The second coming?


24 May 2007

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Online sales are finally showing serious growth but do Irish businesses have what it takes to win over savvy internet shoppers?

Brothers Ciaran and Michael Crean were all set to go into business together in 2001 but the pair opted to go travelling instead and the plan was shelved for two years. It proved to be one of the best career moves they could have made.

In the middle of the dotcom slump, setting up a website to sell motor parts was a likely fast track to the business scrapheap.

“In hindsight, it was a good thing. We would have been dead and buried in 2002,” says Ciaran Crean.

The environment for e-commerce has changed substantially since then. Three and a half years since Ciaran and Michael Crean set up their site, www.micksgarage.ie, the pair are on target for their first million in revenue.

Over this time consumer habits have changed, with a greater willingness to buy online, in tandem with a turnaround in the wider tech sector.

The lesson for budding online businesses is that buyers are choosing from a much wider group of products and services than the usual suspects of books, travel and technology equipment.

New figures from the US retail association Shop.org show sales of clothes and footwear over the internet outstripped those of IT equipment for the first time ever.

The significance of that statistic lies in consumers’ increasing comfort with the web as a shopping medium to the extent of buying goods usually best tried beforehand.

There’s minimal risk to the consumer in buying the usual online shopping staples like books, software or computers but considerably more so in picking up personal items.

Aside from headline numbers, the general thrust of the Shop.org report is that sales via the internet demonstrate strong and continued growth.

The report forecasts an 18pc rise in online sales next year. Behind that figure, profitability levels are good, suggesting that the web at last offers a sustainable business model.

Sucharita Mulpuru, a senior analyst with Forrester Research who authored the report, is bullish about the future. “This strong growth is an indicator that online retail is years away from reaching a point of saturation,” she said.

As far as indigenous businesses are concerned, e-numbers are also starting to look good.

“If you want to set up a lifestyle business online, now’s the time to do it,” says Colm Lyon, managing director of Realex Payments, which processes internet sales transactions for a range of companies in different industry sectors.

By this he means small companies selling crafts or handmade products using the web as an exclusive sales channel.

In April of last year, 43 small business clients went live on the Realex payments system – effectively, they had started making sales through their website. In March 2007, a further 91 went live – double the number of registrations in less than a year.

Supporting this, between December 2006 and January 2007 the Realex system saw a 37pc jump in transaction volumes to around €250m, according to Lyon.

The latter figures are slightly skewed by the airlines discounting heavily and processing motor tax for new car sales, but Lyon believes the overall market is buoyant.

“The number of clients going live is rising, and they wouldn’t be doing that if they weren’t selling,” he says.

Lyon is also chairman of the Irish Internet Association, a position that gives him a wide view of trends in the online sector. He identifies three elements common to selling online, whether it’s a small internet-only business to a large brand upgrading its website.

“All of them understand the scale of the opportunity,” he says. “The second thing is, they understand the need to be different. Innovating is really hard and you’ve got to really think about it – if you do it successfully, it’s a way to distinguish yourself from the competition.”

Thirdly, moving quickly is essential. “The timelines are very fast – people come to us needing to be live today. These guys don’t procrastinate over weeks and months.”

Recent arrivals to the internet shopping scene run the gamut from Bio-Medical Research (www.bmr.ie), which sells its Slendertone slimming apparatus over the internet, to Showerdoorsdirect.ie, which needs no further explanation.

Micksgarage.ie is slightly longer established and interestingly, the Shop.org research has found that the US online car parts market is the third-largest type for online shopping.

The same isn’t true on this side of the water – a fact that the Creans are keen to exploit.

“We’re pretty much unique in Ireland. We’ve been in business for three and a half years and I’m quite surprised nobody’s come in behind us,” admits Crean.

Although there are some specialist sites in Ireland catering for car upgrades, Micksgarage is aimed at the general motorist, not the enthusiast.

“The automotive sector is the last bastion of traditional industry. A lot of the shops are generally trade-oriented and not consumer-oriented,” says Crean.

“What we’re offering is the ability for people to shop around, which wasn’t there before.”

As with choosing clothes, in the offline world buying car parts such as wiper blades, brake pads or a roof rack usually involves a trip to a physical shop.

But whereas trying on clothes is a pleasurable experience for some and requires little technical knowledge on the buyer’s part, braving the motor factor can be a daunting prospect for the uninitiated.

The site is purposely aimed at taking away that fear factor, with a search facility for locating the right part. There’s even a live chat function on every page.

Prospective buyers who can’t find what they’re looking for or who just want advice can talk to a customer service person in real time.

“For us, it’s a very good sales conversion tool and a good customer service tool,” says Crean.

As well as growing business in their home market, the Crean brothers are actively scouting out the UK and think they’ve found a niche in which to compete.

“We would bring our model across and seek to replicate it in the UK. It’s in our plan – Q3 2008 or Q1 2009,” he confirms.

Crean has also spotted a difference between Ireland and the UK in terms of online maturity. “The general consumer [in Ireland] does not know you can buy car parts online. The UK consumer expects it.”

The opportunity is potentially huge: there are an estimated one million cars on Irish roads – in the UK, that number jumps to 25 million.

“Most UK businesses that are going online have been from a bricks and mortar background and aren’t coming at it from an e-commerce background,” Crean says. “We would come at it from a different slant.”

Case study: Putting on pink

Caoimhe Culleton shops online for just about everything, but when she set up her own website, www.pinkputters.com, she knew that her customer base might need some assurance about buying from the internet.

The site’s name hints at its very specific clientele: lady golfers. As a long-time golfer herself, Culleton believes there is a gap in the Irish market for supplying clothes and accessories to women and she supplies a range of brands and products to meet buyers’ budgets.

Taking her cue from the Tupperware party concept, she visits people’s houses to show the products to groups of potential customers, who can then order over the internet.

This helps build awareness for the website, which is essential as there is no real-world Pink Putters shop – the business is entirely online. Backing this is a 30-day refund policy for unused or unopened items.

“It’s to get the idea across that the site is there and if you buy clothes through the site that they’re good quality and you can bring them back if they don’t fit or don’t suit you,” Culleton explains.

The site has been running for just two months and sales are already going better than expected. Culleton expects to be profitable before the end of the year.

She’s currently developing an online sales assistant feature to let shoppers ask questions about the product.

“I really want to focus on customer service. It’s really important for people to know that just because it’s on the internet they won’t get short-changed on service,” she says.

By Gordon Smith

Pictured – Michael and Ciaran Crean, Micksgarage.ie

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