The Maritime Trading Company

In February 1999, Kent Groves sat in a coffee shop thinking about his company's new site on the World Wide Web. As president of Maritime Trading Company, a small business he started in 1993, he still made most of the decisions for the company.

Maritime Trading had had a Web site since 1995. Until recently, there had been no real strategy for the site. In 1995, some friends of Kent's, who had developed skills in Web site development, offered to create one for MTC for little cost. Kent's attitude toward this was "let's throw it up and see what happens." From that time until the end of 1997, co-op students from a local university maintained it. The only purpose of the site was to be an on-line extension of the company's catalogue, giving people using the Internet access to the products.

In November 1998, Kent had the site redesigned to appear more professional and include complete, secure on-line ordering. He wanted to entice people to visit and order on-line. Kent wondered how to both draw traffic to the Web site and encourage customers to come back. His goal was to provide the most interactive and secure on-line shopping experience in Atlantic Canada.

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This case was prepared by Martha Lawrence and Dr. Shelley MacDougall of Acadia University as a basis for classroom discussion, and isnot meant to illustrate either effective or ineffective management. Copyright © 2000, the Acadia Institute of Case Studies. Reproduction of this case is allowed without permission for educational purposes, but all such reproduction must acknowledge the copyright. This permission does not include publication.

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Company Background

Maritime Trading began as a mail-order company specializing in foods and consumables unique to Nova Scotia. Its first catalogue was published in 1993 and products were only marketed in Canada at that time. Between 1993 and 1999, new products were added and subsequent versions of the catalogue were produced. See Exhibit 1 provides a synopsis of the company's development.

MTC had been keeping track of its customers and sales in a database for several years. Although the company had customers from all walks of life, the typical customer had remained the same. Women in their late 30s to 50s, with considerable disposable income, were the greatest consumers of the company's products. When it came to mail-order sales, this typical customer was generally restricted from shopping in person either by geography or time constraints. Maritime Trading had never done very much prospecting for new business; eighty percent of its business had come from repeat customers over the last two years.

The company broke even in 1998. Kent felt this was appropriate, "It takes five years to build a critical mass in a direct-to-consumer venue." Maritime Trading had moved away from just marketing its products to the rest of Canada. Its new slogan, "Delivering Atlantic Canada to the World," clearly expressed its new scope.

Competition

Maritime Trading was in the gift business, selling predominantly via mail-order. The competition was almost any gift store and catalogue, anywhere. Three other organizations promoted regional Canadian products by mail-order and the World Wide Web: Beautiful BC, Canadian Geographic and Images of Canada. Kent considered these three organizations as competition only in only the loosest sense of the word.

Although several entrepreneurs had tried, no one had been successful in creating direct competition for MTC in the sale of Atlantic Canadian products. Kent believed these ventures did not have enough capital to be successful and did not anticipate any threats to his business in the near future.

Distribution Channels

Maritime Trading Company was a retailer and wholesale distributor for many small Maritime manufacturers and several medium-sized companies. It sold products from a retail location, a catalogue and the Web site. Orders from the catalogue and Web site were received by mail, fax or telephone. Products were also sold wholesale to other retail outlets.

Retail Outlet The peak sales period for the retail store was August and September, the prime tourist season in Halifax. Approximately seventy-five percent of the store's sales came from visitors to the area. The VP of Retail Marketing, Stephen Simpson, was responsible for the development of retail operations. Stephen, aged thirty-six, had joined Maritime Trading Company from a position as a general manager in automobile sales. The level of opportunity for retail expansion was considered quite high and a major goal was to open a retail location in Boston within three years.

Kent preferred to spend his time with the mail-order side of the company. Although he preferred to leave it up to Stephen, Kent realized retail was an integral part of mail-order sales. Tourists coming into the store would be encouraged by the staff to register to receive a catalogue. The retail presence of Maritime Trading directly drove mail-order sales.

Catalogue

In 1998, twenty percent of mail-order sales came from the U.S., while less than three percent came from the Atlantic Region of Canada. Seventy-seven percent of mail-order sales were from customers across the rest of Canada.

November was the busiest month for the mail-order business. This was the result of past visitors and Atlantic Canadians buying holiday gifts. The catalogue had developed greatly over the past few years and was currently a full format design (8.5" x 11") with twenty-four full-colour pages.

