Metro Santa Cruz (then Santa Cruz Weekly, now Good Times)
When it comes to small local retailers being able to compete with the big boys, the Internet may be the Great Equalizer
By Jennifer Pittman
EARLY EACH WEEK, Andrea London lays out rounds of cheese. With steel wire and serrated Teflon-coated knives, she goes to work, cutting wedges and blocks according to orders from her Internet storefront. She packages the fragrant bricks in fancy French paper and drops them into insulated boxes. After slipping in a blue ice pack, she calls a shipping company. Another customer served. She heads back upstairs to the customers on her computer.
The World of Cheese, a year-old online retailer and wholesaler of hard-to-find gourmet cheeses, is located in a small, airy warehouse sandwiched between two other unsigned businesses in an undistinguished industrial area of Scotts Valley. It is not the gourmet cheese store of the same name that London once owned in Sacramento, though she still uses the old crafted wooden display shelves. Nor does it resemble the cheese department she once ran in Menlo Park’s upscale Draeger’s market. This is just a high-ceilinged warehouse where most of her 300 cheese-loving customers have never been. She misses them.
London is one of Santa Cruz County’s growing legion of E-commerce entrepreneurs who are forging a path on shifting ground. She’s been into cheese a long time, served on the board of the American Cheese Society and traveled to a lot of famous cheese-making places. It’s just this Internet stuff that’s new.
It’s More Than the Cheese
THERE ISN’T MUCH OF a road map for small business owners who want to make it in the E-marketplace, acknowledges Peggy Dolgenos, president of Cruzio, a local Internet service provider. As Internet businesses have boomed and gone bust in recent years, small retailers are still defining what kind (if any) of online presence to have. As a pioneer, London is sorting through the dynamics of a business model in flux, learning, as she goes, what works and what doesn’t.
Most of the day it’s just London, her computer and the walk-in refrigerator with more than 5,000 pounds of cheese. Instead of chatting with customers, she responds to email cheese queries and deals with distribution routes. She processes orders. She listens to weather forecasts in other parts of the country to gauge how safe her cheese will be in a truck that may end up parked in 100-degree heat. She doesn’t ship at the end of the week unless it can get there before the weekend. These are the kind of considerations a small-time entrepreneur doesn’t usually have to deal with in a store.
Last year, London opened too late to catch the holiday rush. Holiday news was filled with stories about companies struggling to get products delivered in time. This year, she’s gone all out, marketing in traditional gourmet magazines as well as hooking up to more electronic links. Now she waits for orders. She hopes to break even in November, a year after opening up the store. But really, she says, “I have no idea what this holiday season holds for me.
“I’m going by the seat of my pants,” London admits. “There’s no way to prepare. I just had to dive in.” Of course, she did prepare some. She has 16 years of experience in the business and a comfortable list of distributors. She studied web design last year, enough to learn the language of the Internet and decide she wanted to hire someone else to do her website. And she studied her Internet competitors, a shifting, virtual rivalry.
Fits and Starts
‘PEOPLE WERE SO HYPED UP about the Internet that there was a feeling of panic, especially a year or two ago,” Dolgenos says. With nearly 1,500 business accounts, in addition to thousands of individual accounts, many of which are used for business as well, Cruzio has established itself as the leading local small Internet business information source. “Companies that were brick-and-mortar companies were worrying about it and many people rushed out and got something on the Internet.” A lot of those efforts fell flat.
Dolgenos says people often failed the three main challenges for businesses going online: they underestimated what it would take to keep the site current, they hired a lousy site designer and they posted a site that was slow, ugly or just unworkable. In addition, businesses failed to advertise their site properly, and if someone did find it, content was stale since there often was no regular maintenance.
“When people first did this, probably two-thirds of them [posted] were the famous billboard at the end of the dirt road with no light,” says William Tysseling, former president of the Santa Cruz Area Chamber of Commerce, and a small business development consultant who has recently been hired on to help develop UC-Santa Cruz Extension programs. “People didn’t really figure out what it was about and, frankly, a lot of them were pretty bad.”
Business failed to differentiate reasons to go online and many of them shot for a bland, online presence rather than push sales or brand marketing or try to develop a loyal customer base with electronic mailing lists, games and information pages.
