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How E-Commerce Companies Are Changing
Maelle Gavet and Sebastian Siemiatkowski Say It's All About Customer Engagement
ENLARGE Maelle Gavet. Gary Fong/Dow Jones
Maelle Gavet has been the chief executive of Russian e-commerce group Ozon Holdings since 2011. Widely referred to as the Amazon.com of Russia, Ozon became the top e-commerce company in a country dominated by cash by developing a system of couriers who accept payment upon delivery.
Sebastian Siemiatkowski is the CEO of Klarna, a Swedish online payments processor that uses a risk algorithm to reduce the amount of information required from buyers during checkout. The company plans to enter the U.S. market next year, where it will go up against behemoths like PayPal Inc.
The two sat down with Wall Street Journal technology columnist Christopher Mims to discuss where e-commerce is headed. Here are edited excerpts.
Customer Engagement
MR. MIMS: So e-commerce is more than 20 years old and yet it represents only 6% of retail in the U.S. And in most markets it's a fraction of that. Clearly we've got a long way to go. What is the new frontier in e-commerce?
MR. SIEMIATKOWSKI: The initial e-commerce companies like Amazon are really infrastructure companies. They had to solve all the logistical problems, the product-search problems, the e-commerce platform problems, everything they needed to be able to sell stock online.
The new e-commerce companies we see today are totally different. They're much more about product, brand, discovery.
ENLARGE Sebastian Siemiatkowski Gary Fong/Dow Jones
The new frontier is really how do I engage with customers in different new ways, whether it's through social media or whether it's through these cool new things where you can take pictures and see how you're going to look in these clothes. All these things we think are going to bring it from 5% to 15% and 20%.
MS. GAVET:: I completely agree. We've been operating in Russia for 16 years and clearly the first problem we had to solve was an infrastructure problem. How do we deliver? How do we take calls? How do we handle the payments?
This is changing now. It used to be a huge competitive advantage. It is becoming less and less because there are alternatives. And so now we're refocusing a lot of our energy and people and resources to precisely what you described, which is marketing how to interact with customers.
MR. MIMS: Given that so much attention is now being directed through Facebook and other social media, when is that going to become a channel for purchasing?
MS. GAVET: Before Amazon and Facebook, we launched an e-commerce solution in Russian with a social network called VKontakte. It was a big, big failure. Nobody wanted it. The customers weren't ready to actually buy online.
ENLARGE And what we learned from that is that they love social networks to interact with us, to ask us questions, to complain, to send us funny pictures of their cat in the Ozon box, all these kinds of interaction.
So for us, social network is a [customer relationship management] tool much more than a sales tool.
MR. SIEMIATKOWSKI: It's definitely going to happen sooner or later.
If you look at Pinterest, you have things you've collected from different places. To add a buy button that allows you to instantly buy what's on that list without going to every separate merchant—it just makes a lot of sense.
But there are technical challenges. There is also somewhat of a power struggle between the merchants who then feel that they might lose and become nothing other than infrastructure, where they just ship the goods and they don't have the interaction with the customer any more because the sales happen on other platforms. But over time, this has to happen.
Delivery by Drones
MR. MIMS: Is there a danger that e-commerce infrastructure will become commoditized? That like the telecommunications carriers that provide dumb pipes for bits, large e-commerce companies will provide dumb pipes for atoms? Is this going to happen to Amazon?
MR. SIEMIATKOWSKI: I wouldn't be surprised if 10 years from now they don't sell products themselves anymore, they just ship other people's products. So I definitely think that they're on that path.
I think the challenge these companies have is that basically they're becoming a conglomerate of many subsets of things, and they need to stay competitive in every subset. That is really, really hard.
And that's when over time, you will have the Carl Icahns of the world come in and say, "Hey, you should split this, you should spin off." Just take eBay and PayPal. That's the first example we're seeing of that starting to happen.
