News Column

Net Gains

May 2006, HISPANIC BUSINESS Magazine

Derek Reveron

Com

The revenue-generation engines of many HB 500 companies are relocating from brick & morter to Web & wire.

Across all industry sectors, companies on the Hispanic Business 500 are adopting the latest technology and using Web sites to score orders or lure customers. In 2005, 400 companies on the 500 depended on a Web site to generate some portion of their revenues, up from 66 in 1996.

Many of these companies are using multimedia advertising, including television, radio, and print as well as regular and e-mail to drive their Web-based revenue growth. Strategies range from targeted promotions and incentives to new business partnerships.

Totally "e"

TradeStation Securities Inc., founded by brothers and co-CEOs William and Ralph Cruz, leads the way. The Plantation, Florida-based company which sells sophisticated online securities trading platforms to traders and "serious investors" earned nearly all its 2004 revenue of $71.8 million via the Internet (see chart, "2006 Top e-Business Companies," which ranks the top 20 Hispanic Business 500 companies by percent of revenues earned online in 2004).

But a Web-based sales presence doesn't stand on its own. TradeStation helped drive customers to its state-of-the-art site by spending $3.8 million on advertising in 2005, up from $2.7 million in 2004, according to the company's 2005 financial reports, which add that revenues climbed about 35 percent in 2005, to $97 million.

The company also uses telephone call centers, direct mail, and e-mail to attract customers to its Web site. "The e-mail blasts are pretty significant. It's an important part of our marketing strategy," says President and COO Salomon Sredni.

Investing in this multimedia push seems to be working. TradeStation reported 23,973 trading accounts at the end of 2005, up 31 percent from the previous year. The average TradeStation account trades about 530 times per year, while the average trade frequency for Ameritrade and E*Trade accounts is about 10 times per year, according to annual financial reports.

Other top-ranking Hispanic e-commerce businesses include:
• 7Search.com, a Chicago-based pay-per-click advertising and affiliate network that generated 100 percent of its 2004 revenues of $6.9 million online.
•Fulfillment Corporation of America, based in Portland, Oregon, which provides order processing and inventory management services, and earned 98 percent of its $9.2 million 2004 revenue via the Internet.
•Miami-based Alienware Corp., which sells gaming desktops, media centers, notebooks, and accessories.

In 2004, Alienware reported earning 75 percent of its total revenue of $112.4 million online, or $84.3 million. This qualifies the company as the top online revenue generator among the top 20.

Measures of Marketing Punch

Alienware's marketing strategy employs technology to target mostly males, generally between the ages of 20 and 30. E-mail blasts and the Alienware Insider, an online newsletter, reach more than a million people, says Mark Vena, senior vice-president for marketing. Customers who click on certain products
but don't buy them receive e-mails about those items.

A call center in Costa Rica also solicits customers and steers them to the Web site. Alienware advertises with banners on CNET, Yahoo!, and Google, and also has online partnerships with brick-and-mortar retailers. For example, consumers who click on the Alienware logo on Circuit City's Web site can see its products and prices.

Mr. Vena cites two measures of success. Alienware's Web site gets 400,000 to 500,000 visitors a day. And the company earns average sales of 60 to 70 cents per e-mail, four times better than the usual 15 cents per e-mail for online marketers.

Up the Growth Curve

Many of the top e-commerce companies say they are now overhauling their e-business operations to make them still bigger contributors to sales.

For example, Office Solutions Business Products and Services Inc., based in Yorba Linda, California, wants to increase the percentage of the company's sales that come via the Internet (around 25 percent in 2004 and 30 percent in 2005, according to the company) to 80 percent within the coming 18 months. Currently, Office Solutions generates about 30 percent of its sales via telephone and 30 percent via fax. Convincing more customers to order online will cut costs and increase efficiency, says CEO Robert Mairena.

To handle the growing number of online customers it intends to attract, Office Solutions is converting its e-commerce site to an SAP CRM system that will analyze customer purchasing patterns. For example: A customer buys a Hewlett-Packard printer and print cartridges but not paper. The customer might then receive an e-mail promoting a special offer for paper. Office Solutions also plans to offer more special online promotions and incentives such as rebates and discounts. "Customers will get the deals only if they do business online, and they will be aware of them only if they do business online," says Mr. Mairena.
Holman's Inc., an Albuquerque-based supplier of survey and engineering equipment and technology, is also stepping up efforts to attract more online customers.

As of 2004, e-commerce sales accounted for about 50 percent of the company's revenue. To date, Holman's has attracted customers through direct mail and advertisements in trade publications, and hired a consultant to work with Google to improve the company's rankings in search results.

But Holman's will begin this summer offering more incentives to encourage greater numbers of customers to do business on its Web site. The incentives will include free shipping, faster service, promotional items, and discounts.

Holman's also plans to improve its Web site to make it even easier to use. To solicit suggestions for improvements, the company is expanding its customer focus groups to include small businesses with 5 to 10 employees. "The easier the Web site is to use to procure products, the more we will see an increase in business volume," says CEO A. T. Trujillo.

Both Bricks and Clicks

Hispanic brick-and-mortar sales and service companies have been at the forefront in adopting the Internet as a sales and marketing tool.

In the auto industry, for example, Tucson, Arizona-based All Star Auto Exchange LLC earned 70 percent of its $5.7 million in 2004 sales via the Internet. The independent auto dealer's Web site is a virtual showroom that encourages visitors to apply for credit online. All Star's Web site accounts for about 20 percent of its Web driven sales and leads purchased from Internet companies such as AutoTrader.com and Car.com account for the remaining 80 percent. The leads cost $20 to $25 each.

The cost of leads is a big reason for All Star's decision to increase the number of leads generated from its own Web site. The company buys 10- or 15-second television and radio spots asking customers to visit its Web site. Some advertisements urge consumers to "shop in your pajamas." All Star also buys banners on a University of Arizona Web site for sports fans.

Unlike many e-marketers, All Star doesn't send out e-mail blasts. "I think they are abrasive. I send information when people request it and thank-you letters," says CEO Edmund Marquez.



Source: HISPANIC BUSINESS Magazine and Hispanicbusiness.com, Copyright (c) 2006 All Rights reserved.


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