A School For Entrepreneurs

Jeff Reed graduated from the Stanford Graduate Business School last year. At the school he met Pratap Mukherjee, a year his senior. Both wanted to start a company. To do what?

Pratap was listening to the radio. There he heard an advertisement for eBay, the Internet auction site. So he thought, why not an auction site for second-hand cars? That is how Jeff and he set up BestOffer.com. By now there are many such. The bible for a buyer of a used car in America is the Blue Book, a paperback that lists the "fair" prices of all second-hand cars -- different makes, models and vintages. Now there is an Internet site, iMotors.com. You go to it, fill in a form, and iMotors will find a car and sell it to you for less than the Blue Book price. The US market for second-hand cars is worth $350 billion a year. Conventional buying of a second-hand car involves going to a dealer, who may have anything up to 1,000 cars in his car park, test-driving a few -- not too many, otherwise the dealer would get annoyed -- choose a car, and then haggle over the price. No one enjoys it; Internet takes the hassle out of it.

 

Buying nail lacquer can be as frustrating as buying a used car -- so says Jennifer Reese in Stanford Business School's e-magazine. All the big chain stores in America devote the front of their ground floors to women's vanity products. There they are displayed in glass cases. If you walk in there looking interested (oh! You had better be a woman, by the way), saleswomen will home in on you and lure you to their counter. There they will try out on you the various makes and colours you choose. But not too many; you don't want to waste their time. And then you will pay the price they ask for; it is not displayed. Men rather envy the hours women waste shopping for vanity products. But apparently, women do not enjoy them all that much. So Mariam Naficy, Stanford MBA of 1998, has started a site, eve.com, where you can buy perfumes without being chased by fragrant saleswomen -- even if you are a man.

A lot of investment has gone into physical stores; and selling through them is highly labour-intensive. So their mark-ups are high; 50 per cent on the wholesale price is not unduly high. This is where the profit of virtual businesses lies: Internet cuts out the retailing costs. But it does not have to do so. A Thai student, Thi Thumasathit, graduated from Stanford in 1996. His site, ShoppingList.com, lists advertised sales and special offers of actual stores; it actually helps them sell more by spreading information about their sales.

Actual retailing of a product to a consumer involves many steps -- getting the product, stocking it, displaying it in a store, advertising it, showing it to a consumer, packing it, giving it to her, collecting her money, etc etc. As Internet catches on, it is making inroads into each of these activities; they are getting fragmented. Thus a local company in San Francisco Bay area, Webvan, undertakes to deliver groceries to your house. You order various items on its web site, and as long as their total value exceeds $50, Webvan will deliver them to your place at a time of your choice.

All the businesses starting on Internet are not start-ups; by now, the old, physical businesses that Internet threatens have woken up and are turning to Internet themselves. When I first came to Stanford, I took to reading newspapers on the web. The Business Standard is easy to access, and is a visitor-friendly site (but don't try to e-mail the editor, for it will not work). From there I went on to the American newspapers. My greatest frustration was with Wall Street Journal, which I consider the best written newspaper in the world. Unfortunately, its web site is very unrevealing. So I tried to subscribe online. But it refused to take my order, saying that my zip code was inconsistent with where I was.

Fed up with its obtuseness, I started reading The New York Times. It has an excellent site; not only does it put out all the major news as it happens, but it is proud of its columnists, and advertises their columns -- which is more than I can say for my own newspaper. So I became quite fond of The New York Times, and thought it would be nice if I could read it any time and anywhere I liked. I thought I was too far from New York to interest the newspaper. But when I tried to subscribe online, it not only took my order -- without quibbling about the zip code -- but it was delivered the very next morning. Now, when I travel, I only have to ring up the paper's 800 number, and press a few numbers to ensure that my copies will stop being delivered on a certain date and start again after so many days.

Or my bank. Going to the bank is a pain. Being in the middle of the university, the bank branch has long queues of students. The employees are just a bit older than the students, and almost as inexperienced. It took me three weeks to get enough attention to open an account; and then I got good service only because I had a lot of money. But I can do almost everything I need to on my computer itself. I simply go to the Wells Fargo site, and there I can look up my balances and transfer them between acco-unts. It even has a facility by which I can pay my bills online. That reminds me: I had better rush to the bank, for it still does not deliver money to me.