ETD: 678 Retailing isn't easy; Lillian Vernon to go private;
International calling; Internet Sales Tax update; B2B:EBay's Newest $1
Billion Business
E-Tailer's Digest
etd_post@gapent.com
Thu, 17 Apr 2003 06:54:44 -0400
E-Tailer's Digest --- Everything for the Retailer
Issue #0678 April 17, 2003
George Matyjewicz, Moderator mailto:georgem@gapent.com
Published by: GAP Enterprises, Ltd. http://www.etailersdigest.com
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CONTENTS
[1] Greetings
[2] Retailing isn't easy
[3] Lillian Vernon to go private
----- ---- --- -- -> Important Offer <- -- --- ---- ---- --
[4] International calling
[5] Internet Sales Tax update
[6] B2B:EBay's Newest $1 Billion Business
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[1] Greetings.
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Hi All:
As if retailing isn't hard enough - look at what some of our European
brethren suffer with. Laws that deter retailing as we know it in the
US. Is it good or bad? What do you think?
Along those same lines, I note that marketing is very different in various
parts of the world. At a previous engagement, when I touted how good our
services were, I was chastised by many from outside the US. In fact, the
Chief Minister of the BVI where we were HQ'd suggested that we tone down
our marketing, since "we don't do that here." What's it like in your country?
An old client is going private - Lillian Vernon. IMHO, that was a success
story far greater than Martha Stewart and the like. Lillian Hochberg (who
changed her name to Vernon) took $500 in wedding gift money and created the
mail order dynasty. Unfortunately the past couple of years weren't so good
for the business.
Patty Sachs reports some success with international calling. For those of
us who do a lot of international business, it may be of interest.
Finally, it looks like EBay's next major stake will be B2B. All those now
defunct B2B portals couldn't make a go of it, so it will be interesting to
see how EBay does.
And we have an update on Internet sales tax. Get ready folks.
Now, let's get to everything for the retailer.
Sincerely
Dr. George Matyjewicz
Chief Global Strategist, GAP Enterprises, Ltd.
mailto:georgem@gapent.com
http://www.etailersdigest.com
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[2] Retailing isn't easy
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Retailing isn't easy. And if you think it's hard in the US, think
again. Let's look at some retailing rules in Europe:
1. The Belgian Economy Minister sued France's Carrefour supermarket to
halt a campaign that offered price reductions on dozens of
items. Why? They didn't have sufficient stock to satisfy demand for the
products and thus was engaging on "deceptive publicity." Guess they don't
like rain checks.
2. In the Netherlands retailers can offer two products for the price of
one as a special promotion, but Belgium only permits three for the price of
two.
3. In France the value of a gift premium must not exceed 7% of the cost of
the goods it comes with. That means if you buy two shirts and get a free
tie, you'll only get a bad tie.
4. Predatory pricing - selling below cost to drive competitors out of
business - is illegal everywhere including the U.S. But many European
nations also ban outright the promotions and discount prices that are
standard in America. Eight of the 15 E.U. members outlaw "loss leaders" -
the sale of products below cost to tempt consumers into the store.
5. Germany, France and some of the Scandinavian countries are deeply
skeptical about the value of promotions, arguing that they distort rational
purchasing decisions and thus work against the consumer's best
interest. Guess the consumers aren't smart enough to make their own decisions.
6. Belgium bans the use of customer loyalty cards which allows consumers
to accumulate points when making purchases and then exchange them for free
products (such cards are legal in other parts of Europe).
7. When the Euro became legal, the clothing store chain C&A, fearing chaos
at it's tills, gave a 20% discount to German shoppers who paid with credit
cards or debit cards, instead of cash for the first four days. Makes sense
from a business point of view right? Not according to German authorities
who said the discount breached unfair trading laws and the courts agreed,
fining them 1 million Euros.
What's it like in your country?
George
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[3] Lillian Vernon to go private
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A former client Lillian Vernon Corp - the catalog business is going
private. They agreed to be taken private by Strauss Zelnick's media
investment firm for about $60 million, or $7.25 a share in cash.
Former BMG Entertainment boss Strauss Zelnick, who is partnering with
private equity firm Ripplewood Holdings to buy the money-losing Rye,
N.Y.-based company, has ambitions to create the next Martha Stewart, with
plans to move into licensing and television and to expand Vernon's online
presence.
The $260 million specialty catalog and online retailer, which owns several
catalogs as well as outlet stores, was founded in 1951 by Lillian Hochberg,
a German immigrant, with about $500 in wedding-gift money. She came up with
the company's moniker by combining her name with the name of the town where
she launched the business--Mount Vernon, N.Y.; she then changed her last
name to match. Ms. Vernon, 75, who is chairman of the company, will give up
her day-to-day operating responsibilities and become nonexecutive chairman.
ZelnickMedia will be responsible for running the company.
Lillian Vernon Corp. has lost money for the last three years: $9.6
million, or $1.08 a share, on revenues of $260 million in fiscal 2002,
ended Feb. 23, 2002, and is expected to lose $1.84 a share in the latest
fiscal year.
Details at...
http://www.crainsny.com/news.cms?newsId=5502
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[4] International calling
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This message is for those of you who do not casually call International
(for fear the cost will break you) for business or personal reasons. A
friend of mine is stranded in Sydney Australia, recuperating from emergency
surgery--I wanted to call her. I found a Virtual Calling Card service,
signed up for $20.00 and within minutes had my pin number and within
another few minutes I had my friend on the line---for 6 cents a minute. It
can cost double that to call someone in your own state.
I thought it was fantastic! Then, last night I tried a three way call so
another of her friends could cheer her...it worked. I already have
unlimited free long distance and now this VCC...I am in LD heaven.
