Why The Web Still Works

Don't be fooled by dot-bombs. Here's how small companies are winning customers online.

If you're looking for an excuse to retreat from your Web strategy or steer clear of the Net entirely, you don't have to look very hard. "Dot-bomb" has replaced "dot-com" as the latest buzzword. Struggling eToys Inc. (ETYS) is running out of cash; Garden.com Inc. (GDEN) is buried; and the Pets.com Inc. (IPET) sock puppet has retreated to the laundry basket. And if the industry's woes aren't enough reason for caution, you can always blame your reluctance on fears about Net security and high costs--two of the main reasons entrepreneurs cite for not having a Web site.

Those who do have sites aren't always so thrilled with the results, either. About a third of the 647 small businesses surveyed by Dun & Bradstreet Corp. last year said they had their own Web site, but more than half said the Web has had "no measurable impact" on their business. There were even signs of a small-business retreat from the Web: D&B says the number of small businesses that advertised on the Web fell 10% last year, and Verizon Information Services found the growth of new Web sites by small companies is slowing.

But before you dismiss the Internet, consider this: Far from the public spotlight and way off investors' radar screens, the Web is still quietly working for many small businesses. Perhaps not as dramatically as they expected--but working. "The Internet didn't turn your dress shop into Nordstrom's," concedes Pat Marshall, group vice-president for marketing at Verizon. "But the truth is, for small businesses using it as a tool rather than a transformer, it works."

In the following pages, frontier profiles four profitable small companies that have figured out how to make the most of the Web. They've learned it's not a magic bullet, and it won't help sell a lousy product or service. But when used right, it can give you an edge over your bigger, better-financed rivals. The key to their success? Here's a hint: You won't find any multimillion-dollar Web designs, bloated staffs, or flashy ad campaigns among this crew. It turns out that old-fashioned customer service is the cornerstone of their Web strategies. The principle holds whether the goal is to create a new revenue stream, as DiBruno Bros., the gourmet food shop, has done, or to give clients access to information quickly and efficiently, as in the case of Helen Wells's talent agency. Rather than going for technological overkill, these entrepreneurs are focusing on how to make their sites more functional and personal. Their Web sites aren't viewed as a trendy accessory but as an integral part of their business plan.

You might argue that being small hasn't deterred these businesses from succeeding online. In fact, it may have helped. While the dot-bombs chomped through their venture-capital funds like termites through wood, these companies have learned to do more with less.


In six decades of doing business, DiBruno Bros., a Philadelphia cheese shop started by cousins Joe and Danny DiBruno, has never deviated from its basic recipe: sell high-quality products and offer plenty of personal service. That formula holds true today for the new generation of owners, the founders' grandsons William and Emilio Magnuccio, and their college buddy Mark Monaco. They've taken sales from just $700,000 in 1993 to about $8 million last year, and there are now 35 employees.

But how can you maintain that personal touch when 13% of those sales are made in cyberspace and your customers never get to shake your hand, much less taste or smell the cheese? For Monaco, who runs the Web site, it starts with the design and content. It's no accident that the site's background design resembles an old-fashioned hardwood floor, just like the one in the original shop in the old Italian section of Philadelphia. Detailed text often gives cooking or tasting suggestions, or shares news about how customers are responding to a new product in the Philadelphia store. "Food enthusiasts are a passionate group," Monaco says. "You can't just tell them about the cheese. You have to show them you love it, too."

There's also a personalization option--"Become a DiBruno"--which allows shoppers to set up a customized page and receive personal recommendations and gift services from DiBruno. "I thought that was nicer than just MyDibruno, or whatever," says Monaco. "Like you're joining a family."

DiBruno's original site was a bare-bones affair, set up six years ago for a mere $250 courtesy of a local ISP as a promotional gimmick. Since then, Monaco, the tech brains of the operation, has installed features like a shopping cart and pop-up windows displaying detailed information about products. The site cost DiBruno about $4,000 a month to maintain last year, including salaries, because of a series of upgrades. (Expecting fewer technical improvements next year, Monaco projects monthly costs should decline by half.)

DiBruno's Web site has helped win loyal customers all over the world. Last year, through advertising DiBruno's site in upscale food magazines, Web sales grew to 50% of nonstore sales. Tom Lannen, a lawyer who has lived in Guam for the past 20 years, first stumbled upon DiBruno online four years ago when he was looking for Nunez de Prado olive oil. "Every order is processed with a thought towards servicing the customer," he says. Often, Lannen orders both perishable and shelf-stable products at the same time, and DiBruno's staff sends him an e-mail detailing various shipping options for different items and their costs. "It's a level of service that is difficult to get online," says Lannen. "Or offline for that matter."

Frank Definio Sr., another repeat customer, often buys gifts from DiBruno for suppliers and clients of his marketing company Tukaiz Communications in Chicago. Monaco or another staffer often answers his e-mails personally. "Mark will be there for me to take care of whatever I need," he says. The bottom line: DiBruno may be small, but it treats every customer like a big cheese.


You might say that Helen Wells has a model Web strategy. Wells, owner of a $2 million, five-employee talent agency in Indianapolis, uses her slick, stylish Web site to provide a detailed searchable database of her agency's 500 actors and models. Its main goals: to make her clients' lives easier and save Wells some money in the process.

This 21-year-old company does a steady business placing local actors and models for print ads, television commercials, and training films. Say you're a photographer looking for a blonde female for a shoot. Plug in the vitals, and the database spits out a list of candidates. Click on an individual's picture, and you'll bring up more detailed information, such as height, shoe and dress size, and experience.

