eCommerce and

Don't Jump the Gun

In this negative economy, I get a lot of HR emails about layoffs and downsizing.  It is surprising how quickly companies turn to downsizing to solve their problems that relate to their bottom line.  This is the time to find efficiencies and areas of opportunity; not run for the hills and give up.  Understandably, there are times when layoffs are necessary and downsizing is a last resort, but it should not be the first thing that pops into my inbox as economic stresses increase.  Not only do they make us HR folk grow gray hair and get heartburn, they are expensive, reduce performance and diminish one of the company’s most central investments. 

I’m Going To Need You To Get Outside The Box 

In combination with other strategies throughout the company, try some efficiency tactics through the HR department.  First, reevaluate job descriptions and roles in all areas of the company.  People do their best when they are doing something they love; happiness at work is the ultimate productivity booster.  Changing a couple of employees around or even simply adjusting their scope of responsibilities to involve areas of interest can impact employee enthusiasm and create a more efficient and excited workforce.  This philosophy will not only raise the level of efficiency per employee, but will also give a much needed “fresh” look at the overall picture.  Maybe that employee in customer service has some great ideas about supply chain, but has never been given the forum to express these new and exciting thoughts.  At a time when competition is fierce and the opportunity to get ahead narrows, this tactic could produce the “out of the box” thinking a company really needs to get back on their feet and diminish the impact of the depressing economy. 

I don’t know about the rest of you but I have no idea where this week went?  This next week is special to us here at Gordian Project, as we will be celebrating the PlumberSurplus.com four year anniversary!  Time flies, whether it is just this past week or four years since PlumberSurplus.com went live.

• Google wants us to sign a petition to free the airwaves; if you are interested in signing click here.   The Houston Chronicle reports on the subject and seems to honestly try to present both sides of the argument between those who oppose what Google is trying to do and those who are for it. 
• I liked this article because I think the author did a good job of comparing two very different consumer internet companies, Blue Nile and WebMD.  What surprised me was in the very first sentence where the author referenced web 3.0.  I think I know the new buzz word for this year, as web 2.0 is soooooo 2007.  It totally reminds me of that commercial from IBM… bingo! 
• SmartBargains 1, Overstock 0 
• Is there anything that Amazon won’t do?  In my opinion, not really.  On Wednesday Amazon unveiled A9.com, their version of a Google Product Search?
• This weeks Google Olympics logos:
  

Forecasting: A Basic Process for Stabbing in the Dark

Over the last few days I’ve spent some time polishing up our financial forecasts for some interested 3rd parties.  I’m a firm believer in the value of forecasting and planning from the very earliest stages of a venture.  I do all kinds of estimating, budgeting, and forecasting for many reasons.  Sometimes I need an accurate picture of where we are, sometimes I need a conservative picture of where we will likely be in the near term, sometimes I need and exciting picture of where we could be in the longer term.  In any case, the aggregate of the analysis helps provide me with a comprehensive understanding of our business, past, present, and future.  During the refresh process I decided it may be valuable to share some basic thoughts regarding forecasting for a small business.  Although there are very sophisticated methods available to “Engineer MBA’s”, there are some real basics that I think would be beneficial to someone just starting out, and pointed in the right direction.  After all, who really wants to get into linear regression?

In general, as you walk through the accounts in your profit and loss statement you will find that some accounts are what I will call “fixed and known”, at least in the near term.  These accounts may include things like monthly lease payments, general liability premiums, or your annual California LLC fees.  The rest of the accounts are things that are generally tied to a combination of historic reality and a forward looking strategic plan.