MR. MIMS: Maelle, as somebody who has handled logistics in one of the most difficult environments possible, what do you think about delivery by drones?
MS. GAVET: I think drones are a very good technology when it comes to delivery, but this isn't about having a drone going to the warehouse all the way to your house.
Think about New York. I don't even understand where drones [would land]. Where it becomes really interesting is when you have many warehouses and you can't possibly keep your stock level where it should be to ensure same-day or even next-day delivery in all these warehouses.
Here drones comes in very handy because they become like roads. You just send drones back and forth between the warehouses to optimize your stock level.
That, I very much believe is likely to happen. Whether a drone is going to land in my garden in Moscow soon, no, I don't think so.
Tips for Artists Who Also Want to Pursue Profits
Bargaining, Networking and Getting Creative With Space Are Key
By
Daniel Grant
When people think of career advice for artists, it's usually along the lines of what was written to Paul Cézanne : "Think of the future. One dies with genius, and one eats with money."
These days, there are a growing number of advisers out there who try to give artists advice about how to balance those two considerations—following their vocation while making sure it brings in enough money to support them.
Here's a look at some the advice they have to offer.
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Build a Network. While the myth of the solitary artist remains strong, the art world is a who-you-know place, and opportunities—to show at a gallery, to receive a commission, to be part of an exhibition, to rent an affordable studio—arise through recommendations and introductions. "Networking can have a catalytic effect," says Kay Takeda, director of grants and services for the Lower Manhattan Cultural Council, which offers career workshops and a six-week "Basic Finance for Artists" seminar. "Go regularly to openings and talks at galleries and nonprofit art spaces so that you can meet like-minded artists and critics."
She adds that artists need to learn how to make an "elevator pitch," talking about their own work in a brief and concise way, when the conversation turns to them.
ENLARGE Caroll Michels recommends that artists not be afraid to negotiate sales commissions. Anibal Merlo
Don't Be Afraid to Bargain. It is received wisdom that gallery owners get a 50% commission on sales, but Sarasota, Fla., artist career coach Caroll Michels recommends that artists "not be afraid to negotiate sales commissions with galleries and corporate art consultants. Those who are courageous enough to negotiate are paying 40%." Sculptors, whose upfront foundry costs may well exceed the expenses of painters, have extra incentive to ask for a lower commission.
Use the Personal Touch. "I encourage handwritten thank-you notes whenever possible," says Alyson Stanfield, an artist career adviser who is based in Golden, Colo., because this type of communication is more personal than an email and is more likely to cause the recipient to remember the artist.
Ms. Stanfield recommends that artists have note cards printed with their art on the front and image credit on the back to be sent to buyers, or "when someone introduces you to a VIP, when someone helps you hang your work or host an event, when someone writes an article about your art."
Get Creative With Space. There never are enough art galleries to accommodate the swelling mass of artists, but Vicki Engonopoulos, co-director of career services at the School of the Art Institute of Chicago, recommends artists create their own exhibits in a "pop up" gallery, a vacant storefront or empty building. Building owners have been willing to allow these types of events if certain conditions are met, such as keeping the premises clean, protected from theft and damage, and leaving the owner free from any liability if someone is hurt. (Many insurance companies carry short-term event coverage.) An even more informal exhibition setup artists can use is an apartment gallery, in which artists turn their own living rooms into display areas to which the general public or specific guests are invited.
Mr. Grant is a writer in Amherst, Mass. He can be reached at reports@wsj.com.
Tech Tools That Small Firms Need to Avoid
Experts Weigh in on the Hardware and Software You Shouldn't Buy
Tech marketers are eager to tell small companies what hot new gadget or software they ought to invest in.
But just as important, experts say, is what business owners shouldn't snap up. Adopting the wrong technology could saddle the business with a load of headaches that end up doing much more harm than good.
To figure out what businesses should avoid, we turned to The Experts, an exclusive group of industry and thought leaders who hold in-depth online discussions for The Journal Report. Here are edited excerpts of their responses.
