When tourism fell victim to the terrorism of September 11, Palm Springs, Calif., took the hit, too. The tony desert resort saw an overall dip of nearly 10 percent in business through autumn of 2001, and expects business to be twice as bad this year. Yet the Terra Cotta Inn, a 17-room establishment, actually saw an increase of 16 percent. It helped that the inn depended less on convention business than its larger rivals, but there was a better reason. Owner Tom Mulhall has nothing to hide: the Terra Cotta is a clothing-optional resort, and his secret weapon has been the Internet.
"We [started] actively promoting ourselves back in 1995," says Mulhall, noting that nationwide, the numbers of the clothing-optional industry have been bad. "I would say about 75 to 80 percent of our guests find us because of the Internet." The strength of his stripped-down, functional site (sunnyfun.com) is anticipating the needs of potential guests. Instead of just selling the resort, the site also provides information on restaurants and things to do in the area. And it targets overseas guests by using key words--"nudist," "naturist" and "hotel"--in Dutch, French and Spanish. The lesson for small businesses: when it comes to e-commerce, size matters. And smaller is often better.
Many large corporations aren't structured to take advantage of the Web. "It goes against the mainstream of how [corporate] business people invest and choose to run a business," says Sean Moss-Pultz, owner of Zero Entropy, a Web design firm in San Diego. "The market on the Web is very niche-oriented. There's no real big market you can go after." By approaching the Web as a mass-marketing medium, he says, big companies ask for trouble: "It's very easy for a small business to come up on the Web and go out and control an entire niche market. Maybe it's only six to 10,000 users, but that can be enough." Such modest ambition is alien to the corporate mind, says Nicolas Topiol, chief strategy officer for Diamond.com, a Sunrise, Fla., online jeweler: "Big companies think they can adapt their environments to them, not adapt to the environments."
Adaptability may be the main quality that defines the successful Web-based small business. The Iron Works, a Springhill, La., manufacturer of outdoor barbecue grills and entertaining accessories, has learned from his company's first Web experiences and created a presence (www.topgrills.com) that takes customers in hand and leads them to the point of purchasing the company's high-end products, as well as margin-building add-ons. As a result, it has grown from one Web site in 1995 to more than 20, with the profitable number of orders doubling from 2000 to 2001. "The concept is to find the person looking for outdoor cooking, then take him to a site telling him how to do it, then take him to a site letting him purchase what he's just been reading about doing," explains Iron Works president Paul Faaborg. Customers are kept close and encouraged to share photos at the sites and interact. If someone has a question, Faaborg as likely as not will personally answer it. "A lot of big companies may think the Internet is another form of printed advertising," he says, "where it's really an opportunity to meet your clients up close and personal."
Small businesses often prove better at cost control. Medina CycleWorks of Berkeley, Calif., uses the Web to customize bicycles for buyers, with high-end frames starting at $300 and running to about $2,500--pricey, but well below costs for comparable products at most retail bike shops. As his volume has built on the Web, the company has been able to leverage relationships with vendors and get better margins. Medina's site (wrenchscience.com) relies on a complex specification process, in which customers choose such things as forks and wheels, all while being guided to proper fit. So much automation brings an efficiency that gives Medina 33 percent margins. "Six hours [in multiple visits to a store] is literally cut down to a little bit of time on the phone," says owner Tim Medina. "Technical experts have told me [our site] would have cost us a couple of million dollars to build," says Medina. In fact, the price tag was about $350,000. Medina found a programmer with more than 30 years of experience in enterprise systems who was willing to teach him and his employees "how to think like a programmer," and design the underlying personalization database.
Limited resources can be a blessing. "The bigger the company is, the more money they've got to pay their way out of problems," says Rob Frankel, a brand consultant to both small companies and Fortune 500 firms. "They tend to buy their answers." This can lead to laziness. "If you're a small company, you're hungry for that business, whereas with someone at a large company, they're doing their job but it's not a passion," says David Turnbull, CEO of Seattle-based CollegeGear.com. "Where they go to work they do their 40 hours, I remember when we started out we were doing at least 60 to 80 hours a week." CollegeGear, which sells such licensed paraphernalia as T shirts and mugs with college insignias, has turned that drive into $4 million in annual sales.
Finally, small-business Web sites are less likely to fall victim to technical overkill. Corporate officers all have broadband connections, and seem to think that everyone else does, too. "You can always tell someone who has no idea about how to do business or of how to treat customers if they have a [Macromedia] Flash intro on their site," says Frankel. "Over 80 percent of the country is still on dial-up. These people do not want to sit there and watch your ego-driven show." Companies would be better off using less glamorous technology in ways more focused on revenues, such as direct communication with customers. Tom Antion of Antion Communications in Landover Hills, Md., who sells materials on public speaking from his site, antion.com, keeps a mailing list of more than 105,000 and regularly communicates with them, never failing to mention new products available on his site. "Within 20 minutes, there's money coming into my business," he says. Sales from the publication bring in from $20,000 to $40,000 a month. "This is why the judicious use of these tools... not spamming, gives you an infinite return."
In other words, the heart of the Web is the customers, and having a company arrange its world around them. "It's not just a process," says Steve Doviak, marketing manager for Thule, Inc., a manufacturer of transportation systems for sporting goods, "it's like someone on the phone with your customers. It has to be a two-way medium." Otherwise those customers may dial a different number.