Internet Retailer has a lead story today about how the analytics player Omniture has swooped in and picked up the e-commerce platform provider Mercado for a song! The story says that Omniture was able to buy Mercado for a measly $6.5 million after Mercado has been pumped with over $65 million of capital over the years.
It’s not really all that surprising to me to be honest. I’ve gotten so many sales calls from Mercado over the years trying to sell me their insanly overpriced offering that it just seemed unsustainable. Not only that, but their advertising was everywhere! Like Dot-Com boom-everywhere in the e-commerce space. They were prime sponsors or significant sponsors of so many shows that I’d attend. They had to be paying an insane amount of money for all that advertising and sales effort.
It always seemed to me that they must be overcharging for their software to keep the marketing and sales machine chugging along and now that suspicion has been proven correct.
I’m willing to bet there will be a lot more providers like this falling in this little e-commerce dot-com 2.0 bubble burst. The business and revenue models of so many of the companies that I see at shows like Shop.Org and Internet Retailer are straight out of 2000 before the bubble burst. They all seem to be built around going after the big guys (the 20% in the grand e-commerce market) in the Internet Retailer Top 500 and charging top dollar to do it, when the same solutions could be offered to the remaining 80% if they would have a decent pricing and servicing structure.
Although this time it’s worse because most of these companies are run by suits from the East Coast that are totally clueless beyond anything but the deal.
At least during the dot-com era the jokers driving their Titanics into the same iceberg over and over were a lot of time nerds, geeks, or other variety of egghead that actually knows something that were inadvertently elevated to the position of businessman. This time it seems that it’s being driven by empty suits with a smile and a handshake from the beginning.
I’m still amazed that anyone is investing any money in these companies, let alone $65 million!
Fools and their money.
There’s a lot of big hitters out there who’s CIO’s have got to be getting a pretty interesting presentation ready for their bosses!
Tags:epic-fail, mercado, omniture
As we start to wind down this year I want to go back and cover an important topic that I touched on in a previous column some time ago as well as at my Indy sessions. Not enough is changing as fast as it needs to so I’m bringing it up again. I’m directing this column to parts, accessory, and apparel OEM’s in the hopes that it will eventually help us dealers and retailers when it comes to selling more of your products.
First and foremost if you want us (your retail partners) to sell for you, stop fighting against us! I can’t get over how hard it is to get the idea through to so many of you that we, the dealers and retailers, are on the same side. Our goal is typically to sell as many of your vehicles, vehicle related widgets, or vehicle riding apparel as possible to our willing and eager customers. We’re investing an insane amount of time and treasure to get the world to beat a path to our virtual doors. So why do you do so many counter-productive things that make us not want to (or not be able to) help you?!
First, what’s up with your MSRP models? I’m not talking about setting some insane MSRP that no one in their right mind is going to end up paying anywhere close. I’m saying that it would be lovely if you would give some consideration for your retailer’s need to make money when rationally setting your MSRP’s. Especially if you’re going through distribution. Every single link in the supply chain is going to expect their cut (whether they actually do anything of value to deserve it or not).
Get rid of every single link in your distribution chain that is not legitimately adding some type of significant value. In most cases that’s going to mean that you should stop using a distributor that doesn’t do anything more than basic warehouse and transport. Are they providing e-commerce and multi-channel merchandising support? Are they providing both forward as well as reverse logistics and handling customer service issues? Are they providing comprehensive aggregated demand forecasts that are farther out than your lead-times? Are they providing market and customer research data? Or better yet, are they selling their own lines that compete with yours? If you’re not shaking or nodding your head in the appropriate directions in response to those questions, you need to re-tool your distribution strategy.
So while based on your costs and your required profit margin an MSRP of $99.95 might look quite nice, by the time it gets to my website it’s just not going to be worth carrying that snazzy new doohicky if my gross margin is only 13%.
I mean sure, we can price it for more than MSRP to make a margin that justifies us carrying your product and providing the necessary level of customer service and support, but do you really think that’s a good idea? Especially if the customer can just go to your site and buy it for less? Which leads me to my next major issue…
Why are you selling direct? Seriously. Fish or cut bait. You’re either a direct sales model or you’re a channel sales model. Pick one! First you set an MSRP that’s unrealistically low, and then you go and sell on your own site at a price that only you can realistically afford to live on! I’ve got no rational reason to be selling your stuff on my site in those circumstances. It’s not worth the headache for a 3% net to compete with you! Why are you making me compete with you?! You’re supposed to be my supplier, my partner, my friend! Why are you stealing my customers?!
I’ve run into insane cases like where my site ranked much higher on a Google search for a popular, expensive, highly sought-after line of niche products than the OEM’s own site did! I could have sold the crap out of their products for them. So could the other 5 or 6 retailers that were also in the top 10. But instead the business geniuses at this company decided that they prefer to keep their MSRP at a level that could only realistically support selling off their own site. I tried to work with them. I laid out the business case. They even agreed that if they did things the way I was proposing they would probably sell more if they more fully supported their retail partners (especially the ones with vibrant e-commerce businesses). But they had their model and they weren’t going to change it. Whatever…
Now they get to spend all that extra money handling things like direct to consumer marketing and advertising, retail issues like customer service, shipping, returns, etc. etc. Instead of supporting and leveraging their retail sales channel (in this case e-commerce) they get to spend their money doing all the things that the retail partners they should have been working with are already doing! It’s insane!
I’m not saying that their aren’t brilliant business reasons why a direct to consumer model in this era of e-commerce, 3rd party logistics providers, and world-wide overnight shipping can work very very well. In fact I’ve got some fairly radical ideas that that very business model may be the predominant model for the future of our industry. I’m just saying that from what I’ve seen, most of you guys that are selling direct and selling through the channel have not really thought it all the way through.
I might not necessarily care if it was only yourself it was hurting, but I want to sell your stuff because my customers want it! Help me help you make more money for all of us!
Visit my site (www.radicalpowersports.com) where you’re going to see more written about these and other topics that have to do with radically overhauling how the motorcycle and powersports industry’s business models currently operate. How would you like your sacred cow burger cooked?
Tags:bad-business-practices, Column, dealerships, E-Commerce, ecommerce, internet, motorcycle, powersports, Powersports Industry, rant, selling-online