Start with the “Fixed and Known” 

I suggest tackling the more obvious “fixed and known” accounts first.  For example, if you’re in the highest LLC fee tier then the fee isn’t going to change until it’s finally ruled unconstitutional and goes away.  Then you get a big refund check, assuming you’ve filed the right paperwork, and you can go buy a Range Rover.  Anyway, knock those easy ones out first.  Careful though, even some of these “easy” ones may need a little extra thought...  If you’re sure your office space and lease terms will accommodate your planning horizon then plug in the number.  However, if you plan to grow or move within the period, you’ll need to estimate the new “fixed and known” lease payment numbers starting at that point.  If your office space use is very flexible you may even forecast based on headcount and a standard square footage per employee.  In any case, with a little thought and consideration of your future plans you’ll be able to knock these out fairly quickly. 

Forecasting the Unknowns 

On to the tougher ones!  The revenue forecast may be the most challenging and important forecast of all.  Many times other accounts are driven by the revenue forecast.  For example, if your margin is a steady 35%, your cost of goods sold will likely be forecast at 65% of revenue, assuming the absence of early payment discounts.  The revenue forecast should incorporate your historic performance as well as future plans.  You can look at simple sales dollars, customer acquisition, order generation, average ticket, market trends, growth rate when you did X vs. Y in the past, etc.  Hypothetically speaking you may say that in 2006 you focused on “product offering breath and depth” initiative which generated 35% growth in order count.  In 2009 you plan to focus on that initiative again, while also implementing an up-sell program to increase average order by 5%.  You can use these numbers, with a 2008 actual, to build a 2009 forecast.  Likewise, if your plan includes less sales growth focused initiatives in 2010 you may forecast less growth in that year. 

Performance, Present Condition and Future Plans 

This past performance, present condition, future plans thinking is the cycle you need to go through for each account.  Using transaction fees as an example… A) In the past our volume was lower and our rates were higher. B) Recently we had our rates reviewed and lowered based on our increased volume. C) Next year we plan to implement a payment service that carries a lower average rate than the services we offer today.  If you can estimate the percentage of transactions that will use the new service based on some past marker you can easily forecast the transaction fees through your planning horizon by applying the current rate to a portion of your revenue forecast and the new rate to the remainder of your revenue forecast.  How about 3rd party vendors that don’t have fixed contracts… A) How many seats with which vendors have you used at past revenue levels?  B) How many are you using at current revenue levels?  C) Do you plan to fundamentally change seats/revenue dollar in the future?  Maybe you exchange revenue levels with customer service rep count, which is based on a staffing plan pegged back to revenue.  In either case, revenue is driving its way through to give relative reference for A, B, C, and the forecast.

In this way you’ll go through each account: A, B, C, forecast.  Historic data, current actuals, and a strategic plan is all you need.  And, well, a spreadsheet.  Hope this provides some help and motivation to get started with your forecasting early!

Small, fast growing companies thrive off of nimble, entrepreneurial, growth infested staff at all levels.  The thought is that eventually, you will be able to fill from underneath, as the company grows-up and develops a strong upper management team.  But finding the turning point between hiring for ideas and hiring for tasks is challenging; and there is a point. 

The small business e-commerce entrepreneur must understand that even when hiring for entry level positions, it is better to hire the analytical ace then the taskmaster.   For example, just because someone might say they want to start their own company someday when interviewing for an entry level position, doesn’t mean they won’t be an excellent employee for the two years they do spend with your company, and by no means should it be an immediate turn off.  Yes they might leave in a year or two, but it is better to hire employees that can grow the company with their ideas and complete the tasks, then worker bees that complete the tasks but require additional management. 

The truth is that both the “taskmaster” and the “analytical ace” suffer turn over and it has just as much to do with the nature of the position as it does the nature of the employee.  Finding the tipping point when your company is huge enough, and I mean huge enough, to support worker bees is a fine science.  However, judging this pinnacle could make or break your growth and efficiency.  Especially in this down economy, when investments should be even more calculated and on target, it is better to invest in someone who can grow you, rather than save a few dollars on someone that can sustain you. 