“What business people have to realize is effective web retailing isn’t just an extension of your business, it’s a new business altogether involving a whole new set of objectives, distribution and marketing techniques,” Tysseling says. “The way that I think about it is this: it’s one of those moments when the market simply flat out goes in another direction and nobody really knows what that direction is.” Business people have had great expectations, but they didn’t always guess correctly where the market was going to go.
Consumers will never buy cars the same way again because they know they can look up the prices online. They are on the Internet for spare parts, books and new homes. But the need to go online hasn’t affected industries equally. After the initial hype, there has been a perceivable shift in what the Internet means to local business.
“It was overrated,” Dolgenos says. “The huge shift is coming slowly. And local stores are taking it slowly.”
The strong economy has kept local retailers busy without being online.
“A lot of people were out shopping and [retailers] didn’t see a drop in day-to-day sales because of the Internet, so the burning need to get online hasn’t grown,” says Pete Eberle, Downtown Association executive director.
But it’s simmering. Everyone’s at least talking about it. They’re trying to figure out what kind of site to post and how to pay for it.
Business 2 Business
PALACE ART & OFFICE SUPPLY, a 50-year-old local business, initially went online last year for one customer: UC-Santa Cruz. Since they were one of Palace’s biggest customers, it was important to get online to keep them. The site is still solely for commercial customers, who contribute about 60 percent of the total company sales. Online ordering lets customers see in real time exactly how much their order will cost, while sparing the store the trouble of filling out order forms.
A lot of websites are also aimed at creating a community of users centered around product. At www.gopalace.com, there are pages of information, links to quizzes and games including hangman and solitaire. Score 100 points or more on a quiz, you get a free frappuccino on your next order. Cabrillo College and Monterey County Office of Education are ordering online. Yet the catch remains small. Ninety-five percent of Palace’s commercial customers still use the more traditional telephone or fax to order.
As if the chain stores weren’t big enough competition for the small boutiques, online competition looms. “How do you compete with the Amazon.coms of the world?” asks Kathy Bisbee, Cruzio’s vice president of marketing. “Bookshop Santa Cruz competing with Borders may not be their biggest competition; it may be that Amazon is their competition. I think that’s true for all businesses.”
When the big office-supply chains set up websites, Palace was way behind the curve. But Gary Trowbridge, vice president of sales, says the unintentional delay gave them time to pull together a more competitive site. That, and the fact that Palace is part of a national coalition of independent supply stores that shares technology costs. What would have been a nearly prohibitive investment for an independent store was relatively easy to bear when it was divvied up among coalition members. Independent booksellers have done the same, pooling resources to promote a competitive online presence.
With the Internet, unseen coalitions of small retailers can avail themselves of the perks of being a big chain–a global presence and combined buying power–but still keep their own home-styled service and sites. Sometimes small retailers stop short of forming coalitions but still develop cooperative online relationships. Outdoor World has Internet links to parks and content about outdoor equipment. Pacific Wave links to surfing information.
Trowbridge says Palace purposely keeps its site homey and user-friendly but not slick. It avoids a corporate coolness and lets customers loyal to a local seller know: it’s still small town.
“I’d say [online chain store competition] helped us,” Trowbridge says. “They came out and redefined how they thought people would shop, but people still wanted a relationship.”
One Man’s Niche
BOASTING MORE THAN 1,200 book titles and 100,000 old and new comic books in his downtown Santa Cruz store, Atlantis Fantasyworld owner Joe Ferrara has taken it slowly. Posting online a single category of reading materials–the family genre–Ferrara is taking aim at the non-comic-book reader, the “civilian,” with titles from Batman Gotham Adventures, Scooby Doo, Rugrats Magazine and the Archie cartoon family. For the 24-year-old comic-book store, the year-old online venture is more about marketing to a new niche than competing against mega-retailers. But Ferrara aims ultimately to do both.
“My philosophy has been [that] there are a lot of people trying to cut up what was already a small pie,” he says. As in any brick-and-mortar store, the name of the game is drawing the shopper back. If it’s not selection, it’d better be price. But Ferrara is banking on something a little more old-fashioned: service. Or perhaps better put: convenience. Speaking like a retailer of old, Ferrara says he’s not selling product.
“I’m selling service. They can get this product anywhere. It’s mass market now. There’s very little that I’m selling that they can’t find somewhere else or, probably, if they dig hard enough, cheaper at Toys “R” Us or something. The magic of how we treat them translates online.”
