Internet Coffee Service, or ICS, is becoming a well-known term in the coffee service community. ICS can be described as e-commerce/Internet retailing where an operator sells coffee or allied products via the Web to customers in an unlimited radius. The operator then works with third parties to deliver the products to the consumer’s door.
ICS presents a significant opportunity for traditional OCS operators to tap into small office/workplace accounts that are underserved. It expands services for operators, can increase revenues, and does not always have a sales tax, unlike a traditional OCS online ordering feature where a location goes to an operator’s Website, reorders product and pays via invoice when the items are delivered by the OCS route driver.
But the service comes with its drawbacks, too. ICS can be a distraction from an operator’s traditional OCS operation. It exposes operators to protecting consumer’s credit card information and also presents other problems, such as not being able to easily offer equipment (who would install or service the brewer?).
Before jumping into the world of ICS, operators should consider its benefits and challenges, as well as the goals behind adding the service.
Where it all started
Kirby and Cherri Newbury were pioneers of ICS with the launch of DiscountCoffee.com in 1998. The duo’s mission was to provide value, speed, convenience and customer control to the office coffee industry by way of secured e-commerce. It was quickly realized that via the Internet, ICS customers could choose from thousands of SKUs rather than a traditional OCS selection off the truck.
Customers could create their own orders wherever and whenever, feeding the need for convenience and personalization.
Since 1998 the ICS industry has grown exponentially, especially in the present-day point & click world of Internet retailing. ICS has been found to be a perfect opportunity for operators to get into the under-served/non-served area of ‘small offices/workplaces’ of less than 20 -25 full time employees, explains OCS industry veteran Ken Shea. This type of small location is not ideal for the traditional OCS operator; there are just too few people to make a profit after factoring in the driver stop times, transportation and minimums. With ICS the small location can suddenly customize orders and the operator begins generating revenue without having to send a route driver.
Despite the pros of ICS, the drawbacks to offering the service aren’t few, said Kirby Newbury, CEO and Co-Founder of DiscountCoffee.com. For starters, operators aren’t able to easily offer equipment when they are in the ICS business. “UPS and FedEx are not going to install plumbed in automatic equipment or fix those “short pots,” he said.
As an e-commerce business, operators will also need to consider security as a major expense and business concern. “Once you establish an e-commerce site and start doing electronic financial transactions online, your company is now exposed to protecting consumer’s credit card information from fraud and identity theft,” continued Newbury. The ICS business will also need to find the right talent for creating and maintaining the Website and its contents, too. “This can be a struggle unless you operate in Silicon Valley,” said Newbury. “It is a very specialized skill set that is not taught at your local schools and universities.” The issue will arise of whether to hire and train in-house or outsource the Web support. “There is an abundance of third party companies that will claim that they can build you a Website or do your advertising and marketing to get you listed no. 1 on Google,” said Newbury. “Over 80% of those “snake oil salesmen” that you come in contact with will and can spend everything that you have in your budget – no matter how small or large.”
Once a product is purchased, the operator is then responsible for delivering the product to the customer’s location. “Distribution is costly to deliver product hundreds and sometimes thousands of miles away,” said Newbury. And there are daily challenges to consider in selecting the right third party carrier. Operators are exposed to dealing with “thieves” that claim they never received their order and the very real possibility that an order can truly be stolen from the door step of the intended recipient. “B2C is the highest cost of delivery because of reasons like this,” said Newbury.
For those looking to conquer the challenges and jump into ICS, Shea and Newbury have some advice.
How do I get started?
The first step is deciding what type of Internet presence you want to seek and creating a business plan. “A true business plan is required for success in ICS,” said Newbury. “Otherwise, your existing OCS business will quickly acquire a drain on resources and may even be a “black eye” to your existing OCS brand.”
According to Newbury and Shea, there are two basic types of ICS Websites. The very basic is an informational Website. “That is a web presence that will be your virtual business card. It’ll work for you 24/7 giving your site visitors an electronic brochure on who you are and what your company offerings are, along with contact information on how to follow up with your company. This type of site can be built and maintain for minimal cost,” said Newbury. “It can be dangerous
Newbury recommends securing a domain name – a .com is recommended – and placing the domain name on everything from signage to virtual business cards to email signatures. The next step, he says, is elaborating the Website with a catalog of products.
The more complex type of ICS Website includes crossing over and selling product. Before doing this, Newbury and Shea suggests operators ask the following questions:
Do we want to sell locally, statewide, nationally or worldwide?
What should we call our web site name?
(This many times may jeopardize your local OCS business if done incorrectly.)
Do we have the talent in-house or are we going to outsource?
How are we going to attract new customers and what will be the cost of acquisition?
How are we going to deliver the product?
With a complex ICS Website, everything should be password and price protected, too, says Newbury. “If pricing is visible to everyone, that can be dangerous if you’re offering different prices to different people.”
According to Shea, there are as many reasons to do ICS as there are not to do it. “It’s important to bring this topic front of mind for operators and get them at least thinking, Is this something I need to get in or compete against?” he said.
In this day and age, there are a plethora of places for consumers to get what they are looking for at the price they want. Newbury and Shea agree that this means OCS operators should be reviewing what they offer and how they offer it. “If you’re not offering a product a customer wants, they will find it online somewhere else,” said Newbury. “Even if you don’t offer ICS, you at least should be offering a wide variety of products. You should be willing to get your customers what they want.”