Let People Answer Phones
Small-business owners should stop using automated answering systems unless they have a high call volume that cannot be handled by one person. Having the telephone answered by a well-trained, empowered person differentiates your business and adds credibility and confidence in the business's ability.
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This front-line person builds relationships with customers, making them feel valued. Unlike an automated system where a customer's only option is to leave a message, a strong receptionist knows when to alert you to a problem or an urgent message and can put the customer in contact with someone who can respond immediately.
— Sharon Hadary is the founding and former executive director of the Center for Women's Business Research.
Put Down the Cellphone
Early studies of the lives of executives showed a day filled with constant interruptions. This was a surprise to management scholars, as the theory was that executives spent their time thinking, planning and having important face-to-face conversations. The advent of cellphones and texting has taken the ability to be in a constant state of interruption to new levels.
ENLARGE I'm not advocating throwing away your cellphone. Rapid response to clients or customers is often very important. But small-business owners need to protect against entire weeks lost to just doing, with no time for processing the events that unfold. The best owners I see are responsive but also clear the decks for periods of time and don't look at their messages. They do this to reflect on the bigger picture, to think about more than the crisis of the moment and look ahead to prepare for the next challenges.
— James Schrager is a clinical professor of entrepreneurship and strategic management at the University of Chicago Booth School of Business.
Stick With the Old
I love a new tech toy. I had a laptop when 12 pounds was a great weight, I carried a portable phone when it came in a bag the size of a construction worker's lunch box, and I remember when we called recipients to see if the fax got through, then followed up with a hard copy in the mail. Each of those gadgets was cutting edge in its day, and I've kept up the pace with new phones, tablets and a touchscreen laptop. I am proud to be an early adopter and very advanced for my age (which is also advanced).
As much as I love shiny new boxes, when it comes to work, I am happy to use old technology as long as it works for us. I do not like to upgrade software until I am sure it is solid and the bugs are out. We never employ new technology until we are sure that it will improve our productivity and be worth the time and effort to train our people.
There is no old technology I hate using as long as it serves its purpose. I detest working with companies who "upgrade" technology without complete understanding of the effects on customers or do not have backups to keep everything running smoothly during the transition.
Please do not tell me that you are going to use a nifty new app on your iPad to take my order unless you are sure you have a good wireless connection as well as full command of that app. Do not announce that you have found a way to do all paperwork for your customers digitally unless it works with their systems.
Do not use shiny new toys for your business unless you know how to work them.
— Mary Liz Curtin is the owner of Leon & Lulu.
How Startups Can Win Cash on Campus
Colleges Sponsor Competitions for the Best Business Plan
ENLARGE SparkFund's Joe Indvik and Leigh-Golding DeSantis at the company's offices in Washington, D.C. Emma Mourning
By
Alex Davidson
Business schools across the country are trying a new tactic to build closer ties to entrepreneurs: holding competitions.
A host of colleges, from Harvard Business School to the University of Michigan Ross School of Business to the University of Utah, are running contests that offer cash prizes for the best business plan put together by a startup.
The goal is for the schools to get access to potential successful entrepreneurs (and deep-pocketed donors).
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Students, meanwhile, get a potential career boost: Since most of the competitions are limited to students, alumni or faculty, the startups often make deals with current students to have them pitch the business plan—in exchange for jobs or internships.
Winning Visibility
For the startups themselves, there's obviously the promise of cash. But there's also the chance to get their concept critiqued by experts and get themselves and their ideas some much-needed attention.
"Your biggest challenge when you're fundraising in the early stages of the company is visibility," says Joe Indvik, one of four co-founders of SparkFund, an energy-efficiency financing company, who teamed up with a group of M.B.A. students at the Haas School of Business to pitch his company to the MBA Impact Investing Network and Training competition there.
"The M.B.A. network is strong and often tightly connected to the angel [investing] community," Mr. Indvik says.