I was having a hard time figuring out how to get in to this week’s variety, because this past week seems like a blur.  Lucky for me I checked my email and Amazon was gracious enough to send me an announcement about their newest feature, still in beta, UnSpun.  I thought this would be a good way to start out, I mean it’s not like they are the largest internet retailer in the world or anything.  Oh yeah and I didn’t want to be the umpteenth person to mention their second quarter profits doubled this year.  Oh wait, dang it I just did.

• Amazon announces UnSpun!  Yes Amazon has found another way to get shoppers involved in the purchasing process.  The feature is still in beta, but like I said above I got the email about it today.  "UnSpun by Amazon (unspun.amazon.com) allows you to find lists about anything where the community has voted and added items. UnSpun gives you the best, the worst, the funniest, the obvious, and the obscure.” as explained by the email.  My favorite part about it was that the "UnSpun  team" provided an antidote to explain how these lists are created.  "Recently, the UnSpun team got spun up debating the movies we were most ashamed to admit liking (view this list). Jonathan said Breakfast Club while Michael was all over Showgirls. An e-mail exchange gave way to heated conversations which eventually boiled over into Mark's impassioned defense of Warren Beatty's acting chops over that of Dustin Hoffman's. Red faces and bruised egos aside, we all learned a little more about one another, and a lot about movies we ought to buy (when nobody's looking, of course)."  This may be totally fabricated, but as a consumer I loved the personalization of it.  Maybe I am totally gullible but I felt like I got to see a little insight into the world of those working at Amazon, and it made me like them, more. 
• Consumers want to do their research online before making a purchase, whether that purchase is made in store or online, according to a study by Nielsen online.  This is great news for multi-channel retailers as the internet is driving offline sales. 
• Yahoo profits fell below expected Wall Street estimates in the second quarter, which was not too surprising.  What was surprising to me is that "Yahoo said that it incurred $22 million in costs stemming from 'advisors related to Microsoft's proposals to acquire all or part of the company'".  Who are these advisors?  That is a lot of money regardless of what company you are and especially given the outcome of their “advising”.  It gets better, listen to this Microsoft, to help address the 11% increase in Yahoo’s search service in the second quarter, Yahoo announced a partnership with Google.  According to the article "Yahoo recently announced a partnership with Google that will have Google fielding some queries made on Yahoo sites, to match them with advertisements and split any resulting revenue."  Read the full article here. 
• No wonder we pay over $100 for jeans now-a–days!  Retailers are taking dressing rooms to the next level, and it is quite unbelievable.  What I want to know is if it is actually necessary?  Are we really going to keep increasing the cost of our attire just to have some sort of 3-D scanners in the fitting room?  I mean, I love to shop but even I think we are getting lazy, and because of it retailers are having to strategize to accommodate our laziness.  According to the article retailers like Banana Republic are adding call buttons and delivery doors so that sales assistants can bring products to shoppers.  If you have ever shopped there, you know that they bug you enough as it is when you are trying things on.  I am already preparing myself for when I have to say "no I don’t need a piece of cheesecake and a cup of tea to enjoy while trying these clothes on".  While I am on this rant I want to address the fact that we are becoming a society of those that cannot think or make decisions on their own.  I love product reviews I read them when I am making online purchases.  I also like to know my friend's opinions about my outfits (sometimes).  But are we so dependent on what others think that we need "an interactive mirror and webcam" in the dressing room so that we can include friends and family in on our shopping experience?  If your friends and family have that much time on their hands, more power to you. 
• If you follow Gary Weiss at all you know how he feels about Overstock.com’s CEO Patrick Byrne.  If not, he refers to the company in this post as his favorite "corporate sleaze poster child".  Overstock.com reported its second quarter earnings last Friday which caused the stock to drop by more than 41%.  If you read the Q2 2008 Earnings Call Transcript it may become clear why the company’s earnings didn’t measure up.  This blog has taken the liberty of capturing a few key highlights of the transcript for you, and it doesn’t bode well for Byrne.
  

