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Internet Office Coffee Authority Details E-Commerce Challenges

Posted On: 11/21/2016

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TAGS: vending, office coffee service, online OCS sales, online coffee sales, office supply companies, Ken Shea, Kirby Newbury, DiscountCoffee.com, Discount Coffee, Chip Potter

"Many operators -- like me -- regard office supply companies as remoras," said Ken Shea, founder of Ken Shea & Associates LLC (St. Charles, MO). "They're parasites on a viable organization. As a 'direct store delivery' operator, I hated to see someone else selling products into my accounts." With that welcome, Shea introduced Kirby Newbury of DiscountCoffee.com (St. Peters, MO). Newbury's company has pioneered the sale of coffee service products and accessories over the Internet. This kind of service enables an operator's client to purchase compatible supplies from someone else, with e-commerce convenience.

For that reason, he wore a boxer's warm-up robe as he took the podium at the National Automatic Merchandising Association's 2015 Coffee, Tea and Water conference in National Harbor, MD, to discuss "How to Use the Internet to Grow Your Business." The session was introduced by Chip Potter, NAMA's vice-president, communications and information services.

Kirby Newbury, Ken Shea, Chip Potter
PHOTOS: Shown, from left, are Kirby Newbury, Ken Shea and Chip Potter

Newbury recalled that, in 1996, he saw the Internet as a communications medium that could enable an OCS operator to regain the small, hard-to-reach clientele that had played an important role in the earliest days of coffee service. "I thought we would tell those small, often rural accounts about our products -- 'build it, and they will come' -- and they would buy from us. But they didn't." It took him six months to get two customers, one rural and one metropolitan.

"In the 1990s, the Internet was slow, and everyone used the Yellow Pages for shopping," Newbury said. "Sure, we now had the ability to sell nationally and internationally; but we got two accounts in six months."

Shea observed that the Internet has been vastly improved as a sales medium by the development of fast, practical e-commerce services, and has enabled operators to develop a Web presence. He asked Newbury how those innovations have affected the relevance of online selling to office refreshment services.

"Well: we were wrong about one thing," Newbury replied. "We thought that the entry level for e-commerce would get lower and it would get easier. But it's not," he emphasized. "It's gotten more complex. The Internet never sleeps, so you get more home customers, not just commercial ones. But it's complicated."

"What does it cost to get started in Internet sales?" Shea asked.

"Whatever your budget is, you'll spend more," the online pioneer responded. "You'll have a lot of people trying to sell you better rankings; e-commerce consultants are a dime a dozen, and they'll lie to you as often as not."

"But there are off-the-shelf tools available," Shea countered.

"Yes, there are," Newbury agreed. "And they work, but what you get is a 'cookie-cutter' website. You've got to be committed."

Once he figured this out, he went on to create an "Internet coffee service." It offers a wider product mix than most "brick and mortar" operations can provide, and it can be more aggressive, the speaker reported. "A 'DSD' operator won't carry every one of 10 flavors, but we will. Millennials want choice. National brands are selling direct to your customers -- their URLs are on every package you deliver."

Online Security

Shea asked about the security issues that online merchants confront.

"There's a lot of security expertise available in the area of online financial transactions," Newbury replied. "Use it! As an Internet operator, you don't just sell within a 50-mile radius. We're PCI-compliant, and we mean it. No paper leaves our building unless it's shredded. We pay about 3% to the banks and other financial service providers for security; don't skimp on this. If someone steals your card and buys from us, you're not the loser -- we are."

"Can you describe 'cyber-squatters'?" Shea asked.

"Who here has a website that's used as an Internet business card?" Newbury replied. "How many of you do e-commerce as well? I advise you: before you get into e-commerce, ask yourself why. Do you have a toll-free number? Do you offer 'live chat'? There are a lot of lonely people out there.

"Now, suppose you get a URL for your Kute Koffee: the cyber-squatter registers one for Cute Coffee," the veteran online retailer continued. "Whenever someone clicks on Cute Coffee and downloads the landing page, the inquiry will be sent to you -- and will cost you $1." He urged operators to select a ".com" as the top-level domain label -- "and remember that there are a lot of thieves out there. Be proactive." It's also important to be aware of the ramifications of intellectual property law, Newbury continued. "I made a mistake once: I took an image and used it. And the copyright infraction cost us $50,000."

Shea asked Newbury how an online coffee service handles customer service.

"I know: 'Service is part of our name' and so forth; it's become a cliché," the industry veteran replied. "But often it's not; your route driver has a great deal to do with that. We know that the UPS driver is going to drop the box at the address, and do no more. A route driver might do the same thing. And our service is to give the client wider choice."

"You're right about drivers," Shea agreed. "As a DSD operator, the worst problem we faced was that we actually had that '10th flavor' available, but our driver didn't tell the client.

"What would you do to build the ticket, and to maintain contact with your customers?" he asked.

"Right; we don't have the eyeball-to-eyeball opportunity," Newbury explained. "So we rely on the 'touchpoints' that visitors use to navigate our site. And every invoice we send out includes a sales message -- the person who opens that invoice probably is the location decision-maker."

Compartmentalizing

Newbury also recommended that operators who launch an Internet coffee business do so under a different company name. "You put your existing business at risk when you venture online," he warned. "Remember that the Internet is very price-sensitive because it's price transparent."

Another option, he added, is to create a secure and a public website: "The secure one is for your customers only; the public one is for everybody else."

Shipping once was a familiar subject to coffee service operators, but as the industry has shifted away from common carrier to company-owned vehicles, it may have lost touch with the subject. Newbury emphasized that the whole shipping model changed early in 2015, when the U.S. Postal Service, United Parcel and Federal Express adopted new criteria based not on the package's weight alone, but on the result of a calculation made by applying a "divisor" to its weight and its dimensions.

"You need to know about that divisor," Newbury stressed. "You have a contract with your shipper, but the shipper won't tell you what the divisor is. However, there are expert consultants who will tell you, and who can advise you on how to negotiate a better rate."

An audience member asked Newbury about using a common carrier for temperature-sensitive products like chocolate.

"We'd like to do it, if we could figure out how," the e-commerce expert replied.

Shea inquired about the tax implications of selling coffee online to a widely dispersed customer base.

"If we're not physically present in a state, we don't have to collect that state's sales tax," the speaker said. "This will change as soon as the politicians decide how to divvy up the revenue."

"You have no equipment in the field?" Shea asked.

"We do sell a small brewer; but generally, no; we rely on your equipment," Newbury quipped.

"Are you getting requests for biodegradeable products and things like that?" another audience member wondered.

"Yes, we are; mostly from the Coasts," Newbury told him.

"How much do you spend on search engine optimization?" a third operator wanted to know.

"I don't know," Newbury admitted. "It fluctuates: it can be 5% or it could be 20%. We're at the low end of that; we stress organic search, rather than paying for searches. The key is to optimize your content; be original. Swiss Miss hot chocolate is what it is; how do you add romance -- describe it in a way that will build interest and add value, so those algorithms will recognize it as relevant?"

He emphasized to route operators that "You have a better opportunity to sell than we do. If your customers buy from us, you've let them down. Remember, too, that we have costs you don't have. Also, we have to be very sensitive to our suppliers' package graphics and labeling. Watch this; be sure to use current images and text."