Although Mr. Indvik's company didn't take home the $50,000 award, he says the Haas students' due-diligence process helped focus his company and that ultimately SparkFund got something as valuable as cash: attention.
He says he had the chance to pitch his idea to hundreds of people who otherwise wouldn't know what he was up to, and was able to make connections with possible funders and supporters.
Student Opportunity
Of course, some student entrepreneurs take advantage of the contests themselves, without teaming up with a startup partner.
In 2011, Anthony Shop, then an M.B.A. student at George Washington University, entered his school's 2011 business-plan contest to fund DealerPrints—a company that helps used-car dealers create brochures for potential buyers.
He and his partners ended up taking home the prize. "Competing was a great option—we wouldn't have to give ownership of the company away or personally secure debt," Mr. Shop says. "Worst case, we would improve our business plan and get great advice. Best case, we would win $25,000. We ended up getting both."
Mr. Davidson is a writer in San Francisco. He can be reached at reports@wsj.com.
What College Can Teach the Aspiring Entrepreneur
What to Study, Where to Study—and Other Ways to Use Your Education to be Ready to Start a Business
UP Global founder partner Joey Pomerenke discuss tips for aspiring entrepreneurs. Photo: AP.
By
Anna Prior
How do you use college to learn how to be an entrepreneur?
For the student looking to launch a company after graduation, the answers to the typical questions—where do you go to school, what do you study, what clubs do you join and so on—aren't necessarily the usual ones. Aspiring entrepreneurs should view college as a unique chance to build up a set of diverse skills, create a network of potential investors and partners, and soak up life experiences that will help them fly solo.
With that in mind, here's the entrepreneur's guide to getting the most out of college.
A Big Name Doesn't Always Matter Much
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One of the basic things most people think about when looking for a school is how it will look to a future employer. But entrepreneurial students need to remember that for the most part, nobody is going to be paying close attention to their choice of school. No boss will be scrutinizing their résumé—and, the experts say, potential partners and venture investors likely won't be looking at it either. So, a prestigious or pricey school isn't always a must, or even a plus.
Most venture capitalists care less about entrepreneurs' college history than whether or not "their startup [is] solving a big problem and if the founders are the right people to take that idea to a viable company," says Joey Pomerenke, an entrepreneur and founding partner of UP Global, a nonprofit that runs entrepreneur-focused programs like Startup Weekend and Startup Digest.
"An expensive school isn't the key to success," he says. "What matters is that they have the mind-set of being successful, no matter what, so it doesn't matter what school they went to."
Put Networking Above All Else
However, there's a big caveat for prospective entrepreneurs to bear in mind. Even though the brand name of a school doesn't always matter when dealing with investors and others, it may come in handy for another reason: networking.
One of the biggest benefits of going to college is the opportunity for would-be entrepreneurs to be exposed to a vast array of ideas and to build relationships with peers who could one day turn into partners, advisers or investors.
A prestigious school, or one with a solid track record of student startups, may draw more well-connected students and quality mentors. Similarly, a school with a strong alumni network (think highly rated or Ivy League) can offer a wealth of potential business contacts and investors.
ENLARGE The community where the school is located also matters. Going to school in a more entrepreneurial community, such as Silicon Valley, Chicago, New York, Boston or Seattle, will provide a lot more opportunities for networking and real-world learning than a campus in an area without a lot of business development.
Similarly, students should look for schools in a region that specializes in the industry they want to enter, says Scott Gerber, founder of the Young Entrepreneur Council, or YEC, a national invitation-only network of entrepreneurs age 40 and under. Being in the right spot gives students access to a local community of mentors and investors who understand the industry.
Be Mindful of Debt
Going to college and starting a business can be expensive propositions. Business owners loaded with student debt may end up in a big financial hole—their families may have tapped out their resources helping to pay for school, leaving them unable to contribute to the business, and the entrepreneurs themselves may face a tough time qualifying for traditional business loans or other types of financing.
