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| E-tail success: watch the pennies |
January 4, 2005 |
By Peter Wolchak
REALLY SMALL E-PAYMENTS: ONLINE RETAIL IS BUILT ON VISA, MASTERCARD AND AMEX. IF YOU BOUGHT A GIFT ONLINE THIS YEAR YOU PROBABLY USED ONE OF THEM, AND FOR THE MOST PART THEY WORK WELL.
That is, unless you’re a teenager and can’t get a card. Or if you’re simply leery about using credit online. Then etail doesn’t work too well for you. A December study from TNS Canadian Facts found 10 per cent of online Canadians fear credit-card fraud.
And then there are retailers. The credit and credit processing companies charge a fee on every transaction.
This bite out of a $2,000 purchase may be acceptable as an overall percentage of the sale, but what if your product only costs pennies? This is an important question for Apple, which recently launched its iTunes music store in Canada. Songs sell for $0.99 a pop, and as a percentage of that, the credit charge is significant.
For example, you download “Three women blues” by Blind Willie McTell. It costs $0.99 but Apple loses more than $0.20 of that in fees, according to Ken Gouveia, marketing director for enterprise business solutions at Bell Canada. That figure is an estimate only, as Gouveia is not privy to the specifics of Apple’s business arrangements, but it is consistent with other industry estimates.
Bell recently invested in Dexit (see story in this issue), a pre-paid micropay solution that is designed specifically for smaller transactions. For that same song purchase, a “merchant using Dexit will pay a few pennies,” said company president Renah Persofsky.
In the U.S., iTunes sells 2.7 million songs per week.
If half of those songs were paid using Dexit or a similar service at a savings of US$0.15 per transaction, Apple would make an extra US$202,500 per week in revenue.
Dexit is not planning a U.S. launch and currently no online retailers accept Dexit or any similar competitive offerings, but Persofsky is planning to pitch Apple Canada. And such schemes may be the shot in the arm Canadian e-tailing needs. According to the TNS study, 64 per cent of Canadian Internet users did not plan any online holiday-related shopping in 2004.
But maybe you don’t have $250,000: This issue’s cover story is one to dream on: building a home theatre when money is no object. But for many of us,
money is most definitely an object, so how much do you need to pony up for a decent home theatre?
Paul Bernard, the retail sales and marketing manager at Sound Designs in Toronto, suggests about $10,000 will get you a good setup, one you’ll still be happy with in six months. “There are clients who will get a 42-inch rear-projection screen for $3,000 and then pair that with video and audio that will take you up to around $7,000, so certainly you’re looking at less than $10,000.”
He warns against going too cheap, however. “You can buy a $299 theatre in-a-box and a 13-inch TV and call that a theatre, but the quality of the experience is so bad you really won’t enjoy it.”
Yahoo! stretches its brand: And speaking of home theatres, Yahoo! has launched into an offbeat new market. Piqued perhaps that Google is getting so much attention, the company just launched Yahoo!-branded products.
Through a licensing agreement with Diamond Electronics, two home-theatre systems and three DVD players are now available in the U.S., Canada and Mexico.
The home-theatre systems start at US$199 and the DVD players at US$79. It remains to be seen, though, if the Yahoo! online brand can leverage a slice of the crowded home-electronics space.
Next issue: Look for our exclusive coverage of the Branham300, Canada’s premiere ranking of tech companies.
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