• Expectation management
• What to test
• How to test
• What to do after the test is completed

• Improving conversion rates
• Targeting segments to take this farther
• Eliminating massive redesign projects
• Ending subjective arguments about creative
• Developing confidence
• Don't test little things
• Be patient; expect a lot of 0 results between two versions
• Testing misses lifetime value issues, null results might be a victory
  • To elaborate on what he explained was lifetime value issues he explained that a customer may have a poor experience but because they were able to make it far enough in to the checkout process they may complete the sale.  Having said that the customer that had the poor experience on your website will probably remember their poor experience and not return to the site again.

• Scalability of testing:
• How important is the campaign?
• What can I learn and can it be used across other departments or areas?
• How easy can I get the actionable data?
• Am I empowered to react on the results of the test, if so do I have the resources to take action?

• Test against what you can control to get improved conversion rate.
• Define the business objectives ahead of time.

• Headlines
• Images, e.g. People v. Product, Solo v. Lifestyle
• Copy
• Copy Length

I’m a huge fan of web applications.  Moreover, I’m a huge fan of Google’s web applications.  The less dependent we are on applications tethered to computers, operating systems, licenses, and updates, the better.   The more we can share, network and collaborate, the better.  And of course, the free-er, the better.

At the Gordian Project, we’ve been taking interesting steps recently in an effort to capitalize on the value associated with web applications, especially Google’s web applications.  One product that we continue to integrate more and more into our environment, is Google Docs and Spreadsheets.  Google Docs and Spreadsheets is a great web based application for small and medium sized business.

Google Docs is Great, Great, Great

The features and functionality of Google Docs are great: Create new documents, upload existing documents, familiar desktop feel, easy editing, sharing tools, choose who can edit or view files, everyone sees the most updated version of your file, a record of who added and deleted what and when, all you need is a web browser, secure online storage, save a copy to your computer to work on documents offline or distribute them as attachments, invite people to your documents, make changes together at the same time, sharing tools are integrated with your Gmail contact list, and, last but not least, the Coup de grâce… its free!

Great, great, great.  Google Docs is great.

This assumes, of course, that Google docs is up, working and isn’t holding my documents hostage.

If I can’t access Google Docs, then I can’t receive any of those great benefits.  Even worse, if I can’t get to any of the documents I’ve already created in Google Docs, then I can’t get any value out of those documents, until they release the hostages.  Although Google gives me the ability to save my documents offline, saving my documents offline as a defense to Google going down defeats most of the reasons one would use Google Docs in the first place.

Um, Google Docs is Down, No Longer Great 

Yesterday, Google Docs & Spreadsheets appeared to be down.  I needed to work on a document that I created in Google Docs and that my team was collaborating on.  I went to the Google Apps Start Page and clicked Google Docs & Spreadsheets under the Google Apps Links section. 

Here is a screenshot of the error I received:
 

Then, I went to the Google Docs home page, to try my luck there.

Here is a screenshot of the next error I received.

Hmmm.  That’s not good.  Now I can’t work on the project I started in Google Docs.  Neither can my team.  We don’t have the document saved on anyone’s system, since, again, that would defeat the purpose of using Google Docs in the first place.  Now that I’m stuck, frustrated, and wondering when Docs will be back up, I’m wishing I hadn’t used Google Docs at all for this project.

Now what? 

I know!  I’ll blog about the negative consequences associated with becoming dependent on free web applications supported by third party vendors.  Oh crap.  I usually write blogs in Google Docs so that I can receive all the benefits enumerated above.  Now I have to use Microsoft Word.  No collaboration!  No sharing!  No web browser access!  No secure online storage!  Well, at least Word isn’t down. 

A Dependency on Web Applications and the Cost Benefit Analysis

So what’s the lesson here?  Earlier, I ranted and raved about web applications by implying that the less dependent we are on non web based applications, the better.  However, today’s circumstances exemplified the other side of the coin.  The more dependent you become on third parties and web based applications, the more opportunity for failure you introduce, such as having documents taken hostage.  The more critical the area is that you outsource, the more painful the consequences are when they arise.  The free-er the product, the less support you’ll receive at all, let alone in an emergency.