So, for anyone that is dreading long distance charges when it comes to
venturing across the waters for business--these services are the good news
answer.
The service I used was www.WorldxChange.com I am sure there are others.
George, I am sure you have researched and have found the best! I did not
know they existed.
Happy calling,
Patty Sachs, Celebration Expert
www.pattysachs.com
P.S. These calls also sharpened my dialing dexterity...punching in 30
digits or more for pin numbers, etc.
+++ [Moderator's Comments] +++
Thanks for sharing Patty. Telephone cards are very popular now. Many
companies are offering them, including at least one of our clients.
I did learn a lot about that industry that is worthy of note:
1. Just because the rates are low to one country, i.e., Australia in your
case, doesn't mean they are low for all countries. There are points of
termination with calls and the routing determines the rates. For those of
us who fly, you will see cards from IDT in the inflight magazines. They
list countries and rates which look great. Before you use the card in a
country not listed, ask them for the rates.
2. Some phone companies offer special rates if you call particular
countries. We call Mexico, Switzerland and the UK often, and found our
long distance carrier (KISS-Covista) had excellent rates. All we had to do
was ask.
3. In the NYC area, organized crime had gotten into the telephone credit
card business and short-changed the cards. When you thought you bought a
$20 card, you actually got $15.
4. Many people use telephone cards instead of long distance carriers. For
example, Walmart offers a card for 3 cents a minute in the US, which is
cheaper than most long distance carriers. The downside is you need to dial
those 30 numbers to connect.
George
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[5] Internet Sales Tax update
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With pure-play giants like Amazon and eBay still not on the sales tax
bandwagon, the trend's impact on the overall e-commerce sector will remain
muted in the short term.
Once thought to be a monster waiting in the shadows, poised to bludgeon
online commerce, Internet sales tax is proving to be more of a nuisance
than a threat.
Early this year, a half-dozen major multichannel retailers, including Toys
"R" Us, Wal-Mart and Target, began collecting sales tax on online
purchases. The transition came quietly, without much fanfare and, so far at
least, without much fallout.
None of the publicly traded companies that tacked on sales tax has reported
first-quarter earnings yet; most are slated to post results later this
month. But analysts say one thing is already clear: The advent of
widespread sales tax collection by big-name e-tailers has not dampened
overall e-commerce growth. Will this promising trend continue in the
future, or will consumers rise up against online sales tax as its
prevalence grows?
Growing Strong
According to comScore/Media Metrix, online sales in the first two months of
2003, when tax collection began, rose 26 percent overall compared with the
same time period last year, reaching US$13.9 billion. For nontravel
spending, the category of sales most likely to be newly taxed, growth
amounted to 19 percent, to a total of $7.8 billion.
Indeed, one argument used to oppose online sales tax for so long was that
implementing it would derail e-commerce growth. With e-commerce topping $45
billion in 2002, according to U.S. Department of Commerce data, that
argument has lost much of its punch.
But some people never bought this argument anyway, saying consumers began
using the Web to make purchases not because of lower prices, but because of
convenience.
Because the nature of the Internet promotes comparison shopping, in the
short term, multichannel retailers that have begun collecting sales tax
could lose business to pure-plays that eschew such charges.
But even that may be a short-lived phenomenon. Once-staunch opposition to a
blanket Internet sales tax has weakened considerably amid state budget
shortfalls, which have prompted states that have long defended a tax-free
Internet, including California, to take another look at this issue.
Details at...
http://www.ecommercetimes.com/perl/story/21278.html
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[6] B2B:EBay's Newest $1 Billion Business
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EBay formally launched its business and industrial marketplace site in
January, creating a central location where enterprises can buy or sell
anything from drill bits to dump trucks. On an annualized basis the site is
already selling $1 billion worth of goods, up 50% in the last two years,
according to eBay Business general manager Jordan Glazier. About 7% of the
$14.8 billion worth of merchandise sold on eBay as a whole in 2002 was
accounted for by business-to-business sales.
Big manufacturers like Motorola (nyse: MOT - news - people ) and Silicon
Graphics (nyse: SGI - news - people ) have been using eBay for some time as
a low-cost means of selling overstocked or obsolete inventory, but it is
small- and medium-sized businesses that eBay sees as the growth engine for
eBay Business.
Hundreds of thousands of companies large and small already use eBay for
business transactions. While the increase in the number of small and
medium-size businesses that sell to individual consumers has been key to
driving eBay's growth, says Salomon Smith Barney analyst Lanny Baker, "if
they can turn those small-business sellers into buyers on the site, that's
a lot of purchasing power".
Unlike many of the now-defunct business-to-business brainstorms dating back
to the dot-com era, eBay didn't establish its business marketplace and then
try to recruit users. Instead, management began to notice a critical mass
of business activity on eBay last year and decided to consolidate it at one
place on the site.
Rather than relying on small-business owners in search of cheap PCs
stumbling upon the business marketplaces, eBay is starting to promote its
business marketplace systematically. It is running ads in trade magazines
and visiting trade shows to get to know distributors--and with good reason.
"The average price point on eBay Business is several times that of the rest
of the site," Glazier says. A piece of equipment for a physical-therapy
practice can list at $25,995, while one piece of equipment in the pumps
category lists at $150,000. Industrial sales have the same inexpensive
listing fees that apply to items on the rest of the site, excluding cars
and real estate. Posting a sale costs between 30 cents and $3.30.
But eBay also takes a cut of each business sale that ranges from 1.5% to
2.75% or 5.25%, correlating inversely to the final value of each item. If
its $1 billion a year in business-to-business sales is realized, that alone
could add roughly $33 million in commissions to the company's annual
revenue ($1.2 billion in 2002).*
Details at...
http://www.forbes.com/2003/04/14/cx_pp_0414ebay.html
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