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Consumer Investigation: Who makes money on eCommerce websites - eBay, StoresOnLine, or you?



http://www.brightsideofnews.com


We all dream of an easy, laid back means of getting rich. Items are placed on eBay by individuals who believe those postings will line their pockets with coins. The more ambitious ones go instead for their own website where they hope to sell their warehouse full of goods. Others use the "drop ship" method, by being a go-between selling products manufactured and warehoused by well-known third parties. Who is raking in the bucks for these supposed vehicles to riches?
 
Certainly, eBay is making more money than its on-line sellers. The company first quarter revenue of $2.2 billion. Its stock hovers around $24, but dipped to almost $10 a year ago. eBay is the most visited e-commerce site in the US, but how many of those visits filled the wallets of the individual sellers?

The keys to profitable on-line sales are a good website, a desirable product, a competitive price, facilitated purchases, and a low overhead. However, even the successful eBay company is in the middle of a three year restructuring, which involves trying to make its site easier and cheaper to use. Part of the restructure was the sale of Skype last year, but they are holding on to PayPal, the ubiquitous eCommerce payment system. eBay obviously profits from Internet transactions on sites other than its own.


StoresOnLine sales pitch...

You can establish a presence on the Internet with your own eCommerce website. There are several ways to accomplish this, some easier than others. One company, iMergent, seems to make it easy. They provide eCommerce software, web site development, web hosting and search engine optimization tools for businesses and entrepreneurs. Not as famous as eBay, in fact you might say they are infamous due to the many legal problems related to both fair business practices, and securities issues. iMergent's stock sold today for $6.30, within cents of what it was last April, following peaks and valleys.

A subsidiary of iMergent, StoresOnLine, holds seminars inviting hopeful, small business wanna be's to purchase products and services that allegedly enable them to set up their own eCommerce website. It all sounds so good. However, over the years the company has been sued by several states as well as Australia under the adage, "If it sounds too good to be true, it probably is." A StoresOnLine presentation, facilitated by illustrative slides, some of which are included here, found BSN* reporters in attendance. Unfavorable reviews and lawsuit settlements  certainly dented the reputation. We agreed that the company appears to have cleaned up its act, but one must ask: "Who do you believe?"

Going back to 2005, stockholders brought a class action suit alleging that iMergent had represented itself to the investment community as a successful software company while concealing that its sales practices violated the laws of many of the states it operated in and the full extent of the uncollectibility of its installment contracts with its clients, many of which did not meet the Company's own credit criteria, and had thereby inflated the price of the company's securities.

In all fairness to StoresOnLine, complaints and settlements have been minor in the grand scheme of things, and caused mostly because the public doesn't adhere to the practice of "Caveat Emptor." For example, in 2003, the State of Washington executed a cease and desist order related to its Business Opportunity Fraud Act. It was in regard to registration, business opportunity contracts, and disclosure indicating in the complaint that the company's contract failed to state "You are entitled to a copy of this contract at the time you sign it" and that the contract "failed to notify the prospective purchaser that he has seven days to cancel the contract for any reason."

A year ago, Connecticut's Attorney General settled allegations that the company's online businesses made exaggerated and deceptive claims regarding its virtual storefronts. The case resulted in only $130.000 with restitution to as few as 10-12 consumers.

Australia tried to bar StoresOnLine from doing business in that country. The Australian Competition and Consumer Commission accused them of deceptive sales practices. The suit was settled and StoresOnLine is doing business under temporary orders for the next two years.

Having attended both the free-lunch, free-MP3, introductory seminar, as well as paying for and going to the fairly inexpensive full day "training / sales pitch" seminar, I have mixed feelings about StoresOnLine. The lectures were upbeat, fast-paced without time for questions from the audience, but included a fairly comprehensive workbook which covered the day's presentation. If you know little about the components of an eCommerce website, you will learn a lot, starting with a concise glossary of eCommerce terminology.

