Practical approach to e-commerce guides Wilson and Horton

Wilson and Horton group executive officer CRAIG MARSH was one of today's speakers at the e-commerce summit in Auckland. Here is the full text of his speech.

Before we look forward into the uncertain footing of electronic commerce, let us remain for a short time on the relative security of terra firma and put our current position in perspective. Because in choosing a new direction, we need to set the compass bearing based on where we are now.

So where are we now? Well, Wilson and Horton is part of your everyday life. Not a day goes by in this country when we don't touch your life in some way - it may be your morning news, courtesy of the New Zealand Herald or one of our 38 other newspapers, or that television programme you looked up in the Listener.

It might how you dress for today, based on the weather report you heard on one of the group's 66 radio stations or our websites.

It could well be the billboard that grabbed your attention on the way here today. It could be the Wises street map that helped get you here on time. It could even be the credit card we printed that you used to pay for registration for this summit.

But the fact is our products and services are an important part of your daily life. That importance to you is what has made Wilson and Horton a very successful company for the past 137 years - by giving you information that allows you to feel part of the community, information that allows you to form opinions, and make decisions.

One of the cornerstones of that decision-making for the past 137 years has been where to source suppliers of goods or services. Who is offering the best price on that fridge I need to buy, what are the weekly grocery specials, should I sell my shares, and where can I find a tradesman to fix that leaking tap?

So, having established our position as the leading provider of offline content, I would like to tell you how one of the country's oldest and most influential companies transformed itself - in less than two years - to become one of the most popular and recognised websites on the internet.

And that recognition is not limited to New Zealand. During the last week of the Sydney Olympics, the Herald Online Olympic News website figured in the top 25 sites that the world was turning to for its online Olympics news.

As well as content, we have prolific e-commerce offerings. How does a newspaper company get into selling travel? Unless you are a frequent visitor to our site, you may be surprised to know we offer Herald-branded insurance.

If you are a small business, you may be aware that our UBD division is not just a directory and map producer, but also an ISP (internet service provider) and web host to hundreds of businesses. Under the brand UBD connect, we are moving small and medium-sized businesses online. Our investment in the wap business, via iTouch will drive us into the v-commerce and m-commerce markets - enabling you to shop via your cellphone!

So how has a newspaper publisher and printer moved into this new space?

Our development has taken place in distinct stages. The first was to get our basic news service on the web, to establish a presence, and an online brand extension. It obviously worked - in the first year the New Zealand Herald Online received 12 significant awards, including being named the NetGuide Magazine Site of the Year.

The second stage was to try some transformation of that information.

Take the stocks page, for example, and put it on the site for real-time reports. Add in some history, some charts, and a personal stock portfolio that allowed you to get real-time updates on the worth of your stock holding, and we had another winner with Stock Watch.

Take the real estate section, put it online with a search engine, and house seekers had virtual access to the property market without having to wade through pages and pages of property ads in the newspaper. MyProperty.

The third stage was a field of dreams approach which said "if you build it, they will come." We built at a furious pace, and they came at a furious pace. If you look at our site statistics, in just over a year we have gone from fewer that one million page impressions a month, to just under six million.

And that is just the Herald Online news site. If you add in netclassifieds, StockWatch, MyJob, Match, etc., then you are talking in excess of 10 million page impressions a month.

The first three stages involved a process of evolution by revolution. It was fast, it was furious, it was fantastic. "Portal envy" was at its peak.

Within our planning, we were going to be hosting a good deal of New Zealand's e-tail commerce on our digital mall, using digi-cash, our virtual call centre, and the grandiose virtual delivery system to provide a total shopping solution to all those consumers out there waiting to spend their cash on our products.

This digital revolution spawned a whole new language - e-bots, e-alerts, e-commerce, e-gad! It was a financial flop. The e-bubble was quickly bursting, and along with it, the hopes and dreams of untold wealth for staff and shareholders.

This prompted the fourth phase of our electronic strategy, which was to use our premier content to drive profitable transactions. Phase four, was, in fact, good old-fashioned business acumen: don't bet the bank on speculative high-risk, unproven ventures. Phase four involved business cases being developed to support investment. Phase four seeks answers to questions about payback periods, return on investment, and good old-fashioned profit.

Phase five is the current phase - which is not to try to do everything ourselves. Our past strategy was to pure-play every initiative, so that we owned and controlled the value and transaction chain. Today, we are sticking to our knitting. Our pivot of excellence is in newsgathering, packaging and dissemination, and putting buyers in touch with sellers.