Ferrara is selling his small-store feel online. There are no fancy graphics that take minutes to download, or comic-book jargon that is indecipherable to outsiders. He wants customers to easily navigate the site, find what they’re looking for and be able to get the personal attention they’d get if they were in the aisles of his Cedar Street store.
The web may promote an impersonal shopping experience, but local retailers are still insisting customers want what they’ve always wanted–they just want it faster and available around-the-clock. Ferrara doesn’t offer 24-hour phone service, but he promises follow-up contact, special packages and knowledge of the product beyond Superman’s real identity.
“Service is first of all involved with time,” Ferrara says. “Once they’ve found it, is it easy for them to contact us? Do they have to jump through hoops to get to us? I don’t think the bigger guys are going to take the time to attend to special needs. They’re managing inventory; what we’re doing is cultivating hobbies. How I’m going to compete with Toys “R” Us is give them a contact person they can call.”
Online transactions amount to only about three percent of his sales. But he’s optimistic. “I look at it as a big Yellow Pages ad. Those things never pay up over the short term.” Technology lets him reach a market that was unimaginable when he opened his first store. But it’s a double-edged sword because the pool is suddenly home to so many more players. “If I was going to give anybody any advice: Don’t tie anybody up too long. Nobody has any time these days. You don’t want to make something that takes 30 seconds to download; that’s too long.”
That Personal Touch
IN DOWNTOWN SANTA CRUZ, former bioengineer Steve Corbin of the Corbin Gallery watches visitors move from display to display of collectible glassware. When he sits at his computer, he tracks another set of customers. These are the largely anonymous buyers who view his inventory and read about it online. They wire cash into his bank account and receive art glass pieces they’ve never touched. About 2 percent of his online visitors are from abroad although he doesn’t ship out of the country at this point because of export hassles.
“There are always people who want to shop anonymously; that’s why I’ve got the website,” Corbin says. “It’s for people who just don’t want the human interaction. They can send me an order. I can ship it. We don’t have to talk. It’s a requirement for me, for anyone, in today’s market.”
Yet Corbin, like London and Ferrara, still prefers a more personal relationship with customers. He appreciates Howard, an Internet customer in New Jersey who occasionally phones in questions about art pieces shown on the web.
Earlier this year, Corbin filled an online order for a $1000 Steven Lundberg vase depicting a monarch migration. “It was an exquisite piece, very lifelike.” But unlike a customer he shepherds through a big purchase, he never talked with the buyer. “He never sent me an acknowledgment. Personally it was just kind of a hollow, funny feeling. I assumed he got it. I checked the UPS log and made sure he signed for it. But it was much less exciting for me then talking with Howard directly.”
Clearing the Roadblocks
PETE EBERLE ESTIMATES about 20 percent of the downtown Santa Cruz retailers are online, with about half of those set up to do online sales. While many local business leaders and civic boosters believe Santa Cruz is ahead of the game in the online retail market, Eberle’s estimate is consistent with national averages.
According to the National Federation of Independent Business, 62 percent of the nation’s small business have Internet access, but only 16 percent have their own website. While larger businesses are capitalizing on the web, handling sales and business-to-business transactions as well as internal communications with staff, small businesses are moving at a comparative snail’s pace.
Most of the businesses are small, with few resources to plunge into the unknown. And for independent-minded retailers, turning over control of part of their business to some web designer is not an attractive idea.
To help local businesses get over some of the roadblocks to the web, Eberle dreams of making www.shopsantacruz.com a virtual local shopping center that, in its simplest manifestation, would be a webpage of links to local retailers with credit card transaction capability.
“What we need to do as a business community is find a way to get a low-cost website together for the merchants in order for them to do that kind of service,” Eberle says.
The Downtown Association already maintains a website at www.downtownsantacruz.com that lists downtown local and national chain stores. Visitors can click on links to go directly to some of the locally owned and national chain stores that have their own websites.
Going a step further to add transaction ability could help smaller stores that can’t afford to go online on their own. Marketed in Silicon Valley, it would help tourists reconsider passing up that one last Santa Cruz-made purchase. The idea has drawn some attention but not the resources and technology it needs to really fly. For now, virtual Santa Cruz isn’t a reality.
The Small Business and Internet and Technology Fair takes place Thursday (Oct. 12), 11am-7pm, at the Santa Cruz Veterans Memorial Building, 846 Front St., Santa Cruz. Call 831.459.6301 for details.