• What if your business utilizes Google Apps for email and Gmail goes down?
• What if your eCommerce site uses Google Checkout as its payment method and Checkout goes down?
• What if your Search Engine Marketing ROI is calculated based on data pulled from Google Analytics and Analytics goes down?
• What if your videos are hosted on YouTube and YouTube goes down?

As sophisticated businesses continue to charge down the path of web applications, Software-as-a-service, cloud computing, outsourcing almost all features and functionality to third party vendors, and free everything (sans AdWords), we must understand the consequences associated our decisions every step of the way.  The Google Docs web application has a plethora of benefits that are absent from Microsoft Word.  For those reasons, I use Docs every chance I get.  However, the costs associated with the worst case scenario, when and if that scenario plays out, are high, very high (think disappearing documents, not just temporarily inaccessible).  As businesses charging forward, and making strategic decisions associated with the web and the future of our companies, a cost benefit analysis is critical every step of the way.  Every decision that introduces a benefit while introducing a dependency must be made with that dichotomy in mind: buy v. build, outsource v. inhouse, web application v. stand alone, SaaS v. hosted.  Google Docs isn't really free, it's costs are just difficult, if not impossible, to quantify.  However, if you understand that this cost exists, you know that the cost benefit analysis equation isn't one sided, which means your headed toward a good decision.

Hey, Google Docs is back up!  Web App Hostage Negotiators = 1, Google Docs = 0…

Now, I’m going to import this blog post to Google Docs, so that I can share it with a colleague, who can collaborate online using only a Web browser, edit it quickly at the same time, and make sure it’s stored securely online!!!  Hmmm, I’m having Déjà vu.

To give you an idea of where I currently am on the cost benefit analysis, I’m not going to back up the original before I import.  Let’s see if I regret my decision…
 

If you’ve ever leased commercial space you’re likely aware that parking spots can be an important concern.  In the past it has been for us.  How many spaces do we get, what lot are they in, is the lot shared, and so forth.  A good lease will answer all of these questions for all tenants involved.  Luckily in our current location the issue isn’t of much concern.  We do share a lot with our neighbor but there is ample space for all employees and visitors.  We’ve never once exhausted the available parking.  

None the less, a few days ago our neighbors decided to paint their business name on a handful of the parking spaces closest to their building.  Bare in mind, closest to their building means 20 steps closer than the furthest available space.  As one of my partners and I stood in the lot chuckling at this discovery we found ourselves thankful that (1) in this soft economy our business is busy enough that we don’t have time to unnecessarily paint parking spaces and (2) we knew all of our employees are graceful enough to gladly walk the extra 20 steps if it made our neighbor’s day a smidge better.  Just a fun share from the life of an entrepreneur.
 

Last night (late last night) we temporarily (very temporarily) took our eCommerce properties down for maintenance. The downtime lasted about two minutes. Since not being down is, obviously, absolutely necessary for a pure play Internet retailer to function at all, staying up is of the utmost importance to success.  In order to gain some perspective as to the cost associated with downtime, this morning we performed an exercise to calculate how much revenue we lose a minute while we're down.  Although that number makes me sick to think about, we had no idea what we were in for today, or how timely our exercise really was.

Amazon.com Goes Down

This morning, while I was researching our competition on Amazon, I was shocked to see that none of the links were working.  I tried best sellers, a different category and then finally the homepage.  It was such a surprise to me that Amazon was down that my first instinct was to think that it was my connection, my computer, or something I typed wrong in the url.  So I asked a colleague to try to connect to Amazon.  Unexpectedly it wasn't me, my connection, or my computer, it really was that Amazon was down.  I can't yet tell how long they went down, however this article was published at 11:02 AM Pacific Standard Time and our team saw that they were back up by 12:11 PM Pacific Standard Time, so maybe an hour or so. 

