As community-based Web sites roll out electronic commerce services, small businesses and home users are finding an affordable way to set up shop online.
But can the Web support millions of mom and pop Web merchants?
Earlier this month, online community GeoCities announced GeoShops, a program that offers low-cost e-commerce capabilities to its members.
Marketers are hungry to reach small office workers: American Express Co. is sponsoring an area in the GeoShops starter kit page, which helps users get their stores running. GeoCities also is discussing sponsorships with delivery, software and office supply companies that are interested in reaching this audience.
$10 MIL REVENUE
In the first year, GeoCities predicts, GeoShops will attract more than 100,000 marketers and online shops, and generate $10 million in revenue.
David Bohnett, founder and CEO of GeoCities, said those numbers are conservative estimates based on marketing to its members, which he projects will hit 3 million by yearend, and to prospects on the Web. In April, i33 Communications, New York, is launching an online and print campaign to promote the new program.
The service targets small and home office workers, specialty retailers, consultants and professional services.
"We see that as a very broad, untapped market segment on the Web primarily because of the price people have been charged up to this point," Mr. Bohnett said, adding that there also "hasn't been a context to this up to now," referring to the built-in traffic a site gets residing within the GeoCities neighborhood of sites.
For $24.95 a month, members can become a GeoShops merchant and be listed in GeoCities neighborhoods. For an additional, onetime $100 fee, merchants can register a domain name directly with InterNIC, the governing body that oversees the registration, allowing sites to be accessed outside the GeoCities domain.
$120 START-UP FEE
If sites want credit card processing, they must pay a $120 start-up fee, with monthly pricing of $80, or $40 plus 5% of transactions, whichever is greater. Internet Commerce Services Corp. is handling the e-commerce services, using software provided by Open Market.
Until now, GeoCities had a $50 a month merchant program that Mr. Bohnett said was undermarketed and only attracted about 100 merchants.
Another community-based service moving into e-commerce is WhoWhere?, which is developing a proprietary e-commerce application that for a fee will be integrated into its free home page site Angelfire, as well as on its private-label home page product PeopleCity, which iVillage, ZD Net and others currently license for a fee.
Similarly, online community Tripod soon will release an e-commerce product, which will be available for an extra charge and combine licensed technology with proprietary software, said Ethan Zuckerman, VP-research and development. "We think commerce is an incredibly important market," he said.
The Small Business Pod on Tripod has more than 1,000 small and midsize merchants, selling products and services ranging from used videogames to accounting services.
However, as free home page sites begin renting mall space, it raises questions and potential problems. Users, reluctant to share credit card numbers online, will need to be assured that a small, unknown business is trustworthy.
Mr. Zuckerman said Internet Usenet groups have blacklisted retailers with dishonest reputations.
FORMAL GUIDELINES NEEDED
But he added that's still not enough. "For commerce to work, formal and informal systems need to be developed," Mr. Zuckerman said.
Other networks of sites are evaluating e-commerce for their members, and they're learning what works and doesn't work.
Charles Conn, CEO of CitySearch, has tested local e-commerce on the Austin, Texas, site of CitySearch.
"Small rare books are a good example," he said, "where a high degree of customer service is important and where the goods are not highly available."
Harder sells are records, books, computers and other merchandise, where the profit margins are small.
For online communities to be offering e-commerce services is logical, said Patrick Keane, analyst at Jupiter Communications.
America Online's "real estate is far too expensive for the little guy or even the middle-size guy at this point," Mr. Keane said.
At the same time, he cautioned that online communities will be busy trying to regulate the business practices of thousands of amateur sites.
"It's tough to police a large community no matter what the metaphor--a small town or anything online," he said.
Copyright March 1998, Crain Communications Inc.