That's why experts say it's critical that potential business owners need to think about how much debt to take on and how to pay back student loans, right from the get-go.
For one, be sure to research the different types of repayment options that are available, says Mr. Gerber. One example is the income-based repayment plan for federal student loans that is available for qualifying college graduates who move on to low-paying jobs—a situation facing many self-employed people, at least at the start of their venture. The program can keep monthly payments low due to a sliding scale based on income.
For instance, qualifying borrowers who earn less than 150% of the poverty guidelines for their family size—which would come out to roughly $17,505 based on the Department of Health and Human Services' 2014 poverty guideline of $11,670 for a single person—don't have any monthly loan payment. Those who qualify for income-based repayment and make above 150% of the poverty line will have their loan payments capped at 15% of whatever they earn above that amount, according to the Department of Education.
"At the end of the day, you're going to have to pay the bill, but you want to make sure you're giving yourself the most optionality," says Mr. Gerber.
ENLARGEStudents should also look into financial assistance available for entrepreneurs. Several organizations, including the National Association for the Self-Employed and the National Federation of Independent Business, offer scholarships that can help student entrepreneurs. Individual schools may also offer scholarships. California State University, San Bernardino, for example, has the Spirit of the Entrepreneur Scholarship Fund, which gives out up to $10,000 in scholarships a year to both undergraduate and graduate students majoring in entrepreneurship.You Don't Need to Major in Business What should budding entrepreneurs study once they pick a school? Anything they want.
There are many varieties of business major out there, including programs that focus on entrepreneurship. But Mr. Pomerenke advises students to choose a major they're passionate about, rather than just a formal business curriculum. In his experience talking to thousands of entrepreneurs, he says, there is very little correlation between what a person majored in and if they become an entrepreneur. Two acquaintances of his majored in psychology and anthropology, but went on to start a music festival together, he says.
And among notable names, Amazon.com Inc.'s Jeff Bezos studied computer science and electrical engineering (far from retail, e-commerce and books), while Snapchat co-founder Evan Spiegel studied product design at Stanford University.
That doesn't mean staying away from business courses entirely, the experts say. But students should combine things like accounting, statistics and management with other courses that suit their passion, as well as more diverse offerings that might build their skills in ways they wouldn't expect.
A journalism or communications course, for example, can help students get comfortable with cold-calling potential investors or mentors, or approaching strangers on the street for testing or research, says Michael Marasco, clinical professor and director of the Farley Center for Entrepreneurship and Innovation at Northwestern University. Meanwhile, theater and performance courses can help with public speaking.
Students should also remember that startups usually aren't entirely solo flights, so they don't need to worry about mastering every single skill under the sun. "Most companies have two to three co-founders with complementary skills, so students should use their time to find the right kind of founding team to get the skills for them to succeed," says Andrew Zacharakis, a professor of entrepreneurship at Babson College in Wellesley, Mass.
Focus on Experiences—not Grades
Just as the brand name of a school doesn't matter as much for entrepreneurs, neither do the grades on a transcript. Instead of putting all their time and energy into keeping their GPA high, entrepreneurial students should focus on taking away the information and skills they need, as well as key relationships and experiences.
That means pouring a lot of effort into extracurriculars. Starting up a new student organization, or taking on a leadership role at an existing club, could be an opportunity to hone entrepreneurial skills. (Avoid window-dressing, says Mr. Zacharakis, referring to just being the president of a student organization that doesn't do anything of consequence just to add to a résumé.) And many schools now offer activities aimed squarely at future business founders.
"There's a huge amount that happens outside of the classroom—incubators, startup weekends, hackathons," says Stewart Thornhill, a professor of entrepreneurial studies at the University of Michigan's Stephen M. Ross School of Business. "Whether it's run by the university or student-led activities, there are so many opportunities for students to make connections and learn basic skills that aren't necessarily part of the curriculum," says Mr. Thornhill.
