ETD: 929 Cost of carrying inventory; Saying No to VCs;
Microsoft Announces Plans to Enter Online Services Market
E-Tailer's Digest
etd_post at gapent.com
Thu Nov 3 02:58:48 GMT 2005
E-Tailer's Digest --- Everything for the Retailer
Issue #0929 November 4, 2005
George Matyjewicz, Moderator mailto:georgem at gapent.com
Published by: GAP Enterprises, Ltd. http://www.etailersdigest.com
----------------------------------------------------------------
CONTENTS
[1] Greetings
[2] Cost of carrying inventory
[3] Saying No to VCs
[4] Microsoft Announces Plans to Enter Online Services Market
---------------------------------------------------------------
[1] Greetings.
----------------------------------------------------------------
Hi All:
Do you know what your inventory is really costing you? Maybe it's
time to evaluate your true costs to help improve your bottom line this year.
Internet start-ups are going strong once again. The big difference
now as opposed to the late 1990s is they aren't using venture
capitalists. VCs have plenty of cash, and no where to put
it. Entrepreneurs are finding ways to fund their own ventures, and
are doing it well.
Looks like Microsoft was missing out once again. This time with
online services. Remember some years back when they were losing the
Internet to companies like Netscape. They turned on a dime and
revamped their business plan to become one of the leaders in the
Internet space. Today, Google and Yahoo are surpassing them with
online services, and they are fighting back, while protecting its
core franchise of licensing software for installation on a single
computer -- a business that made it one the world's most profitable companies.
Now, let's get to everything for the retailer.
Sincerely
George Matyjewicz, PhD
Chief Global Strategist, GAP Enterprises, Ltd.
mailto:georgem at gapent.com
http://www.etailersdigest.com
----------------------------------------------------------------
[2] Cost of carrying inventory
----------------------------------------------------------------
What does it actually cost to carry inventory? Many business folks
think the costs are merely the cost of purchasing the goods. Wrong!
In addition to purchase costs, the cost of carrying inventory includes:
o Cost of putting away stock receipts and moving material within the
warehouse. How much of your employees' time is spent in these activities?
o Rent and utilities for the portion of your warehouse used to store
stock inventory.
o Insurance and taxes on inventory.
o Physical inventory and cycle counting.
o Inventory shrinkage and obsolescence.
o Cost of the money invested in inventory. How much could you make
on the money you have invested in inventory using other investment
vehicles? If you are financing your inventory, how much interest are
you currently paying the bank?
The carrying cost percentage is calculated by dividing the sum of
these expenses by the average inventory value. It is the amount of
money it takes to maintain one dollar's worth of inventory for an
entire year. Often you hear people say these are "soft costs" which
aren't applicable, since you still need people and warehouse
space. Not true. If you got rid of, or reduced inventory, you will
reduce related costs.
Some gurus use approximate costs, as they believe it is too hard to
calculate actual costs. With today's technology, and a little time
and effort, calculating actual costs is quite easy. Using an
approximate carrying cost does not help you identify areas for
potential improvement in your warehouse operations.
The more you turn your inventory, the more profit you make. Hence it
behooves you to stay on top of your inventory, and to try to sell
through as many times as possible.
George
----------------------------------------------------------------
[3] Saying No to VCs
----------------------------------------------------------------
In the Wall Street Journal it was reported...
Internet start-ups and venture capitalists are back in vogue in
Silicon Valley. But now the two don't necessarily go together.
Consider Flickr, the innovative online-photo service launched by a
small Canadian company early last year. Like many Web start-ups
today, it was built on a dime: Husband-and-wife founders Stewart
Butterfield and Caterina Fake used cheap software to construct the
Flickr site, eschewing pricey computers. Some gear, such as computer
storage, was "about 100 times cheaper" than it would have been even
five years ago, says Mr. Butterfield. It cost only about $200,000 to
pay salaries and get the site up and running, he says.
