What sells on the internet?
1997-02-13
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.