An Aggressive Strategy Is the Key to Success for Online Merchants

Howard Lefkowitz, 41, knows something about what it takes to succeed in Internet retailing, or “e-tailing.”

As EarthLink’s vice president of business development and Internet marketing, Lefkowitz helps determine which retailers to showcase on the EarthLink Mall--a group of about 200 merchants on EarthLink’s Web site. Lefkowitz said the cyber mall is expected to generate between $10 million and $20 million for the Pasadena-based company this year.

Lefkowitz came to EarthLink in 1997 after the company acquired Internet in a Mall, a Tarzana-based Internet service provider Lefkowitz founded. It focused on signing up customers at mall kiosks.

Before that, Lefkowitz was a marketing consultant to GTE for interactive media and other areas and president of the telemedia subsidiary of Home Shopping Network, where he was responsible for sales and marketing of its infrastructure.

Question: What makes a good Internet merchant? For instance, how do you decide who would be a good retailer for your mall?

Lefkowitz: Well, if they host here, we know some things about them. We check them out as best we can. One of my favorites is one we just signed, JustBalls.com. [They claim to be] the biggest ball store on the Internet. It’s a funny name. See, we come at this from a merchandising standpoint. People will go and look [at JustBalls.com] just because of the name.

We’re looking for a great brand. Either a great brand of merchant--like, Amazon’s a great [merchant] brand--or great brands that they are carrying. We’re looking for good deals for our members, and consistency and back-end delivery. Can they deliver the goods? And, customer service.

Q: What is the most common mistake retailers make when launching an Internet site?

Lefkowitz: The most common mistake would be if they simply put it up, people will come. The fact is, that’s absolutely inaccurate. You can have the best site, but without traffic no one will know. One of the most important pieces is driving traffic [through advertising]. The thing we do for merchants at EarthLink is we bring them into our mall, where thousands of people go every day to purchase goods and services.

Q: What were the lessons Internet retailers should have learned from this past holiday season?

Lefkowitz: Our numbers this holiday season were up five times [compared to the year before]. That’s huge. I think merchants learned they’ve got to be ready for an onslaught. We crushed a lot of sites where we merchandised them more effectively [than they expected]. We have an area called “‘Message of the Day.” And we put something up on Message of the Day and a fairly well-known site--that has to remain nameless--asked us to take down the Message of the Day because we were burning their machines [sending more orders than they could process]. All their executives were answering customer service calls. So we literally had to take it down.

From our perspective, it’s just be ready for that time.

Q: What are some of the untapped retail opportunities still available online? Do you ever sit there and think somebody should really do X?

Lefkowitz: There’s so many possibilities. I don’t think shoes are being done as well as they could be. Tennis shoes. You know, you wear a certain type of Nike. It’s the same type of Nike you could buy wherever you want. So it’s identifying those kinds of products that are common across brands and then being able to merchandise them more effectively. Those kinds of items like tennis shoes, like balls, where you know, this is what you want.

Q: What kind of capital is needed to get an Internet retail site started? Is it getting more and more expensive?

Lefkowitz: Again, it’s a sales issue. If I’m a neighborhood pizza guy, I may want my customers to order over the Internet. That way, I can cut some costs because I won’t need as many people answering the phones. I can probably put that whole thing together for a grand. And it’s going to save me probably $30,000.

So it all depends on your goal. If [you] want to try to be Amazon [the e-commerce giant], I suggest you go to 3000 Sand Hill Road [in Silicon Valley] and stand in line in venture capital land. It’s everywhere from $1,000 to millions and millions of dollars, depending on what you are trying to do.

But to get national in scale, if you are a guerrilla, and you are smart, it’s still in your range, without question. If you use guerrilla marketing tactics, including some things like the right site placement--if you have some budget for PR and things like that, a name and some smarts, you can still do that. You can probably do this in the tens of thousands of dollars to get started.

Q: Is Internet retailing starting to settle into grooves? Is it getting too late to go online for a merchant that isn’t already there?

Lefkowitz: Is it ever too late? It’s not too late yet. Was it too late for Federal Express? I mean, what the hell, the Post Office has been here for 100 years. Was it too late for those guys? And after Federal Express, was it too late for Airborne and DHL? UPS? Was it too late for them, too?

I would be aggressive in my pursuit of an Internet strategy, make no mistake about that. And if I was an incumbent organization, I’d start a separate organization in my company and I would tell that guy, who would report directly to the CEO and not to the operating organization, that what I want him to do is destroy my current business, be my worst competitor. Then I’ll find out how to fix my existing business, and I’ll make my Internet business even stronger.

Q: Is Internet retail going to cut into the sales of real-life merchants?

Lefkowitz: Is it going to cannibalize retail? It’s going to grow retail. Just like video didn’t cannibalize films. Remember, people were saying, “Oh, it’s going to shut them down. Stop the popcorn machines.” It’s just not true.

Q: A decade ago, we saw the consolidation of numerous department stores into a few huge national companies. Do you see the same thing happening with online retail, and if so, how soon?

Lefkowitz: I don’t know. There’s room . . . for multiple players in a particular area. There is a lot of room for niche end merchandising, for good merchandising and good service. I think you can differentiate with service.

Will those who don’t pay attention to the rules of retailing on an Internet space have to consolidate? Probably. But there will always be room for those who continue to develop those relationships.