By last year, several top venture-capital firms were clamoring to
invest in Flickr through its parent company, Ludicorp Research &
Development Ltd. In December, Mr. Butterfield had a funding offer
from Accel Partners of Palo Alto, Calif. But the entrepreneur decided
instead to sell to Internet giant Yahoo Inc. for what people familiar
with the matter say was about $25 million, significantly higher than
the value Accel had put on the company and Accel's proposed investment.
"It was a very complicated decision," Mr. Butterfield says. But since
Flickr already had a large user base and plenty of buzz, selling to
Yahoo with its "hundreds of millions of customers" seemed like a better plan.
It's a scenario playing out all over Silicon Valley -- and one with
potentially big ramifications for venture capitalists. A new
generation of Internet companies -- many offering online photo and
blogging services or downloadable software for businesses -- have
been built for a fraction of the cost just a few years ago. That's
mainly due to the increasing popularity of cheap "open source"
software and programming tools, as well as dramatic cost reductions
in computer memory, storage and Internet bandwidth.
And all this is happening at a very inconvenient time for the
venture-capital industry: It raised more money in the first three
quarters of this year than it did in 2004 -- and needs places to park it.
Many Internet companies attending a Web-business conference here
earlier this month described venture money as "almost superfluous,"
says Jason Pressman, a principal at Shasta Ventures in Menlo Park,
Calif. Venture capitalists generally say their money and expertise
are still needed to build large-scale businesses, and they don't mind
investing a little bit less in companies that have built businesses
on the cheap but still want some venture money.
But some entrepreneurs believe the balance of power in Silicon Valley
is shifting for at least a subset of Internet-focused start-ups.
"There is magic in independence," says Chris MacAskill, co-founder of
online-photo site Smugmug Inc., which has no venture funding -- and,
according to Mr. MacAskill, doesn't want any.
Start-ups also are becoming easier to build without venture cash
because entrepreneurs can now outsource programming chores to cheap,
offshore engineers. Brad Silverberg, a partner with Seattle-area
venture-capital firm Ignition Partners, says his son recently
introduced him to a classmate from the University of Southern
California who had built a sophisticated Web-storage company, called
Box.net Inc. "It's two kids, and [some] development was outsourced to
some Russian guys they met on the Internet," says Mr. Silverberg.
Some entrepreneurs can now get their start-ups off the ground for
less than one-10th of what it used to cost. Former Excite Inc.
President Joe Kraus, for example, has publicly talked about how he
started his new Web-media company, JotSpot Inc., for about $100,000
two years ago. That's far less than the $3 million it cost to launch
Excite in the 1990s. "The cost of getting out to market [today] is so
low," and "that spells a different time for venture capitalists," he says.
Besides Flickr, companies that decided to forego venture money
include Weblogs Inc., a blogging company bought by Time Warner Inc.'s
America Online unit earlier this month, and Android Inc., a wireless
firm snapped up by Google Inc. earlier this year.
Shasta's Mr. Pressman says a two-tiered start-up market is now
developing, with some Web companies focused on long-term expansion
with venture money and others looking to a quick sale -- for perhaps
$20 million to $50 million -- to big Internet brands like Yahoo,
Google, AOL, or Microsoft Corp.'s MSN service. Indeed, many of the
modest Web start-ups operating today offer products and services that
seem more like Web-site features than standalone businesses.
For many companies, "that's sort of their plan -- get acquired for a
decent amount of money," says Evan Williams, who founded Blogger.com,
a Web site he sold to Google in early 2003 for an undisclosed sum.
Mr. Williams didn't take any venture money to build Blogger.com. But
he received an undisclosed amount from Charles River Partners for his
new venture, a San Francisco podcasting company called Odeo Inc. With
Odeo, "we thought we had the opportunity to do something more
substantial," and that required venture capital, he says.
As for Flickr, Peter Fenton, a partner at Accel Partners, maintains
it could have been a "breakout" company that fundamentally changed
the way people view and share photos on the Internet. "I really wish
we had made the investment," he says.
