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Knowing their market By Shari Downhill E-commerce has become a vital element in the Rogue Valley�s increasingly diverse economy. But to succeed, business leaders say companies must first know what they�re doing and do it well to give consumers confidence. For Internet businesses willing to take a tip or two from Southern Oregon e-commerce heavy-hitters, success need not be elusive. And the lessons are there for the taking. "It�s not who�s doing (e-commerce) and who�s not in the Rogue Valley, who the successes are, or the failures," said Brad Hicks, executive vice-president of the Medford/Jackson County Chamber of Commerce. "What�s really important is the fallout from the failure of dot-coms. "Rogue Valley consumers are the ones feeling the result of that fallout. We need to think about the long-term effect of that." A decline in e-commerce options could affect employment decisions by upper-level executives willing to relocate to rural Southern Oregon, he said. "I think the success of the dot-coms has allowed people to feel like the Rogue Valley was a viable place for them to live because the Internet became the equalizer," Hicks said. "Although a lot of locations were available to them, they chose to live here." THE KEYS TO SUCCESS Despite a number of prominent failures in e-commerce, all is not gloomy in the Internet world. Survivors of the recent e-commerce fallout will likely hold on, successfully reinvent themselves and continue to do business online, Hicks said. He points to the success of Rogue Valley fruit giant Bear Creek Corp. and musical equipment marketer Musician�s Friend, both companies born and raised in Southern Oregon�s rural retail landscape. Before launching into a fledgling Internet arena, both Bear Creek and Musician�s Friend forged their way into retailing by more conventional means, using solid business plans and an understanding of consumer behavior for their markets. Most importantly, say company managers, overall sales have grown steadily because they learned how to successfully execute simple business transactions. "It�s all in the execution of what you do," said Bear Creek spokesman Bill Ihle. "It�s very easy to take in the money. Then, all of a sudden, you have to make sure the gift gets there. "The retail landscape of America is littered with the bodies of dot-com companies who just couldn�t figure out how to do it this year." BECOMING A MAJOR PLAYER Bear Creek began serious e-commerce trade in 1996, although the company has been doing business for 66 years with sales reaching nearly $500 million in 2000, Ihle said. Internet sales represent approximately 25 percent of the company�s business. Profiled in eCompany Now, a retail technology trade magazine, Bear Creek Corp. Subsidiary Harry and David ranks among the top 11 retailers who are successful at navigating treacherous e-commerce waters. Harry and David stood out among giants like Dell Computer, Microsoft and Nokia. "It�s heady company to be involved with," Ihle admits. "In the next 12 months you�re going to see a shakeout in e-commerce business," Ihle said. "A lot of them have business models where it was very easy for customers to give them money, but when it came time to give the product to the customer, they fell on their face." Ken Wells, Bear Creek�s e-commerce senior vice president, agrees. "The ones who will survive will be stronger," Wells said. "It�s all about trust and convenience." Bear Creek has a strong online presence and relies on proven methods. "Our techniques are time-tested," Ihle said. "We�re not the new kids on the block." "We sat down and analyzed where our customers are located," he said. "With a majority of our customers east of the Mississippi, we have a giant distribution center outside of Columbus, Ohio, which allows us to get gifts to customers on the East Coast within one day of when they were ordered." FOCUSING ON THE NET Like Bear Creek, Musician�s Friend has established major distribution centers � in Knoxville, Tenn., and Kansas City, Mo. � to better stage product delivery. Musician�s Friend began marketing its wares in 1983 through direct-mail catalogs and retail stores. The company merged in May 1999 with Agoura Hills, Calif.-based Guitar Center. Following that move, Musician�s Friend handed its brick-and-mortar operations to Guitar Center and concentrated on catalog and Internet marketing. Now, online sales for Musician�s Friend for the last quarter of 2000 were $16.5 million, a 123 percent increase over $7.4 million for the fourth quarter of 1999. Internet sales account for roughly 40 percent of the retailer�s overall sales. Rob Eastman, the company�s chief executive officer, agrees that dot-com failures can be attributed to those who had little, if any, business experience. "They had no idea what to do when the (product) returns started coming in," Eastman said. "They didn�t realize 10 to 20 percent of that stuff comes back." Failed customer service is a coup de grace for e-commerce retailers, he said. SUPPLEMENTING SALES E-commerce does not necessarily have to take a front-line position for companies to benefit. For some, the Internet supplements brick-and-mortar store sales and offers an opportunity to market wares and information. Terra Firma, a small specialty gift shop in Jacksonville, markets a small number of products online. Shop owner Mark Millner said he believes the lack of the "human element" has dealt a death blow to flailing e-commerce businesses. "Thank God for the small businesses who are in touch with their customers," Millner said. Millner and his wife, Krissy, have owned and operated Terra Firma for eight years. "We put a handwritten note in everything we send out," Millner said of his company�s attempt to provide a personal touch. "I think there�s great merit in the Internet," he said. But, Millner cautioned that e-commerce will never stand alone. "Customers will always return to brick-and-mortar stores for the enjoyment of shopping in person," he said. "The e-commerce businesses thought they could change consumer behavior. "It didn�t happen." STARTING FROM SCRATCH While e-commerce success and failure may be attributed in large part to past business experience, Rogue Valley musician Warren Sirota successfully launched his business, The World Wide Woodshed, via Internet channels. Released in 1998, Sirota�s computer software slows music down, which allows musicians to learn chords, styles and songs without musical distortion. "Our program is a musical self-help tool for musicians," Sirota said. "Musicians have been trying to do it for years with half-speed tape recorders, but they always drop the pitch and make it sound muddy." Introducing his product over the Internet meant Sirota didn�t have to shoulder expensive package design and production early on. It also allowed him to test the market and reach consumers outside Southern Oregon, he said. Still, like other retailers, Sirota says his success lies in also having his product in stores. "I would not have kept afloat with the (Internet) alone," he said. NETWORKING ON THE NET Offering a less tangible product, Apt Property Management owner Drew Lamb began marketing his Medford company�s services two years ago. "I�m not an e-commerce type of company," Lamb said. "But in order to grow my business, I need to network with lots of people." The Internet allows the 31-year-old entrepreneur to do that. "Over the last year, my growth has been pretty stable," he said. Before incorporating the Internet marketing element to his business plan, Lamb worked in the property management field for seven years, managing an $80 million real estate rental portfolio in Seattle. HERE TO STAY Though there are pitfalls and shakeouts to come, e-commerce cannot be written off as a passing retail fad, said chamber leader Hicks. "There�s very much a place in this New-World economy for Old-World consumer habits," he said. "People want the taste, touch, smell and personal relationships. "There are a lot of burgeoning little technology groups out there in the Rogue Valley wanting to educate not just individuals, but business people as to changing technologies." Area business leaders, under the umbrella of the chamber, recently formed a technology infrastructure committee to act as a resource for technology information. "We thought this might be, at the very least, a clearinghouse for some of that information so that the business community understands what�s going on locally as well as out there in the rest of the world." Reach reporter Shari Downhill at 776-4463, or e-mail [email protected] Mail Tribune Home | Ottaway Newspapers, Inc. | Dow Jones & Co., Inc. | Privacy | Contact Us Copyright � 2000 Mail Tribune, Inc.