Om reports that it was two hours:

"A word from Amazon’s spokesperson: 

The Amazon retail site was down for approximately 2 hours earlier today (beginning around 10:25) - and we’re bringing the site back up.

Amazon’s systems are very complex and on rare occasions, despite our best efforts, they may experience problems. We work to minimize any disruption and to get the site back as quickly as possible.

Amazon’s web services were not affected nor were our international sites."

An Unfriendly Error Message

Currently I get a Http/1.1 Service Unavailable which is a fairly generic and unhelpful error when visiting one of the largest ecommerce properties on the Internet. It seems that nothing is being done to update users of the issue or note when the site will be back up. Even though we have two Amazon accounts we sell through, no e-mails or contact has been made mentioning the outages.

Here is a screen shot of the error page.

We wanted to make sure the issues was not location based or an issue on our end so we tested Amazon utilizing a proxy service.  Here is a screen shot of the error page through the proxy service.

Every Minute Amazon Loses $37,947.78 

Since it's infancy, Amazon.com has had it's share of tough times.  The weathering of the dot-com-bomb, perpetual uber lean margins, massive growing competition, an ever growing infrastructure, and now a softening economy, In order to survive, Amazon has been forced to innovate in a myriad of ways.  Everything from longstanding and aggressive free shipping promotions to the Amazon Seller Central Marketplace to Amazon Web Services have helped the retailing giant push forward.  Interestingly, recent metrics have hinted that the mega retailer has swung the pendulum.  Amazon's first quarter results were stronger than expected, thanks in part to strong sales in electronics and general merchandise.  Moreover, Amazon issued a forecast for the current quarter and year that indicates a stronger outlook than Wall Street's current estimates.  During the first quarter, revenues increased 37 percent to $4.13 billion, verses the same period last year.

Jeff Bezos, Amazon.com's CEO, stated that "Our sales growth this quarter was driven by low prices and millions of in-stock items available for immediate shipment."  He added "We're grateful to our customers."

I wonder if what Bezos really meant say was, "Our sales growth this quarter was driven by NOT BEING DOWN.  We're grateful that we AREN'T DOWN."

Let's do some rough math see what Amazon.com might be losing during every minute of downtime.  Amazon expects to generate between $19.1 billion and $20 billion in revenue this year.  Wall Street's projections are on the lower end of that spectrum, at $19.3 billion.  Let's go the optimistic route and say that Bezos will figure out how to reach $20 billion.

($20,000,000,000 projected annual revenue / 366 days in a leap year) / 1,440 minutes in a day = $37,947.7838 Amazon loses every minute of down time

My stomach just fell out of my stomach.

Now, of course, this math is a bit dirty.  They might not reach their projected revenue high.  They obviously sell more during certain times of the day, week, month, and year.  They generate a significant portion of their revenue during the run up to the holidays.  Their international sites may not have been affected.  They generate revenue via other channels, such as Amazon Web Services, that might not have gone down.  Many, many unknown variables could affect this math.  However, we do know this, the number is big.

Let's see how much they lost, assuming they were down for only one hour (Om's post indicates two hours) using the math above.

$37,947.78 Amazon loses every minute of down time x 60 minutes in an hour = $2,276,866.80 lost due to this morning's downtime

Holy freaking crap!  My stomach already fell out.  Nothing is left to fall out.

Let's say it was only half of that.  It's still seven figures.  Wow.  In the word's of Tommy Boy, "[Tommy running into a glass wall] Ow, That's gonna leave a mark."

I don't know what takes Amazon.com down for an hour, but I hope it was something big and something new.  I think our downtimes are inexcusable and our revenue per minute pales in comparison to Amazon's.  Around the Gordian Project we're always talking about scalability.  One of the issues we think about is as pertains to scaling is, if we find a hole, a bleeder, an inefficiency, and we don't plug, bandage, or efficient-ize it, and then we grow, how does that issue or problem scale with the company.  If the hole grows at least linearly with the growth of the company, then we could be in trouble, depending on the size of the issue, relative to the size of the company.