Wholesale

Kent was constantly searching for products to broaden the company's offering, especially for wholesale distribution, which made up approximately fifteen percent of the company's sales. The challenge of this process was to find products that had sufficient margin for wholesaling to be worthwhile.

Wholesale customers included Alder's, a company that owned gift shops in several Maritime airports and Clearwater Fine Foods. Kent saw the wholesale business as a definite growth area. However, the most popular high-margin products were fish products, which were sometimes in short supply. Kent was wary of sales growing to the point where he would be unable to meet the demand of his existing customers.

Web site

Kent viewed electronic commerce (the sale of products and services on-line) as the future of Maritime Trading Company. With the new Web site in place, Kent was intent on increasing sales with the use of Internet technology. Kent did not see the Web site as a replacement for the current distribution channels but an extension of them. His focus was on an integrated marketing strategy, allowing the customer to order products via any desired channel. He was afraid that if Maritime Trading wasn't offering its products on the Web, some customers might be dissuaded from buying.

 

Maritime Trading Company on the World Wide Web

The Web site had evolved since 1995. Initially, it had been just an experiment. It was inexpensive and entertaining to see if a few people would fill out the on-line order form or print it and fax it in. It was completely insecure, with no protection for those who entered their credit card numbers on-line. Orders came occasionally but far from regularly.

At the time, the company did not have its own domain name. The Uniform Resource Locator (URL) or Web site address was long and virtually impossible for a customer to remember. In 1995, the site was linked to the sites of a few of Maritime Trading Company's suppliers.

In 1996 and 1997, information management co-op students from a local university were hired to redesign and maintain the Web site. In 1996, Maritime Trading acquired the domain name maritimetrading.com. The site, shown in Exhibit 2, was largely unchanged until December 1998. By this time, Kent was no longer satisfied with the site. He felt it was too static; it did not make use of the interactive aspect of the Internet medium. He contracted Icom Alliance to redesign the site. Icom was a small, Halifax-based, information technology services company specializing in electronic commerce and Web-enabled business solutions. The new site is shown in Exhibit 3.

Maritime Trading agreed to pay Icom Alliance $2,500 for the initial design and a floating percentage of gross on-line sales (twelve and a half percent, on average). These payment terms were not typical but they involved a far lower up-front cost than the standard payment terms. Under standard terms, a site like the new maritimetrading.com would have a start-up cost of approximately $10,000 and monthly updating fees of $150. Kent thought that he was getting a better deal with Icom Alliance. Furthermore, he knew the Icom managers personally and felt comfortable doing business with them.

The Future of maritimetrading.com

Kent felt he had some good ideas about what the new Web site could accomplish. He believed that his own three-step marketing strategy for the company -- acquisition, retention and extension -- was applicable to the Web site as well. Acquisition meant getting customers to visit the site for the first time. Retention referred to keeping the customer coming back. The third step, extension, was motivating customers to buy across a broad range of product offerings on the Web site.

Kent viewed this three-step process as the building of relationships with customers. He felt that relationship building was the only way to make the new Web site successful. His ultimate goal, of course, was to increase sales above and beyond what the catalogue brought in. In the meantime, Kent wanted to get customers comfortable with the Web as a shopping medium and provide a place where they could get useful and current information about Maritime Trading and its products. He was not exactly sure how he would know if the Web site was generating sales that would have come in from the catalogue anyway.

Site Promotion

In 1999, the URL was promoted on all business cards, letterhead, envelopes and gift cards. It was also printed on all private labels, inserts and hang-tags. The address was published on every second page of the general merchandise catalogue and in the music catalogue. On-line promotion included links from suppliers, promotion by Icom Alliance and targeted e-mail. Kent's goal was to incur little or no additional promotional costs for the Web site.

In the past, Kent supported the idea of registering with search engines but felt quite differently about it by 1999. Although it was free to register with search engines, he wanted to avoid "getting lost in the sea" of search engine results. "What if in two years the whole search engine thing crashes? Then what are you left with?" Kent reasoned. He felt strongly that search engines were a thing of the past.

Kent also felt uneasy about using on-line promotion such as links from other sites and banner ads. He didn't want very many links or any ads on the Maritime Trading site because he thought it would lead people away. He knew from searching the Internet himself that after going from link to link, it was difficult to remember what pages had been visited. Besides having links on the pages of a few suppliers and on Icom Alliance's site, there were not any other sites on the Web that included links to maritimetrading.com.

