The strategy conversation you can only have here
Our company sells two "products" on the internet: unit trusts (Mutual Funds) and wine. I thought it might be interesting to share some of our experiences because my research, although brief, is showing that other people are having the same experiences that we are.
Our products are completely different. While wine is a commodity that has physical properties and can be touched and tasted, unit trusts are purely an information product. When last did you hold a unit trust to your bosom and savour the dividend yield?
I believe that in these early days of cyberspace, information products will lead the way when selling over the net. Our experience is that while unit trust sales have taken off, our sale of wine has been dismal.
Before you shoot me down and throw Virtual Vineyards and CDNow in my face as examples that prove my theory wrong, I would like to defend myself by saying that my argument is not exclusive. There will be internet websites that are very successful in selling commodities but the people selling information type products will consistently find it easier and will do better.
So what are examples of these information products? Anything that doesn't really need to have physical properties. I say need because computer software is generally bought in a neatly packaged box with a manual and CD but you could just as easily download it from the internet - sans the pretty box and documentation.
Other examples of information products would be services offered, books, broking and pure information - paying $100 a month to view equity analysis over the internet. Information products are any items that are not dependent on a physical state. A book is a good example because while you can touch and hold it, it is through convenience that we use it in paper form. Alternative media for distributing the written word (like the internet) will allow books to take on many new forms in the near future.
Now what about commodities? The Hop Shop is a web in site in Verbier, Switzerland selling household items, cosmetics and Swiss chocolate - all commodities. Alan Woolman, the webmaster, recently did a survey which came up with the following results.
Question: Have you ever bought anything online?
Often: 0%
Occasionally: 43%
Never: 57%
Question: What types of product have you bought?
Computer/internet related: 46%
Books/catalogues: 27%
Health/fitness: 2%
Household products: 7%
Sports equipment: 2%
Food: 7%
Other: 9%
These included CDs, greeting cards and clothing.
Question: What is your main reason for buying on the internet?
time-saving: 28%
ease of use: 24%
availability of products: 12%
price: 5%
alternate shipping address: 0%
I'd never buy on the internet: 31%
While not being authoritative the survey could be viewed as a small indication of buying trends on the internet. Interestingly, the top items purchased are information-based.
But is it not only the nature of the product that causes it to sell. An interesting point was made from a contributor to the I-Sales discussion group who was commenting on why the capitalist system works: "You need to have an elite that runs the impulsive consuming habits of the masses (through advertising and education)."
I believe that this is true and is possibly one of the reasons why commerce on the internet has not skyrocketed just yet. Those of us on the internet are the elite and the masses are not here yet. The question to ask is whether the masses will arrive on the internet or the internet will increase the size of the elite. Before either happens we are likely to follow the middle of the road with the elite selling to the elite.
My advice to those of you about to set up a business on the internet: if your product is a commodity then expect to have a tougher time selling it than if your product is information-based.
Please let me know when you prove me wrong - I have a couple of cases of excellent Cape wine in the basement.