Including the purchase of four new computers and a high-speed Internet connection, Wells spent about $20,000 on the site. While she still can't quantify the site's contribution to the bottom line, she does know that it's winning fans. Michelle Gilbert, studio manager at Tod Martens Photography, an Indianapolis-based commercial studio, often consults the Wells database to preselect potential models and then directs her own clients--mostly corporations producing annual reports--to view her picks online. That saves Gilbert the trouble of sending around the heavy photo book. While Wells's bigger rivals in Chicago all have Web sites, Gilbert says they don't have their entire roster of models posted online. With Wells, "I know what they've got, I know I can access it when I need it," she says.

The site caters to the agency's actors and models as well. Besides giving them more exposure, the site lets them check schedules for open casting calls, classes, and other events on the agency's online calendar. Soon, Wells will be installing software that will allow her clients to view the audition tapes of her actors and models in streaming video. In time, Wells hopes to wean all her clients off her pricey print photo book, which costs her $40,000 a year to publish. So far, it's slow going. "Some of them panic," she says. "They still want the book. I'm educating them. Time was when they didn't want to use the fax machine, either."


A thrifty dot-com? No, it's not an oxymoron. Just ask the two young owners of Sneetch Enterprises Inc., an online retailer of DVDs and videos. Co-founders Sean Lundgren and Todd Livdahl, both 32, launched sneetch.com from their homes last year on $5,000 in credit-card debt and set up shop on Yahoo Stores while holding onto their day jobs in the information technology department at Disneyland. "We know good personal service makes a company and we got that from Disney," says Lundgren. "We know that's the core."

Indeed. Sneetch racked up more than $800,000 in sales in its first year, selling what are essentially commodities--at not particularly low prices, but with an extra dose of service. Case in point: Sneetch.com had only been in business for a month last year when someone requested a DVD of American Pie, a film their distributor didn't have. Not one to disappoint a customer, Lundgren drove all over the Los Angeles area until he found a copy. "Lost money on that sale," he says. But in the long run, Lundgren realizes such attentiveness wins repeat business. Routinely, if a customer wants a video they can't find, Sneetch will direct the customer to a competitor who has it. "My wife watches me send out these e-mails and says `Are you nuts?' But we want the customer to be happy," says Livdahl.

Apparently, they are. Rave reviews from Yahoo! Inc. (YHOO) customers about Sneetch's great personal service persuaded Yahoo's Rob Solomon, director of production for Yahoo Shopping, to offer Sneetch a prime spot on the portal's high-traffic shopping site. "They're willing to go above and beyond. That goes a long way," Solomon says of the duo. Sneetch went from three orders in its first month to more than 4,000 a month less than a year later--due almost entirely to its Yahoo positioning and word of mouth. Recently, they added CDs and some electronics items to their inventory, boosting sales by 40%. Lundgren and Livdahl have since quit Disney and now work full-time on Sneetch from their homes. Already in the black, they still don't advertise or court VC funds, and they handle most site updates themselves. The duo's biggest debate these days centers around expansion: whether or not to get an office. Livdahl says no. Lundgren, who has a new baby at home, is ready for some more professional digs. Sneetch plans to hire two employees this year, but still, it's "easy does it." The partners are determined not to join the ranks of the dot-bombs. "We're not laying off 300 people. We didn't spend millions on a stupid TV commercial," says Lundgren. Most important, he adds, "Customers like us." More of them every day.


Regent Book Co., a $10 million book jobber in South Hackensack, N.J., which binds and distributes educational books, has always held its own against its larger rivals. So when competitors began setting up Web sites, co-owners Doris Levin, 74, and her daughter Frayda, 47, followed suit. About 18 months ago, they invested $25,000, hiring a Web designer and database programmer to put their catalog online.

However, success didn't come instantly. The original site proved to be confusing and hard to use and pulled in few new sales. So the Levins consulted the best experts they could find--their customers. The librarians who order from Regent had plenty of beefs, and not just about Regent's site. Most distributors' sites were too time-consuming and intrusive, they said, requiring you to register before you could browse the books for sale. What's more, the intense graphics took too long to download, and search engines weren't flexible enough. The Levins listened carefully. First, they hired a librarian with HTML training. They also sent an existing staffer for training in Front-Page, a Web design program, and other software, so updates could be done in-house at a lower cost. The Levins budget about $300 a month to host and update the site. Taking a page from the book of big-time e-tailers, such as Lands End Inc. and Victoria's Secret, Regent's site now allows visitors to search for products by their stock keeping unit number. They have also added a software-based automated e-mail response system to send customers routine messages, such as confirmation numbers for orders received. "We designed the site so they can use it however they want to," says Doris Levin. "That gives us an edge with the big guys." At least it does with customers like Jo Faye Walker, a librarian at Obion County Public Library in western Tennessee. Walker regularly forgoes the deep discounts that bigger distributors offer to do business on Regent's site. "The site is easy to use, and it has good information on it and it's up-to-date," she says. Since 1999, Regent's Web sales have grown to 10% of revenues and are projected to reach 15% by yearend. Levin wants to bring that up to one-third. Assuming, of course, her customers agree.

To be sure, for every small Web player like Regent, there are still many more companies cautiously waiting out the dot-com collapse. When they do come online, says Sarah Harlin, producer for Yahoo stores, which is experiencing a steady influx of merchants, they're learning from others' mistakes. "People can see what works," she says. And what doesn't.

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