URL for this article:
http://online.wsj.com/article/SB113072135739183848.html
----------------------------------------------------------------
[4] Microsoft Announces Plans to Enter Online Services Market
----------------------------------------------------------------
Microsoft unveiled a new strategy yesterday to move software and
services online, seeking to fend off a growing threat from Google and
other nimble upstarts born on the Internet .
With a new Web site called "Windows Live," Microsoft hopes to create
a new platform that will unfasten some of its applications from
computer hard drives.
The site, available at http://www.live.com, repackages some of the
features Microsoft already offers at its heavily trafficked MSN.com,
adds more customization tools and makes it easier to view the same
products and services at any time from any place -- whether it be a
home computer or a mobile phone in a shopping mall.
"It's a revolution in how we think about software," Microsoft
Chairman Bill Gates told reporters and industry analysts today. "This
is a big change for ... every part of the ecosystem."
Microsoft also provided a preview of "Office Live" -- a Web site that
will provide online access to nearly two dozen applications designed
to appeal to the estimated 28 million small businesses with fewer
than 10 employees. That site will be offered on an invitation-only
basis early next year.
Likewise, many of the Windows Live services were not yet available on Tuesday.
Microsoft's online push represents its most ambitious attempt yet to
adapt to the challenges and opportunities posed by the Internet while
protecting its core franchise of licensing software for installation
on a single computer -- a business that made it one the world's most
profitable companies.
Aiming at Google. But Microsoft's long-running dominance is being
threatened by rapidly growing companies like Google and Yahoo, which
are offering more Internet-based applications and services for free,
blurring what's being hosted on the Web and what's stored on a
computer hard drive.
The trend makes a computer's operating system less relevant to consumers.
"This is all about Microsoft really pointing all its resources at
Google," said technology industry analyst Rob Enderle.
Microsoft brings plenty of muscle to the battle, with $40 billion in
cash. The company's flagship Windows operating system, which controls
most computers, gives the company a huge foundation on which to build
an Internet platform.
But Microsoft's past could haunt the company, particularly if enough
people resent its historic efforts to bully potential rivals -- a
strategy that spurred a high-profile antitrust battle with the
federal government.
With Windows Live, Microsoft "is asking people to entrust a lot of
their lives in the hands of Microsoft," said Forrester Research
analyst Charlene Li. "Trust is a loaded word for Microsoft."
Gaining Trust. Microsoft will also have to prove that it will be
able to assure people that data they entrust to its Internet-based
servers is always available, Enderle said.
The perils of relying on Internet connections became painstakingly
apparent as Microsoft tried to unveil Windows Live yesterday. The
demonstration was delayed several times when the service lost its
connection to the Internet.
Industry analysts say Microsoft has little choice but to shift more
of its business online because the Internet is steadily becoming the
preferred computing platform for households and businesses.
Office Live won't offer word processing or spreadsheets, but will
include 22 applications that will help automate accounting and
project management.
MSN.com will continue to operate, too, although Windows Live offers
many of the same features. Microsoft plans to eventually move MSN's
e-mail, as well as its free Hotmail service, to Windows Live.
Windows Live will be offered for free and try to make money from the
rapidly expanding online advertising market that has been fueling the
explosive growth of Google and Yahoo, providing them with the
financial and intellectual firepower to mount their challenge.
Microsoft plans to charge monthly fees for some of the Live Office
features aimed primarily at small businesses -- a subscription model
that has been a boon so far for online software pioneers like
Salesforce.com Inc., NetSuite Inc. and RightNow Technologies.
Article at...
http://www.ecommercetimes.com/story/47087.html
----------------------------------------------------------------
Links to follow
----------------------------------------------------------------
GAP Enterprises, Ltd. http://www.gapent.com/
E-Tailer's Digest http://www.etailersdigest.com
Interim Help http://interimhelp.com
Sophisticated Me http://sophisticatedme.com/
Marketing Your Web http://www.gapent.com/myweb/
Automated Press Releases http://www.automatedpr.com
More information about the ETD
mailing list