Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
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Goballzout, launched in January, purchased a simple out-of-the-box web site. While he is not completely satisfied with the results for the long haul, Quinn says he probably would not have done it differently today-only because he could not afford a customized site. The platform he purchased had a $99 set-up fee and his web site provider charges him $99 a month to operate it.
“The solution is basic and gets the job done for a small company like ours,” Quinn says. “But it is limited in its interfaces and it is very difficult to add functions. We can see already that once we start to grow, we’re going to have to move to a bigger and more sophisticated platform. We just can’t afford that right now.”
Quinn fears that the Goballzout.com platform prevents him from adding more sophisticated content. “We tried live video, for example, but the site could not support it adequately,” Quinn says. “We couldn’t get it to work right and we did not have anyone to help us. We decided to take it off until we had the resources to do it right.”
Other new retailers have also found getting the right platform to be a challenge. Afriel.com used trial and error to find platform provider Lunar Pages. “We tried a couple of no-name platform providers, but we wanted greater reliability than what many of them offered and we needed a company that could provide us with 24/7 support,” McDowell says. “We finally found a company that was easy to work with and has hardly any downtime.”
And while going the low-cost template route worked for Goballzout.com for now, TheTrackShack’s Hansen wanted a site that from the beginning could handle the scale and sophistication he envisioned his site having later on. “We wanted something that 30,000 people could jump on and start using right way,” he says. He declines to say how many customers are currently using the site.
Security is important
Having rejected the low-cost startup offerings in the market, Hansen, who operated an Internet software business before selling it and going into the online music business, used his former software connections to find low-cost developers. He found software engineers who could build a sophisticated customized e-commerce web site in India.
“We were able to get the latest algorithms in a customized site, but because it was done offshore, it cost us a fraction of what we would have paid U.S. developers,” Hansen says. “And we still have them on retainer so if we need changes, we call them at 9:30 at night and, because of the time differences, the changes are made by the next morning.”
Another thing Hansen does not like about some of the low-cost products is that they don’t always have top-of-the-line encryption and other security features. Hansen says new Internet companies often overlook security, but security is critical to their success. “To be credible in the market, you have to convince the public your site is safe and protected from hackers,” he says. “You pay dearly for the software and firewalls necessary for a higher level of security, but it is important if you want the market to take you seriously.”
In addition to using advanced security software, Hansen recommends that new companies use the services of companies such as Hacker Safe or TRUSTe. These companies charge retailers to routinely inspect the security of their site and certify that it is secure.
Marketing is a big challenge for many new retailers who often are unaware of the complexities associated with finding affiliate partners, optimizing search engine results and trying to figure out how to spend a limited number of dollars dedicated to promotions.
“Marketing was a huge learning experience for us,” says Goballzout’s Quinn. His company has spent a lot of time identifying affiliate partners that could send potential customers to his web site. Magazines and associations that supported skateboarders, in-line skaters and skiers were a big help.
And Quinn says his company had to spend more time on product descriptions than he initially thought in order to get picked up by the major search engines such as Google and Yahoo. “Writing these product descriptions takes a lot of time, but it is really important,” he says. “By using the right words, your product will get picked up by the search engines and you’ll get multiple page listings. Using the wrong words can get you ignored.”
Afriel.com’s McDowell also found search engine optimization was a priority. “Getting the right keywords into your product descriptions is important to convert shoppers into buyers,” she says. “You can pay for clicks and it is not too expensive if you do it correctly and conduct your research upfront. But if you don’t do your research, you may be paying for the wrong words and ultimately the wrong customers.”
And Quinn found that when his company pays for clicks, it has to be very specific about what it agrees to pay for. He will pay to get listed only when a customer types in a specific product and brand. “If we paid for clicks every time someone typed in ‘skateboard,’ our money will be gone very quickly,” he says.
For TheTrackShack, the key was finding the right demographic channels on which to promote the site. Hansen’s company also owns 15 Internet radio stations, including a pop station, a country station, a hip hop station and a Christian music station, which promote the TheTrackShack. He also has done promotions on MySpace and participated in Google AdWords in order to reach the desired demographic.
Customer service is always a big challenge for many new retailers. Explaining to customers that a product they want is not available is hard to do, but Quinn says he has learned that customers will be more forgiving if you’re honest. “If there is a delay in shipment, be 100% honest. And we don’t send formulated e-mails. Every e-mail we send is personalized. People want personal interaction and our volume is small enough now that we can give them that.”