It was for these reasons Kent strongly felt traditional promotion was the way to go for the new Web site. He didn't want to pull customers onto the site who had never heard of Maritime Trading. He wanted customers to see the URL on products and in the catalogues and then go to the site. This way, they would be familiar with Maritime Trading before they arrived at the Web site.

Keeping people coming back was part of the retention step of the marketing strategy. Kent was still wondering how to retain customers effectively. In order to make a purchase or enter a contest on the Web site, the customer had to fill out an on-line registration form, which included his or her e-mail address. This gave Maritime Trading a way to make contact at a later date and build a relationship.

The site also used "cookies" or pieces of information saved on the visitor's computer that allowed the company to record how often a particular computer accessed the site and what kind of pages the visitor looked at while there.

Cookies and unsolicited e-mail were a current issue of debate. The Canadian government was reviewing bill C-54, "an act to support and promote electronic commerce by protecting personal information that is collected, used or disclosed, in certain circumstances… " This bill meant banning the use of information collected on-line for any purpose other than what the customer intended.

It was clear that any steps taken in the use of cookies and e-mail would have to be careful ones. The permission of the customer was obviously important.

Goals

In January 1999, the new site had 10,000 visits. Kent hoped to have 50,000 visits per month by the end of 1999. Sales on the old site had been roughly $500 per week. The new goal was to have weekly sales of $1,000-2,000 by the end of the year.

Kent didn't have figures on the length of the average visit but he knew that longer visits meant more interest and more time for a relationship to be built. Catalogue requests had been fairly good in the past since they did not require a credit card number to be given on-line. However, Kent hoped for more activity with the new site. Kent felt these goals were important as consumers became more comfortable with the idea of electronic commerce. He anticipated sales would become a significant measure of site effectiveness in the long term.

Gathering his Thoughts

As Kent sat in the coffee shop, he began to organize his thoughts about the Web site. Although his off-line promotion of the site was quite extensive, he wondered if there was anything he could do to make it more effective on the shoestring budget he had for Web site promotion. The site had to be profitable in order to be worthwhile -- it was already quite expensive and he needed cost-effective ideas. Kent was pretty sure off-line promotion was the way to go but was a bit concerned after hearing that someone wanting to visit the site could not find it because they had not been exposed to the promotion of the URL.

Kent felt building a relationship on-line should be the main focus of the Web site. He was not sure how he could do this most effectively. The new site had cookies and the database of customers was growing. He really wanted to figure out how to build strong, lasting relationships with on-line customers. He knew he needed to give them something of value in order to keep them coming back.

Kent also realized that e-business could be more that just a Web site but he wasn't exactly sure what else he could do. The office used accounting software for invoices and inventory management and much of the internal communication was done using e-mail. Kent was puzzled as to how he could use e-business when dealing with suppliers, since only around five percent even had a fax machine, let alone Web-based ordering systems.

Kent was meeting with Icom Alliance next week. He had some thinking to do. He flagged down a waiter, "Can I get a refill on this coffee?"

Exhibit 1 - Synopsis of MTC's Development

Year New Products Other developments Sales
1993 Gift boxes, jams, maple products, fruite syrups, fruitcake, hand-made soap, herbal oils and vinegars, balsam Christmas Wreaths First catalogue published N/A
1994 Clothing, dried flowers, coffee, oatcakes, lobster pate Retail store opened in Halifax, second catalogue produced N/A
1995 More titles of East Coast Music

More emphasis on Canadian East Coast music vendor kiosk on Halifax waterfront, East Coast music catalogue produced, expansion of retail store, third catalogue produced, started to explore the Internet

$350,000
1996 Toys, books, home decor items, King Cole tea, Gonong chocolates, live lobster Retail expansion continued, forth catalogue published, hired co-op student to do new web site design $500,000
1997   Full-page colour catalogue published, more advanced web site; all products on-line, expanded into wholesale $700,000
1998 Jewellery, art, smoked salmon, maply syrup Sixth catalogue produced, relationship with Icom Alliance began, new web site launched in December $750,000

 

Exhibit 2 - Former Web Site

Exhibit 3 - New Web Site