Report on E-Business-Report on Business Special Report
Hub-and-spokes strategy helps e-tailers retain personal touch Mary Kay Cosmetics is among firms keeping the tradition of independent, local reps while marketing on-line
MARJO JOHNE
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Shannon Shaffer, a Mary Kay Cosmetics Ltd. consultant, sells lipsticks and moisturizers even when she's asleep.
Thanks to a Web site that Mary Kay created just for her two years ago, Ms. Shaffer's customers can, whenever they choose, browse through an on-line catalogue, send her e-mail and load up their virtual shopping carts with the company's latest line of makeup and skin-care products.
Ms. Shaffer can, in turn, use the site to place her orders with Mary Kay's Canadian head office in Mississauga.
"People are on-line all hours of the night," says Ms. Shaffer, who lives in St. Thomas, Ont.
"I have clients who order just before they go to bed and I've even received orders at 2 a.m. from a skin-care customer who lives outside of the local area."
While selling on-line is not a new concept, the Mary Kay system for doing it does have a twist.
Instead of selling directly from Dallas-based Mary Kay Cosmetics Inc.'s centralized Web site, the company has set up and hosts individual sites for its sales reps, like Ms. Shaffer.
With this hub-and-spokes-like model, the main site offers only corporate and product information.
Visitors to that site who want to shop are linked to the individual site of the nearest local rep.
"This allows us to keep the tradition of our existing model [of selling products through independent local consultants] while, at the same time, providing a conduit for consumers to order products from Mary Kay on the Internet," says Mike Hammel, manager of applications and technology for Mary Kay Cosmetics Ltd.
"And it's not completely impersonal: customers still have that relationship with their consultant."
Mary Kay is not the only company with such a system.
Andrew Bartels, research leader of e-business strategies at Giga Information Group in Cambridge, Mass., says more companies are starting to see the wisdom of the hub-and-spokes model.
By providing and maintaining individual Web sites for their salespeople, companies can open a new channel for selling their products while maintaining one-to-one relationships between local representatives and their customers, he says.
And by choosing to not sell directly through a centralized site, says Mr. Bartels, companies avoid competing with -- and angering -- their sales forces.
Many companies already provide links to local representatives' Web sites but, unlike the hub-and-spokes model, these sites are owned, developed and maintained by the representatives themselves. Consequently, the sites lack uniformity and often emphasize the individual over the corporate brand.
Web site addresses usually reflect only the name of the representatives and their Internet service providers, unlike, say, Mary Kay, whose Web addresses include both the company and the individual consultant's name.
"What you want to do is give the customer a combination of corporate branding plus that local personal touch," says Terry Lister, leader of enterprise portals practice at PriceWaterhouseCoopers Canada.
"In the case of Mary Kay, what the company is doing is acknowledging that their customers trust Mary Kay as a brand-name product but that they also trust their local representative as a member of their community."
About 12 per cent -- or roughly 3,100 -- of the 26,000 Mary Kay consultants in Canada now have their own Web sites, for which they pay Mary Kay $50 a year to design, set up, host and update.
"It's another selling tool, another thing that puts me and my products out there," says Toronto consultant Francine Comeau. "We have the catalogue, the mail, we have referrals from clients, and now we have the Net."
Mary Kay could not say what percentage of its retail sales come from the Internet.
The company tracks only on-line orders from its consultants, who buy wholesale from Mary Kay.
However, it has seen its revenues increase by about 15 per cent each year since it rolled out its Web program two years ago, Mr. Hammel says.
Ms. Shaffer believes the site has definitely boosted her business.
Although she declined to give specific numbers, she says sales have risen since she went on-line, and about a quarter of her 250 clients now order over the Internet.
George Aguiar, president and chief executive officer of GP Capital Management Group, a financial-services company in Toronto, saw the hub-and-spokes approach as the next logical step in his company's e-business strategy.
GP Capital's first Web site was more like an on-line brochure, he says, offering little more than information. In its second phase, the site became more "transactional," allowing clients to access account information on-line.
Now, says Mr. Aguiar, GP Capital is redesigning its Web site to include sites for individual advisers, to which clients can go to monitor their accounts, e-mail their advisers or talk through a real-time chatroom.
Like Mary Kay, GP Capital will charge its advisers a nominal fee -- a one-time setup charge of $250.
But unlike Mary Kay -- which developed a set of site-design templates for consultants to choose from but doesn't allow them to post anything beyond it -- GP Capital will let its advisers add more personal touches.
These include special announcements, information on areas of specialization or promotions.
"What we're trying to do is brand the adviser and, at the same time, make it possible for advisers to offer their clients the convenience and value of e-commerce," Mr. Aguiar says.
"For an adviser to do this himself, he'll need a significant investment in infrastructure and he'll also need to hire a Webmaster.
"But we as a company can provide it as a service to both our advisers and to their customers."
About 30 of GP Capital's 75 advisers have put their names down for a Web site. That's a far cry, says Mr. Aguiar, from the days when many of his advisers thought he was "doing the devil's work" by putting the company on the Net.
"Up to this point, advisers have feared the Internet as they believe it disintermediates the relationship between them and the client," he says.
"But this is a way to enhance that relationship as well making the Web site sticky so the client becomes addicted to the services provided and will keep on coming back."
Jerry Garcia, a partner at Accenture Canada, says putting customers through to a Web site attached to an actual person could increase a company's chances of closing an on-line sale.
"Up to 80 per cent of customers that go on the Web don't complete the transaction," says Mr. Garcia.
"But if they had the ability to actually interact with an agent or salesperson, they may be able to complete the transaction."
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