And, of course, students should budget plenty of time for networking. Experts advise young entrepreneurs to be engaging and enthusiastic, but avoid being pushy or demanding.
"It's kind of like dating," says Mr. Zacharakis. "You see someone attractive, you approach them, get their number but don't ask them to marry you right away—that's kind of creepy."
Seek Out Good Advisers
Entrepreneurs should also be on the lookout for potential mentors. Along with faculty members and other professionals brought on to campus to mentor, Mr. Thornhill recommends seeking out the local small-business development office. He says many communities have these sorts of offices funded by the state or a local chamber of commerce, and they can typically provide some guidance and connect young entrepreneurs with mentors.
Another good source of help: local banks. "Community bankers typically know who the business mentors are," says Mr. Thornhill.
But students should be sure to have candid conversations with any potential advisers at the start of a mentoring relationship about expectations. Is the mentor just there to give advice, for instance, or will he or she expect an invitation to join the board of a fledgling company or to have some ownership or management role?
Students should be wary of mentors seeking just to latch on to potentially successful startups. "It's not common but not unheard of for people to hang around at ecosystems, hoping to get a piece of the pie," says Mr. Thornhill, adding that entrepreneurs need to do due diligence and research on any potential mentors.
He says warning signs include a mentor who doesn't actually do anything except mentor and one who hasn't launched a business. Students should ask for references and do some fact-checking online. Says Mr. Thornhill, "A good mentor should applaud you for doing your homework, whereas someone who is a bit dodgy might get a little nervous."
Forget Summer Vacation
It's tempting to head out to the beach when summer rolls around, but in addition to working on their own ideas, young entrepreneurs should consider spending their summer months interning for other, more established entrepreneurs.
Undergraduate students have at least three chances at summer internships ahead of them and can use each one to explore a different part of the business cycle, says Linda Darragh, professor and executive director of the Larry and Carol Levy Institute for Entrepreneurial Practice at Northwestern University's Kellogg School of Management. For example, after freshman year a student can consider interning at an innovation lab at a well-established company. Next summer, it might make sense to intern at a company in the high-growth stages. Before senior year, students can check out a startup.
The type of job doesn't matter, she says—just being in that environment can be helpful. So, interns should be ready to roll up their sleeves and do everything, including taking the trash out at night.
Another activity to think about is studying abroad, which can give students a firsthand look at overseas markets and a better understanding of how to plunge into the global economy. Robert Rosenberg, director of entrepreneurship programs at the Polsky Center for Entrepreneurship and Innovation at the University of Chicago's Booth School of Business, says it's generally more useful to learn about one's own startup market. But if students do choose to go abroad, they "should be planful" and choose a destination that's known for a particular industry or is a hotbed of innovation, like London, Shanghai or Tel Aviv, and try to land a position at an incubator or an accelerator.
Think Hard Before Launching
Finally, there's the question of whether or not to get started on an entrepreneurial career while at school. Many experts note that the classroom and campus can be great places to conceive and test out new business ideas—plus, the risks are low, especially for undergraduate students. "You generally don't have a family, you may have some student debt, but the challenges that complicate your life are generally at their least," says Mr. Rosenberg. "The downside risk of failing is at its lowest."
Still, others say that actually launching a business while still in school can be challenging since students risk not getting all they can out of school or giving all they can to the business.
At Stanford Graduate School of Business, for example, graduate students aren't encouraged to launch their businesses while pursuing their degrees. "We encourage them to use their time to explore and really understand a user need, do some testing, and apply what they are learning in the classroom, but while we can't stop a student from launching while in school, we don't encourage it because we want students to focus on academics and make the most of their time here," says Leah Edwards, director of the school's Center for Entrepreneurial Studies.
Ms. Prior is a staff reporter of The Wall Street Journal in New York. She can be reached at anna.prior@wsj.com.
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