May 13 2008
Comment - Ecommerce revenue shares: more than money
Philippe Muheim, Head of Business Development, Real TSP was so stirred up about our recent piece on ecommerce solutions that charged on a revenue share basis that he penned this comment which we thought was worth sharing
Philippe Muheim, Head of Business Development, Real TSP was so stirred up about our recent piece on ecommerce solutions that charged on a revenue share basis that he penned this comment which we thought was worth sharing.
I was interested to read the article about the new Transact product from Shopcreator, which offers a revenue share approach for small to medium sized businesses wishing to implement an ecommerce system.
Whilst I would agree that the product could well be useful as a ‘toe in the water’ for small retailers wishing to assess the impact ecommerce could have on their business, I would be very concerned if the wider retail community were to regard it as a quick, cheap fix to the challenges of setting up and growing an online channel.
It’s all very well to offer revenue share schemes – indeed, this is the approach that Real TSP takes and it has proved very successful for our clients, who include Adams Kids and Boots, amongst others. But a truly successful revenue share scheme is much more than a financing mechanism, and it most certainly should not merely be viewed as a means of shifting risk from one party to another.
Significant time and effort need to be invested at the beginning of any ecommerce venture to ensure that the site has such essential features as engaging site design, customised promotional and navigation functionality, personalised display of content based on user profiles, properly established business processes and integration with IT management systems for inventory and orders. Obviously a revenue share scheme will reduce the initial cash outlay required to put these foundations in place. .
In my view however, the real value of a revenue share scheme comes from the ongoing incentives that it gives to the supplier to grow the client’s online business. Without this ongoing partnership, there is a very real danger that the online operation will be launched and after an initial flurry of sales, the business will stagnate and fail to deliver its maximum potential.
So, what exactly do I mean by ongoing incentives? They are the constant drive for the supplier to provide at no additional cost a range of services that can take many forms, including:
- The development of sales enhancing features
- The implementation of cost-effective marketing campaigns to drive traffic to the site or to build lists
- The development of profiling and targeting tools to extract maximum value from the customer database
- The improvement of back end operations that affect the customer experience
- The secondment of an experienced ecommerce manager to the client to help them set up the best internal organisation
Revenue share is about a joint commitment to grow an online business to the benefit of both the retailer and the supplier. After all what’s the point of not paying any fees, if there are virtually no sales either?
