E-Commerce Start-Up Business Plan

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NoHassleReturn.com

Opportunity

Problem & Solution

Problem Worth Solving

As E-commerce continues to accelerate, so does the problem of merchants and manufacturers needing to process returns. The average rate of returns for Internet-based companies is 9%. In the coming year the value of returned merchandise was $1.5 billion. Every one of these transactions involves financial processing. Many of them require physical shipping of physical goods, plus processing the goods as received. This is a huge hassle. 

Our Solution

NoHassleReturn.com is an e-commerce start-up company positioning itself to become the market leader in offering online merchants and consumers a uniform and trouble-free way to return merchandise purchased online. The company offers a business-to-business solution to online merchants of physical, non-perishable products. The company utilizes a consolidation approach in handling all product returns that allows online merchants to instantly save bad sales, restore customer satisfaction and stimulate repeat sales, while offering consumers a convenient, centralized online location to claim returns. By creating a new service category and utilizing the first-mover advantage, NoHassleReturn.com positions itself for rapid growth and gains a strong opportunity to raise entry barriers for possible competition.

Target Market

Market Size & Segments

E-commerce continues to accelerate and the amount of money spent on purchases made through the Internet shows no sign of decline. During the holiday season (November 20 to December 19), retailers saw online revenues quadruple, jumping 300% to about $11 billion and far exceeding expectations, according to a study by Shop.org and Boston Consulting Group. The study of 30 retailers in such categories as apparel, books and music, home and garden, specialty foods and electronics showed a 270% growth in the number of orders. The study indicated that online sales were growing at 145% annually and it projected online retailer revenues of more than $36 billion for 1999. An earlier study conducted by Ernst & Young, before the holiday frenzy, already estimated that total revenues for online retail and consumer products for the calendar year 1999 were around $25-30 billion.

While a notable amount of positive publicity about the Internet shopping has recently appeared in the media, the number of problems encountered by online shoppers actually increased more dramatically than the sales figures. According to a poll conducted by WebAssured.com, the number of complaints filed between November 25, 1999 and January 13, 2000 was up 404% over the same period last year. Over 62% of the respondents claimed they had experienced at least one problem with an online transaction. Misrepresentation/misinformation and delivering defective products each accounted for at least 22% of all complaints. In the breakdown of types of problems occurred, delivery of a wrong item accounted for 17.2%. These kind of problems ultimately result in product returns that cause additional costs to the consumers and both costs and lost revenues to the retailers.

Presently, not all online retailers have established simple and trouble-free return procedures. Pure e-tailers such as eCost.com have no physical presence and therefore require consumers to ship back the merchandise without offering much help in the process. Even some well-known retailers such as BestBuy.com, an extension of Best Buy, do not allow consumers to return items purchased online at their physical stores. To make things worse, the return policies are not always well displayed on retailers’ websites, and customers are sometimes required an authorization prior to returning any merchandise such as in cases of Buy.com and eCost.com. Consumers may have to read through the entire return policies, including the notorious "fine print," in order to make sure they use the right procedures and that required time frames are followed. This creates additional aggravation–on top of having to return the merchandise–which all reflects in reduced customer satisfaction. The significance of an "easy return" cannot be underestimated as about half the people who have not shopped online cited the cost and hassle of returns as a significant factor for not shopping online. Moreover, a recent survey by BizRate.com, an online shopping center, found that 89% of online buyers said that return policies influenced their decision to shop with an online retailer.

When a wrong, defective, or misrepresented item was delivered to a consumer, the return process often proved uneasy. According to recent findings by PC Data Online, 30% of all consumers who returned items found the return process difficult. It is apparent that existing return procedures are inadequate and sometimes irritating. The solution, however, does not lie in forcing all online retailers to establish a "no-questions-asked" return policy and to post it clearly at the top of their websites. The entire sequence a consumer has to follow, starting from looking up the procedures on the Web and then having to make a trip to UPS or the Post Office, has to be streamlined. There is clearly a need, as well as an opportunity, for a new service company to improve the overall return process for online shoppers. As a result, the consumer satisfaction will be enhanced and it will translate into increased repeat sales for online retailers.

