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Nov. 12, 2007 – Think e-commerce, and be smarter than a fifth-grader

November 12, 2007
Filed under Columns

It’s a strange world that requires a parent to first have to watch the TV show “Are you smarter than a fifth grader?” and then somehow convince their child that they do know better despite the fact that they might not know more.

(And for the record, the victorious child is actually a sixth-grader and with all due respect to our Lehman Trikes friends, who really does know what the capital of South Dakota is anyhow?)

In the spirit of such TV game shows, let me pose three questions, each designed to make you smarter for your own upcoming challenge, that annual rite of passage called “How do I make next year better than this year?”

Question No. 1: What is the one part of the U.S. retail world that has increased by an average of at least 20 percent in each of the past five quarters, dating from the second quarter of 2006 to the same period this year, according to the U.S. Census Bureau?

A hint: We’re not talking about just retail sales in powersports dealerships but retail establishments in the United States as a whole.

Answer: Online sales, commonly referred to as e-commerce.

Question No. 2: A recent survey by Bill Me Later/Ipsos Insight, a technology company and separate marketing research firm, found
12 million Americans admitted to shopping online during a conference call at least once in the past year. Did the survey find that men or women were the biggest culprits?

Answer: Shockingly, men. OK, that might be a bit stereotypical, but don’t tell me that didn’t surprise you.

Lastly, question No. 3: In the aforementioned survey, what age group made up the most frequent conference-call shoppers?

Answer: Ages 35-54.

Now take those last two answers, ball them up into one package — men that are aged 35-54 — and what do you have? The biggest core group of new motorcycle buyers, according to the recent J.D. Power and Associates customer satisfaction survey.

Clearly, you don’t have to be smarter than a fifth-grader to realize that e-commerce — either starting it or increasing it — has to be near the top of your to-do list for 2008.

Those who contest that thought likely do so with one of two arguments: That the true in-store retail experience is still where you want your customer experience to occur and hence your marketing/advertising budget will reflect that. And second, you believe it does not make sense to spend so much time and energy on a part of the business that will result in so little to the bottom line.

Before I address those arguments, let me point out only half of powersports dealers believe the primary purpose of their Web site is to provide another purchasing outlet for their customers, according to a national survey conducted by Powersports Business earlier this year.

The same survey also found that more than 95 percent of dealers believe marketing was their dealership Web site’s main purpose.

Perhaps we can alter those percentages in the coming year by examining the two arguments on why some dealers have stayed away from the sales side of the Internet.

First, the idea of concentrating on the customer experience within the dealership is certainly important. No doubt about it. But by focusing on one outlet (the store) and not the other (the Web site) means in your haste to improve business, you could actually be losing it.

Consider: The State of Retailing Online 2007, a survey by Forrester Research Inc., says 35 percent of online customers have made purchases from the brick-and-mortar store and 45 percent of catalog customers also have bought items from the online store. So clearly, many consumers do not restrict themselves to one form of shopping, meaning if you’re not catering to all their whims, then you’re losing sales.

Second, the idea of putting so much time and effort into something that might not bring a whole lot to the bottom line is validated by reported data. The latest U.S. Census Bureau report found e-commerce made up 3.3 percent of total retail sales in the second quarter of 2007. However, that percent has been rising, and some officials knowledgeable of the e-commerce field put the percentage much closer to 10 percent of total U.S. retail sales.

For the sake of argument, let’s say the newcomer to the e-commerce world would probably make less than those already in the busine- ss, so let’s put their e-commerce sales in 2008 at 3 percent of their overall revenue. Then let’s convert that into dollars for four groups of dealerships, each of which we’ll divide according to their annual revenue. So here is the amount of dealers that do not currently offer e-commerce could add to their bottom line by adding online sales in 2008:

  • Dealers making between $1 million-$2.5 million: $30,000-$75,000;
  • Dealers making between $2.5 million-$5 million: $75,000-$150,000;
  • Dealers making between $5 million-$10 million per year: $150,000-$300,000;
  • Dealers making $10 million and over: at least $300,000, if not more.

    Those are certainly not eye-popping numbers, but remember they are also fairly conservative. Also remember there is probably no other part of the retail sector that is so well established and growing that a powersports dealer can so easily tap into.

    And don’t forget: Those smart fifth-graders (and sixth-graders) are already tuned into the ease of e-commerce. So at some point, you’ll have to convert. Why not play it smart and do so in the new year?

    Neil Pascale is editor-in-chief of Powersports Business. He can be reached at npascale@ehlertpublishing.com psb

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