The presenters were professional and personable, with a positive attitude. They know how to market, inspire, encourage, and close the deal, with only subtle pressure applied, similar to what any one-call-close salesperson is taught - create a sense of immediacy (special price today only), answer all objections in advance (purchase price and monthly fees stated right up front), reassure the buyer that they are making the right decision, try to up-sell, and create value in the buyer's mind that offsets the cost.

Their pitch is that they have all the pieces of the puzzle to make a website successful, all for one price, all integrated from one supplier. They provide the website, site design, and research tools to discern which products are most sought after, to determine most searched keywords, all touted to help get your site on the first page of most search engines. They also provide analysis tools to see how your site is doing, what is driving people to your site, plus the ability to process and track sales, and to keep in touch with customers.

In their defense, I'd say StoresOnLine has learned its lesson from past complaints and law suits. The presenters cover ALL the bases of truth in advertising. For example, as simple as it may seem, they told us you need a computer, one with a high speed connection to the Internet if you want to do business on line. You will need a merchant account to accept credit cards. With a small jab at eBay, they said if you only have PayPal, you look like small potatoes. They explained that you will want to get a VeriSign certificate to reassure your customers it is safe to do business with you. A separate price of over $2,000 for VeriSign was quoted (to illustrate value), but they said it is included in their Pro package.

We were told that StoresOnLine "provides tools, resources, customer support. It is not a get rich quick scheme; it is not a business in a box. You have responsibility for your own success. Results depend on your efforts in promoting your site." We were told that StoresOnLine will show you how to make money, but YOU have to do the work.

Their top of the line program - called Pro - stands for "Promotion" and that was what the day was all about. Their bare bones version is called Express. A half hour into the session, all the pricing was laid out and the differences explained. A packet given out at the two-hour introductory presentation to those who paid to attend their following day-long seminar included a seven page Disclosures Required by California Law handout. It also listed the prices, the service provided, and the commission structure for their sales consultants. The officers' backgrounds were noted, and legal actions against the company with outcomes, such as the Assurance of Voluntary Compliance in Oregon where they agreed "not to misrepresent the ease of the software." To which I can only say: "Duh". What software doesn't tout itself as "easy to use," and how many of those companies have been sued for that reason?

You'll find many older, and some new, on-line comments about what a 'rip off' the StoresOnLine program is. My feeling is if you go into something with stars in your eyes, instead of with your eyes wide open, no matter how many disclaimers you are presented with, all you can see are dollar signs fueled by your own high hopes.

I was amazed when talking to one woman who purchased before the seminar had even concluded, during her personal consultation. She had researched the doggie clothing products she wanted to sell, but admitted to not having done any research into the company that she had just written a sizeable check to. As Barnum is reputed to have said, "There's one born every minute."

The Better Business Bureau in the State of Utah rates StoresOnLine as an "F", and you know what your Mom did when you brought home a bad report card. You had to promise to improve if you were going to get off probation. That seems to be what the company is trying to do after getting their hands slapped so often. If StoresOnLine lives up to what they claim, if their support people are really paid in relation to the grades their callers give them, if their improved software works as well as touted, then if a person is realistic about the work, time, and cost required to be successful in business, they are offering a pretty good deal. Their Pro package cost thousands less than the next example of how to set up your own website that we'll present in Part 2.

Steve Mihaylo, iMergent's chief executive officer, in January 2009 noted some operating improvements: "We are working to reach more highly qualified prospects as well as limiting sales efforts in markets where we have encountered less qualified prospects due to the current economic environment. We believe these improvements will lead to improved profitability. We also believe, once the effects of these improvements have been realized, there should be a reduction in legacy complaints from customers and reviews by regulatory agencies."  [Translation: We aren't selling to stupid, poor people any more.] Ya gotta admit, an intelligent, aware buyer who has sufficient start-up capital to run a business and doesn't have unrealistic expectations should cut down on unhappy customers.

Another way to establish a business presence on the Internet is to hire a professional design firm to do it for you. That's what John Taylor, a naturopathic doctor did when he wanted to market his own line of products. Read about his Natural Wellness website's development and success in our next installment.


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