Market Segmentation

As stated in the previous section, the estimated online retail revenues were around $25-36 billion. Both sources providing the estimates indicated that only merchants selling physical products (books, CDs, electronics, apparel, etc.) were included in the breakdown by category. No mention was made of services such as online hotel reservations, news subscriptions, or online brokerage being included in the total figures. However, it would be advisable to use a more conservative approach when estimating the total revenues of online merchandise sales. Presented below are estimates for Internet retail sales made by National Retail Federation shortly after the 1998 holiday season.

Competition

Current Alternatives

Direct Competitors

Based on the current intelligence, there is no independent company out there specializing in a "returned merchandise" service to online consumers. No single company is known to be employing a concept of establishing a single point of presence on the Internet for consumers to claim returns. The current situation allows the new company to gain the first-mover advantage and build entry barriers for any possible new entrants.

Internal Competitors

The first competitors to the new service are the online retailers themselves. Since NoHassleReturn.com will need to strike partnerships and strategic agreements with retailers in order to offer its services, they are classified as internal competitors. Retailers may perceive that their internal return procedures are adequate and fully meet customer demands. However, the discussion under the Need Assessment section of this plan clearly indicated that there are significant drawbacks and shortcomings in the return process across the entire industry. Even companies like Amazon.com that touts a quick and easy return policy now sees its customers go to Barnes & Noble superstores to return books. Partnering with brick-and-mortar retailers may be seen as a solution by some e-tailers. However, from the consumer perspective, there still will not be a centralized location to return merchandise, no quick and easy return procedure, and no savings on shipping costs. Consumers may end up having to go from one physical retailer to another to return various items.

Online retailers may try to partner with carriers and service providers such as UPS, Mail Boxes Etc., or Rite Express. Reportedly, eBay.com is working out an agreement with Mail Boxes Etc. to appoint them as a preferred/exclusive service for product returns. eBay.com may receive rebates per shipment for directing its clients to Mail Boxes Etc., but consumers again will have little or no benefit. The standard shipping rates are applied, the choice of carriers is now limited, and online merchants are not informed about product returns ahead of time so that bad sales could be saved. With NoHassleReturn.com, at least one selling opportunity will be given to retailers while consumer is on the Web–something a partnership with a carrier cannot provide. Moreover, serving as a demand aggregator NoHassleReturn.com should be able to arrange necessary agreements and provide consumers with greatly reduced, or even free, shipping for all returned merchandise.

 Channel Competitors

Thinking in reverse to the previous paragraph, service providers such as Mail Boxes Etc. and PostNet may try to forge strategic partnerships with numerous online retailers to simplify the return process. But as it was described, online retailers will be shortchanged in overall customer satisfaction, information exchange, total costs, and additional selling opportunities. Consumers, on the other hand, will lose out on the limited number of "exclusive" carriers for particular retailers, and uniform simplicity in the return process will not be achieved. Moreover, both Mail Boxes Etc. and PostNet combined do not have sufficient physical presence in the market.

Carriers such as UPS and FedEx may try to enter the arena. Those organizations have extensive networks of facilities, experience in shipping, and a track record of quality. The U.S. Postal Service has recently started a TV advertising campaign of a service for online merchants that allows consumers to print return labels online. This is a step towards addressing the shipping end of the return problem, but it falls short of saving bad sales and creating new selling opportunities for merchants. No single shipping company can fully provide the range of benefits the proposed company can. NoHassleReturn.com will be able to arrange strategic alliances with numerous carriers and even play one against the other in negotiating rate reductions and preferential service terms for both merchants and consumers. Being a smaller company with a focus on the e-commerce community, it will also have a greater degree of flexibility in adjusting to customer needs.