For whatever reason Amazon.com went down today, I wonder if they went down for the same reason when they were just a "tributary".  If so, maybe back then, when the company was smaller, the dollars lost didn't seem so extraordinary, and as such, the issue one that didn't make the top of the "plug, bandage, or efficient-ize" list.  Now that the company has grown up, the issues relative size, although maybe not bigger as a percentage of the size of the company, means that the dollars lost have much more of an impact.

Maybe Wall Streets more conservative revenue estimates had issues like this built into them.

As Goes Amazon, So Goes Ecommerce... 

Retailers can and do use Amazon's marketplace as their sole internet sales channel or as an additional sales channel to their own website. Amazon's brand and traffic drive sales for the less known retailers and in return Amazon takes a commission of the sale.  Obviously sales were not coming in like they normally do via our Amazon marketplaces.  I would hate to think what we would do if Amazon was our one and only way of selling products on the internet.  Not only did this issue cause Amazon to lose money but it also caused tons of other retailers to lose money, including us.

Alas, the company, "remains the leader among e-tailers" according to the American Customer Satisfaction Index's fourth-quarter 2007 survey.  This shouldn't surprise anyone considering the numbers referenced above.  I guess the bigger they are, the harder they fall.  Not that we would mind having the problem of generating $37,947.78 per minute...

A Great, but Simple Promotion

When you are in business to sell products online, you may be after such things as more sales, increased internet traffic, and online communities touting your site as a great deal and encouraging people to buy from you. And usually these are good things. But as we found out recently, sometimes you have to be careful about what you wish for. An example of this is the Omaha Steaks promotion that we had just initiated, a promotion that had been highly successful and was well-received.  A little too well-received, actually, and that caused a few tense hours over a recent weekend.

Our Omaha Steaks promotion was simple: when you make a purchase from us, we’ll send you a gift certificate in the form of a coupon code for $20 off your Omaha Steaks order, which we sent along in the order confirmation email. We had partnered with Omaha Steaks, purveyors of fine steaks and other food products, to provide this great value to our customers. This seemed to be a great promotion, and all was running smoothly until it got SlickDeal-ed.

Deal Wars: When Slickdeals Strikes Back!

Slickdeals.net is a great site for sharing, finding, and aggregating deals. I am a frequent visitor of the site, and have made some great buys based on deals I’ve found there. Slickdeal-ers tend to be a savvy bunch who really know how to game the system. They are a great source of information about products, pricing, and great buys.

So when a Slickdeal-er made a purchase from our site and instantly got their free $20 Omaha Steaks gift card in their order confirmation email, a light went on. They posted this great deal onto SlickDeals.net and pretty soon the frenzy began. The Slickdealers searched our site, found the cheapest item they could with free shipping, and began placing orders. One guy even placed over 60 orders! Being the sophisticated online retailer that we are, we allow customers to easily cancel orders that haven’t shipped. Since this happened on a Saturday, customers were able to place orders, receive their coupon codes instantly via email, then cancel their orders and repeat the process over and over again.

While we are all for good deals, we felt it wasn’t fair to our promotion partner to give away these gift certificates to fraudulent consumers whose only goal was to sell them on eBay. So after some discussion, we decided the best course of action would be to send out the coupon code after we knew the order wouldn’t be cancelled rather than instantly. Our terms of use stated that the offer was only good on non-cancelled orders, so those who placed orders then cancelled were not sent the coupon code.

Lessons Learned

This was a great lesson for us in the value of community sites as well as their potential dangers. While we loved the idea of our site getting a lot of notice and exposure, we also learned that we have to protect ourselves from situations that can spiral out of control. Rest assured, while our next promotion or deal may be a “slick deal”, we will take measures to prevent an incident like this from occurring again.