pitfalls which anyone who wants to startup a retail venture online should take note of :

1. Low Overheads Online?
   Yes, this is the ubiquitous reason why half the world wants to set up a business online. However, while it is easy to set up something online, this becomes a double-edged blade as it means that a million other people with the same idea is going to jump on the boat also. And the last time I checked, a leaky boat (a.k.a Internet) with a million people on it (a.k.a IT startups) sank (a.k.a Dotcom Bust). Marketing (additional costs) and Differentiation are the ways to go.
   
   
2. 24/7 Online Presence
   Websites work for you so you don't have to be there 24/7 right? Wrong... Websites serve the purpose of getting the message across but there's still tons of follow up work to be done before you fulfill sales. And guess what? Having a 24/7 website presence with international customers mean that unless you have a streamlined and efficient business process, you're be replying mails and parcelling off trinkets 24/7 too once your business expands.
   
   
3. Serving the Customer
   The wonders of being online negates the need to have face-to-face communication with your customers. Good for all the shy startups huh? Nope. Research shows that since up to 60-80% of communication is non-verbal, online retail startups effectively miss out this majority of non-verbal feedback as their main communications will be based on webmails and to some extend IMs. It becomes harder to know a customer better and develop long lasting customer relationships, a key source of revenue for many a brick and mortar shop. In comparison, I would think that a traditional retail outfit with about 10 regular customers would fare much better than an online one with 100 come and go online ones.
   
   
4. Collecting the Payment
   After making the sale comes collecting the payment. Should be easy online right? What with all the online payment portals and credit card services, right? Unfortunately, not all online customers think so and many still view making online payments as a risky transaction and would feel much safer to purchase something using cold hard cash at their local mall.
   
   
5. The Magic of Touch
   Similar to the last point, the edge that traditional retail has over online retail would be what I dub the "Magic of Touch". This is the sense of safety and confidence that a customer can get from being able to see and touch the good he/she is about to purchase. Being a major part of the selection and purchase process, online stores selling unique items (collectibles, antiques ... etc) will have to find some means around this problem. On the flip side, this is less of an issue for the more "standardised" electronic or household items.

Having said all that, this is not about discouraging retail-based startups from taking the online route. The key point to note is to be well aware of the inherent short-comings of taking a business of selling online and find innovative means to mitigate these negative effects.

Be creative and different, then the drawbacks of selling online would never become too big a problem to you.

Planning : Too Much, Too Little or Just Right?

Its pretty often that I heard of people I know wanting to start up a company to call their own. To escape from the corporate machine, gain financial independence, etc ...

First Step? Normally this would be the analysis or planning phase where the good ol' business plans are written, surveys are done, market analysis ... etc. Now, point of this post isn't to ramble about the types of foundation work that needs to be laid down prior to starting up (though that could be another post in the future). My aim is just to briefly bring focus to the dangers of both under-planning and over-planning.

Under-Planning : I guess if you find yourself asking "what now?" too often then it may be a sign of udner-planning. Without doing the proper homework before starting up, one may easily find that there wasn't any demand for the product/service in the first place. Or worst, to plunk down hard capital into a business only to discover that there already is a competitor doing the exact same thing but faster, better and cheaper than you ever can.

Over-Planning : All good things come in moderation and so does planning. The problem may arise when one goes into "lets check out all parts of the plan again, just to be sure. Then we'll just stick to the plan and things will be nice and dandy". Tough luck but that's not the way the world works. Some factors in the business is bound to change sooner or later so having a static plan is not going to be a good idea. A rough idea of where one is heading would suffice. The only thing worst that could happen is known as "analysis-paralysis" where you try to make sure your plan fits all textbook theories. In which case, one can mostly forget about starting up at all.

Conclusion: Aim for just enough information backed with a rough plan which would allow you to get down to work without being either too unaware of actual circumstances or becoming too obsessed with details.

(PS: A good read : 5 Ways to Start a Company (Without Quitting Your Day Job) )

Are we heading for another Tech Boom (and Bust)?

Given the large amounts of money that VCs have begun to pour into the so-called Web 2.0 Startups, the question of whether we are heading for another tech bubble burst is once again on the lips of many tech analysts.

Personally, I feel that we aren't exactly back in the days of indiscriminate funding of every company whose name ends with ".com" and that tech founders aren't exactly stocking up on those Herman Miller chairs before they see their first cent in revenue. However, it still seems to me that many a startup has not found a solid revenue model and are still in the "burn zone".

Eric Chabrow seems to think that we aren't going to face another tech burst from the reasons he lists in his article - 5 Reasons We're Not in a Tech Boom. However, it does feel that the reasons listed seem based more on the financial aspects of IT businesses.

Seems like only time can tell if there will a deja vu in store.