There is a wise old saying: "Without Vision, we will perish." In internet parlance, more often than not, that is reversed, and the visionaries are perishing. In an ironic twist, a website called dotcomfailures, which was established to track the high-speed roadkill of internet e-commerce sites, itself closed down recently - the victim of too much cost and too little cash.

We maintain our vision, but it has changed somewhat in recent months. Information seekers continue to flock to our sites, so that is what we serve to them.

We have just launched our travel site. Now travel has long been a feature of newspapers - where to go, what to do when you get there, and how much will it cost. You will find exactly that functionality on our website - with several additions. Once you have read the travel article online and had your appetite whetted for sun and sand, you can check the flight times to your chosen destination, the prices, availability of seats, currency conversion, time difference - and then book it. And to give you peace of mind, you can also book your travel insurance on our site as well.

This strategy of adding another dimension to the information seeker was illustrated with the recent launch of the fourth Harry Potter book, by J.K. Rowling. On the day of the launch, the Herald Online carried a story of the phenomenon surrounding the book. It generated a lot of interest, so the bottom of the article carried a link to buy the book. The interest generated by the article, and the stimulus to purchase the product that you had just read about, prompted more than 400 of our readers to click through to the bookstore site. It is a formula we will continue to apply as a service to our readers, and as a model for profitable transactions.

So our role has changed - we now provide the information and eyeballs, and we have linked up with other partners to provide the fulfilment. It is called collaborative affiliation, and we will be using our superb content to help drive these profitable transactions.

The internet has reversed a lot of previously held beliefs, and practices. It has also taught us some valuable lessons.

Let me end on what we see as some of the lessons we have learned, and hopefully provide some guidance to those of you out there who may still be in phase two or three of your internet strategy.

Lesson 1:

Don't drink out of the fire-hose. If the pressure doesn't kill you, the volume will. We made the mistake of trying to do things too fast, instead of doing the right thing, and the thing right.

Lesson 2:

Be prepared to change course rapidly. Off-line strategy is often encased in 5-year business plans, which are dusted off on an annual basis and fine-tuned based on the events of the past year, and the future-gazing of the next year. The internet doesn't allow that pace. Be prepared to massively change strategies every couple of months.

Lesson 3:

Nostalgia has no place on the internet. There are two key reasons why you have a presence in e-commerce – strategic and financial. Strategic means you are there because you have to be, for competitive, or customer reasons. Financial means you are there because it cuts your supply-chain costs and provides efficiencies, or - it returns a profit. We do have products on the internet for strategic reasons, but our financial philosophy now is: "If it isn't going to pay, it isn't going to stay."

Just in the last month, this approach was taken towards a product that would have broken even within 12 months from a cost-out cash-in perspective. However, return on investment was beyond an 18-month horizon, which was an unacceptable burden on a challenging P&L for next year. In the bricks and mortar world of commerce, a return on investment after 18 months would be a sound proposition – but we have seen that the online world is anything but sound. So the real-world rules, just like the strategies, need to be compressed at cyberspeed, so that if the ground shifts, you can shift with it.

Lesson 4:

Know what business you want to be in. Our "field of dreams" approach was enormously successful in attracting net users to our sites. However, in staying with the sporting theme, sports clubs did not really start to prosper until they realised they were not in the sports business, but the entertainment business. If you go to a major sports event, people have paid to get into the stadium, but they are also queuing to pay for food, drink, programmes, and merchandise. The "if you build it, they will come" philosophy proved successful, but now that they have come, our challenge is to get them to open their wallets for some of the entertainment extras.

The concept of "surfing" is now outdated. All the studies show that people are looking for information, which is news, product information, hobbies etc., and they are transacting business. They aren't surfing, they aren't aimlessly wandering, and they definitely don't seem to be focusing on entertainment specifically.

Our online presence provides that vital information, and also provides an early entry into transacting based on that information. For example, our StockWatch product is enormously successful as a research tool for share investors - we know the users spend a lot of time researching stocks and making charts. With the launch of QuickTrade in the middle of this year, those same investors can take their research information and act on it by buying or selling - all on the same StockWatch site.

Lesson 5:

Brands rule, ok. Stay true to your brand, don't try to create new brands if your existing brands work well off-line. You just spend a lot of money trying to occupy a piece of the smallest but most precious real estate on earth – top of mind.

And finally,

Lesson 6:

Don't become a prophet of doom - become a prophet of profit.

With all the dotcom failures, it is going to be easy to throw the hands up and say the internet model doesn't work. For the vast majority of companies who have ventured into the punishing failures of online commerce, that is a reality. A lot of money has been burned, but a lot of money has also been made. The internet is growing exponentially.

Official e-commerce summit website