Designing,Web,Business,for,Suc ecommerce Designing a Web Business for Success

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Every business everywhere has a design, intentionally or not; a structure that is tuned to generating profit by exploiting what's known as leverage and sustainable competitive advantage.Let's look at a few offline examples:If you are a manufacturer, your design involves identifying a market opportunity, developing a product, building a factory, locking in distribution, and handling customer warranties and complaints. Your leverage is in the capital you put into the factory and your competitive advantage can include superior products and product development, lower manufacturing costs, access to capital and locking up the distribution. You measure your success by return on investment (the capital bit) and market share (the advantage bit.)If you were one of the big management consulting firms, your design is simple – hire the best minds – your leverage is usually a few (well-connected) partners selling work at partner prices but done by low cost juniors. Your competitive advantage; the relationships you form with clients who then prefer you to the unknown competition for jobs on which their own employment security may depend.Things are different on the web and much more fragile. An example…On the web, you write an e-book, put up a web site and drive traffic to it by locking into search engine keywords. That's your design. The leverage, you are endlessly told, is the small amount of time spent on the book and the competitive advantage is your expertise – captured in the book.The problem for the web entrepreneur is that digital products are extremely easy to copy eliminating the leverage. Search engine competition is fierce and positions unstable. And the apparent expertise is as easily replicated as the book (no sustainable competitive advantage.)The bottom line: on the web most entrepreneurial activity is transient. People enter, create something, and hold on to it as long as they can but then their position is eroded, their profits drop and they exit. If you want to develop a long term business, you have to shift to something much different. Thinking about the three components – design, leverage and competitive advantage will help you enormously. A couple of examples:In the e-book field, e-Book Wholesaler sells private label e-books to resellers with full resell rights. The design is very simple. Tom Hua, creator of e-Book Wholesaler, sources books from a stable of authors and offers them to the market with resell rights.Very simple. But he levers and protects his business cleverly.The basic leverage is in outsourcing writing and selling the same book many times. He also levers his marketing by allowing each book to be personalized with your address, codes and favorite affiliations (generating viral marketing opportunities for the buyer plus selling memberships of the e-Book Wholesaler site at the same time - automated affiliate marketing.)Even though he uses a membership site formula (levering a single sale into regular income), his sustainable advantage is low, being mainly in the inventory of books he has. His formula is easily copied or muddied, the primary barriers being getting it organized and building membership. Indeed there are others like his including The Viral Profits Warehouse ™ and the increasing number of private resell rights sellers.In the AdSense field, JVMembers have built something original. The design is again simple. They set up a number of AdSense sites; they promote them on the web, and populate the sites through contributions by their members. The members write short articles and share in the AdSense revenue generated from their pages.The leverage is in the writing of the articles. JVMembers needs thousands of individuals generating fresh, original content all the time (very attractive to the search engines). These thousands of writers cost JVMembers nothing and for their role in organizing it they get 50% of the AdSense revenues. Sustainable advantage is not high in that the concept could be easily copied.Our two examples share the characteristic of having simple structures, using leverage well but being readily copied. Are there web businesses that cannot be easily copied? Here are a couple.Saleshoo is in the eBay drop ship business. They use a regular design – sourcing product and distributing it to members who have pre-sold it on eBay. Members can also buy for their own account and can derive affiliate income (marketing to new members.)So where is the advantage? It lies in excellence of service. The major problem faced by drop ship users is reliability of supply. If you sell something on eBay the buyer expects you to deliver it. Failure of a drop shipper can impact your reputation with eBay. Saleshoo's focus is on reliability of supply as well as good prices.The Internet Marketing Center is a $60m business selling web tools and education. Their sustainable advantage; they started out as a guru business and migrated to a bigger entity. Today, their advantage lies in their exceptional in-house web marketing talent plus their huge affiliate organization and finally their access to capital to build exceptional products with high production values.The message; design is critical and you need to be aware of it. Leverage is mostly well understood; analyze a few businesses to see the main components. Competitive advantage is difficult and typically found in complexity (the base of reliable sub-suppliers owned by Saleshoo), service (reliable supply) or mass (as in IMC).