Our Advantages

At NoHassleReturn.com, we feel we provide a value-added service to a variety of consumers. By having a safe and easy-to-use return service, the company benefits more people than simply the average customer.

Merchants Advantages

  • Increase revenues! NoHassleReturn.com turns the systemic problem of product returns into new selling opportunities.
  • Enhance customer satisfaction and retention with the quick and easy return process and boost repeat sales! NoHassleReturn.com provides the opportunity to instantly deal with returns, save bad sales, and turn unhappy customers into loyal patrons.
  • Improve customer service with a simple, trouble-free way to return merchandise! NoHassleReturn.com makes it easy for consumers to return products and follow return procedures.
  • Simplify the shipping hassle for consumers! NoHassleReturn.com provides the option to print a shipping label since pre-printed labels sometimes get lost or misplaced, which provides added convenience and peace of mind to consumers.
  • Improve inventory management and logistics! NoHassleReturn.com immediately alerts you when your customer initiates the return process so that you can act on it right then, not when the merchandise arrives at your door.
  • Fine-tune your internal efficiencies and product offerings! NoHassleReturn.com provides you with invaluable new data on all your product returns by customer group, product category, etc., so you can analyze your operations better.
  • Enhance your image! NoHassleReturn.com underscores your customer orientation, which you can use to promote your business.

Consumers Advantages

  • Return merchandise with ease! NoHassleReturn.com provides one centralized online location with a simple and trouble-free way to return merchandise in just a few easy steps.
  • Buy online, return online! No need to call in or email your merchant if authorization is required–NoHassleReturn.com does the communication for you.
  • No need to look up every single merchant for return policies every time! NoHassleReturn.com summarizes it for your particular item and makes sure the return time frames are followed.
  • Generate a shipping label! NoHassleReturn.com generates a shipping label for you so that you do not have to worry about misplacing the pre-printed label or spending extra time at a shipping company’s counter if the pre-printed label is not included.
  • Reduce or eliminate shipping costs! Through strategic alliances, NoHassleReturn.com reduces or completely eliminates the cost of shipping.
  • Keep track of your returns! If you would like, NoHassleReturn.com will remind you to ship the claimed item and will maintain a file of your returns for your records.

 Online Community Advantages

  • Increase awareness in the community! NoHassleReturn.com serves as a "returned merchandise credit bureau," providing discrete information to consumers on merchants and to merchants on consumers.
  • Cross reference marketing leads! NoHassleReturn.com maintains a database of purchases that help custom-target online buyers in a more efficient way.
  • Improve the overall image of the online merchant! NoHassleReturn.com enhances customer service of online merchants and overall customer satisfaction by simplifying and streamlining the return process.
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Keys to Success

Keys to Success

In order for the company to operate, a number of specific ingredients are needed. Following are things to put in place before the service can be offered.

  1. Develop a customer service & customer satisfaction software application that uses order number (of a merchandise item) and merchant’s Web address to:
    • Retrieve all pertinent information on a participating merchant.
    • Match appropriate return procedures against the returning item.
    • Present procedures to the consumer in the most concise format.
    • Provide reference to the merchant’s entire return policies if requested.
    • Inform the merchant of the entire transaction as it occurs.
    • Gain authorization from the merchant to return merchandise if needed.
    • Present the merchant’s website to consumer for selling opportunities.
    • Provide confirmation emails to the customer of the actions taking place if requested.
    • Interact with the merchant’s database for further customer details if needed.
    • Maintain a record of the transactions for the company’s own database.
  2. Develop successful relationships with online merchants to facilitate exchange of information.
  3. Develop strategic alliances with online merchants, shipping companies, and credit card issuers to negotiate reduction or elimination of the shipping costs to consumers on returned merchandise.
  4. Design, maintain, and promote a user-friendly website, the corporate trademark, that offers an easy and trouble-free merchandise return procedure for consumers.
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