Ka-ching! VARs Cash In

The next flavor of potato chips to come out of Kettle Foods won't be decided by the company's C-suite. It'll be determined by the same people who came up with the Spicy Thai and Cheddar Beer flavors in 2005: the consumers.

Those who want to vote need only visit kettlefoods.com and click on "Passport to Flavor."

Welcome to the brave new world of e-commerce. It's no longer just about setting up a system that allows customers to use their credit cards on the Web. It's about rolling out enticing online marketing campaigns that draw in new customers.

The VAR behind Kettle Foods' Web site is Portland, Ore.-based eROI, which builds and deploys Web sites and e-commerce solutions primarily for SMBs. But eROI takes its services a step further, promoting those sites through e-mail and viral marketing.

The number of eROI's customers jumped 37 percent--from 101 to 138--between 2005 and 2006. In the same time frame, those clients saw their collective online sales grow by 83 percent.

"When we sat down to do some planning at the end of 2005, we thought our event-registration solution would be the money-maker for us in 2006," says Ryan Buchanan, CEO of eROI. "But it was building interactive e-commerce sites that really took off mid-year."

An October 2006 study conducted by Yankee Group, a market-research firm based in Boston, corroborates what eROI and other e-commerce VARs have been experiencing in the past year.

Of the 722 end users that responded to the survey, 52 percent of very small businesses (2 to 19 employees, as defined by Yankee Group) expect their spending on e-commerce and online marketing to increase between 2006 and 2007. Forty-four percent of small businesses (20 to 99 employees) anticipate the same, and 44 percent of midmarket companies (500 to 999 employees) have an equally optimistic outlook.

"The concept of e-commerce is still percolating down to the SMB space," says Russell Morgan, president of the Information Technology Solution Providers Alliance, or ITSPA, a nonprofit based in Portland. "Small businesses tend to rely on their peers to make business decisions. For an initiative to take off, a company has to see another business in its space pull it off successfully."

And that's just what's happening in the SMB arena as more businesses enjoy exponential growth as a result of e-commerce and online marketing projects.

Alima Cosmetics, another eROI customer, started as a one-woman show, with the owner formulating foundations and rouges in her kitchen. Now the company employs five part-timers, and daily online orders have climbed from about $20 to $1,300.

"Small and midsize businesses are realizing that if they have a product or service to sell, they can put it online and go global," Morgan says. "An e-commerce solution makes a small business appear bigger and affords it an expanded market reach."

Kent Lewis, president and founder of Anvil Media, a search-engine-marketing company, says stragglers--SMBs that have been holding off on e-commerce--are seeing now that conducting business online "isn't just for gaining a competitive edge anymore; it's vital to survival."

Going forward, solution providers in the e-commerce space will encounter myriad opportunities.

Those with vertical-market expertise will be equipped to build customized solutions, says Gary Chen, SMB strategy analyst at The Yankee Group.

Then there's integration.

"SMBs aren't looking for the same e-commerce solutions that an enterprise is," Morgan says. "They want something that's going to tie in with the systems they already have in place."

For Troy Webb, chief marketing officer at InCentric Solutions, A VAR in Morrisville, N.C., the appeal of e-commerce accounts lies in their typically lengthy sales cycles.

"I'm looking to close six or seven SMB e-commerce deals in 2007, and each is worth anywhere from $200,000 to $500,000," Webb says. "That's just for installing the software. Down the road, those same businesses will want integration--to tie their shipping and billing systems to their e-commerce solutions."