Byte by Byte

By Kevin M. Smith: The Gazette
Date 2/9/06

Maryland companies large and small are taking advantage of the booming online retail market popularized by such giants as Amazon.com and eBay — though none is in their class.
Fighting for a piece of the growing Internet retail pie are a series of Web sites that provide space for businesses to reach — so the merchants hope — millions of buyers, sites such as shopmarylandnow.com, mammothmall.com, frederick.com and searchmaryland.com.

These sites are designed to help retailers reach a broader client base, for a fee. The sites, and other regional ones such as bethlehempaonline.com in Pennsylvania and etravelmaine.com in Maine, typically offer advertising rates for three-, six- and 12-month periods. Often, however, the sites arrange for affiliate marketing instead of charging a fee, with the site collecting a percentage off any sale made through it.

On the other hand, there are small businesses such as Comfort1st.com and fredneck.com that do their own online marketing and selling — and have experienced growing success.

What has happened, according to industry officials, is that out of the dot-com bust has come an online business model more reflective of the general business community, where smaller retailers are experiencing steady, rather than spectacular, growth, with their online presence a big factor.

Tracking the business

E-commerce sales may be a drop in the nation’s retail bucket, but it’s making a bigger splash every year.

E-commerce revenues in the third quarter of 2005 totaled $22.3 billion, according to U.S. Census Bureau data. Those figures are adjusted for seasonal variation and holiday and trading-day differences, but not for price changes.

Total retail sales for the third quarter were $957.9 billion; e-commerce accounted for about 2 percent of that total.

But while overall sales were up a robust 8.5 percent from the prior-year quarter, online sales grew an explosive 26.7 percent.

Online retail sales in the United States are expected to grow just over 20 percent annually until 2008, then slow a bit, reaching about $200 billion in 2010, according to a report last year by FTI of New York, a financial consulting company.

The growth has helped some of the big dogs, such as eBay and Amazon.com, finally turn a profit after years of losses, according to company information.

‘‘It’s growing, without a doubt,” Thomas Saquella, president of the Maryland Retailers Association, said of online retail.

While Saquella said Maryland does not track online retail statistics, he suspects the state’s market growth mirrors the census data.

Retailers use different online methods, but the benefits for all are similar, said Peter Morici, an economics professor at the University of Maryland, College Park.

‘‘Internet retailers enjoy a number of advantages,” he said, ‘‘In addition to saving on gasoline and hassle, Internet retailers offer greater variety and depth of inventory, the opportunity to clearly compare alternative products, and better price transparency.

Brick-and-mortar retailers have yet to offer good, tangible responses to these challenges,” Morici said. ‘‘These advantages in shopping convenience, information and pricing will loom ever larger as more and more Internet-savvy young people enjoy increased buying power.”

Like Saquella, Morici thinks Maryland’s e-commerce sector is growing about as fast as the nation’s.

Cultivating online growth

While searchmaryland.com provides only links to its clients’ Web sites, shopmarylandnow.com and mammothmall.com represent themselves as resources for shoppers.

Shopmarylandnow.com offers contests, coupons and specials, plus links to shops and other sites such as mammothmall.com. Mammothmall.com claims to provide access to more than 500 retailers. Mammothmall.com also includes a consumer resource page that has links to anti-virus and anti-spyware Web sites, plus the Better Business Bureau and U.S. Consumer Product Safety Commission.

Mammothmall.com, headquartered in Rockville, has been in business since 1998, according to its founder, Joseph Lucas. Lucas, a Web site designer by trade, created the site in his free time.

‘‘The idea, during the early days, was that people were used to going to shopping malls,” Lucas said. He wanted to create a site that would eliminate the need to search online for products on a store-by-store and item-by-item basis.

While Lucas’ intent was to target stores in the Washington, D.C., metropolitan region, most of the retailers using his site have been from New York, California and Florida, he said.

Only a few shops pay the rates listed on the Mammoth Mall Web site, which start as low as $300 for six months, Lucas said. The others work on an affiliate marketing deal, with Lucas making a commission from sales made via the site.

Searchmaryland.com is the brainchild of Ephricon Web Marketing of Baltimore. It was created by Ephricon founder Jon Payne ‘‘to help gain free and affordable exposure for local businesses and their Web sites, as well as to allow residents of Maryland to easily locate local businesses,” according to information on its Web site. The site hosts roughly 250 business sites from around the state, he said. Down the road, Payne said, he may start charging retailers, but he has no plans to do so.

Payne said he launched the site in late 2004, about 18 months after establishing Ephricon, to fill a niche: helping consumers find local retailers.

‘‘On the Internet, there’s probably at least several dozen different directories,” he said. ‘‘There are a lot of retail directories, [but] there’s not that many regional directories. Sometimes people just want to use the Internet to find the shop down the street.”

The key, of course, is higher rankings on popular search engines, Payne said.

Ephricon’s revenues have grown five-fold since it was founded, said Payne, who declined to provide specifics.

‘‘We’re a small firm, profitable firm that’s doing well, but we want to stay the size we are,” he said.

G3, host of shopmarylandnow.com, was established in 1984 as Graphics III Advertising Inc. In 1996, G3 Group was created as a division to deal with the burgeoning Internet market. The company, known as G3 Group, launched shopmarylandnow.com in July 2002. The site bills itself as ‘‘your local guide to everything in Maryland.” Calls to G3 for comment were not returned.

A more locally oriented Web site is Frederick.com, operated by270net Technologies Inc., an Internet technologies and Web design company in New Market, and AreaGuides of Frederick. Frederick.com advertisers, or sponsors, have a Web page and the idea is to direct consumers to the sponsors’ business.

One retailer using both searchmaryland.com and Frederick.com is Jennifer Guenther, owner of Enkore Kids of Frederick, which sells new and used children’s items such as clothes, toys and videos. She said the store has always had a Web presence, but she began viewing the online component as an important part of her business only in the last two years.

Guenther said she pays $450 per year to have an advertisement and link on Frederick.com.

She said she typically gets two hits per month that originated at searchmaryland.com. Conversely, ‘‘Frederick.com does really well for me,” Guenther said. ‘‘I typically get at least 100 hits per month.”