Strength in Numbers

The Internet has long been billed as the great equalizer in business, whereby

small microenterprises can go after customers and niche markets as well

as any large corporation. But with the increasing number of World Wide Web

pages growing day by day, it's becoming more difficult for small organizations

to find that level playing field, thanks to the costs associated with marketing

a domain name and the sophisticated technical skills needed to set up an

effective electronic commerce site.

"Putting up a Web site by yourself is like throwing a bottle in the

ocean," said Wally Bowen, director of the Mountain Area Information Network

(MAIN), a nonprofit Internet service provider in Asheville, N.C. "How is

anybody ever going to find it?"

Bowen said the answer lies in pooling resources, a la the traditional

public market in which crafters, farmers, bakers and local retail shops

get together under one roof and market their businesses as one venture.

The traditional model has been extremely successful in small towns and large

cities, drawing everyone from large wholesalers and retailers looking for

unique products to tourists in search of the perfect souvenir.

Bowen and like-minded community leaders in states such as Ohio, New

Mexico, Hawaii and Washington believe that taking the model to the virtual

world not only will help businesses successfully find a niche on the Web,

but will help spur economic development in rural areas.

"There's so much potential at the grassroots level to grow the economy,

especially today," Bowen said. "And it can be done on a scale that is sustainable.

Here in the mountains, we no longer have sites for large manufacturing operations.

In fact, we're losing the little employment we do have in that sector, so

if we're going to grow jobs, it's got to be at the small business level."

A little more than a year ago, MAIN put the theory to the test, establishing

the Blue Ridge Web Market on grants received from the Appalachian Regional

Commission and NC Connect, a rural Internet and telecommunications program

sponsored by the governor's office.

The venture initially attracted 35 Western North Carolina businesses,

including small pottery retailers, art galleries, handmade-doll companies

and a book publisher. Not only did they get a free presence on a 12-county

network with 3,500 subscribers and 60 public-access terminals drawing in

thousands more users, but MAIN provided technical assistance by customizing

Web sites and setting up secure servers.

But it's too soon to tell if such ventures work — either for the businesses

or the local economy.

Several businesses have seen sporadic successes. One craft shop, for

example, wound up taking in a $24,000 commission last year after a museum

in Charlotte saw its products on the Blue Ridge Web Market.

Jeff Racer, owner of Balm of Zarahelma, which makes herbal soaps, now

receives requests for a dozen free samples of his product each month and

estimates that the Blue Ridge Web Market accounts for about 10 percent of

his business.

"The site really gives me added exposure that I wouldn't get on my own

because most of the people who stumble onto my business didn't initially

come looking for soap," Racer said. "They came looking for general information

about Asheville or the Blue Ridge Mountains."

Others have managed to reach new markets. John Garrou, owner of Garrou

Pottery in Black Mountain, N.C., sold products to a buyer in Colorado. "To

be honest, we haven't gotten a tremendous amount of business from the site,

but it's enough to make it worthwhile and to make us really glad to be there,"

he said.

Still, others have been sorely disappointed. Cynthia Bright, editor

of Bright Mountain Books, a regional publisher in Asheville, N.C., says

she has never received an order through the Blue Ridge Web Market, though

that could be because her firm was unable to take credit card orders online

or over the phone.

And Craig Cornett, owner of Frog Ranch Foods in Millfield, Ohio, which

shares a site with the Appalachian Center for Economic Networks (ACENet),

another public Webmarket, saw such little activity that he is planning his

own Web site. He said, however, that his firm didn't pay much attention

to the community site, hence the only responses he saw from customers were

miffed e-mail messages alerting him to outdated information.

"The truth is, we're kind of in transition right now, kind of feeling

our way, trying to figure out the right approach," said Amy Borgstrom, executive

director of ACENet, a private nonprofit economic development organization.

"But...the Internet is a key part of economic development for the businesses

and communities that we work with. It amplifies everything we do."

From Top-Down to Bottom-Up

Richard Civille, executive director of the Center for Civic Networking,

a nonprofit organization in Friday Harbor, Wash., that promotes the use

of information infrastructure for community economic development, originally

conceived the idea of a virtual public market back in the early 1990s after

visiting a bricks-and-mortar public market in North Carolina.

With a grant from the Agriculture Department, he built the Public Webmarket,

a national demonstration model that acted as a portal for market sites run

by local economic development organizations in a number of rural areas.

"Our vision was to partner with community-based economic development

organizations and develop some sort of a shared-cost arrangement with them,

where they would help to recruit local businesses," Civille explained.

"We would provide market access to the businesses themselves, charge

the organizations a little bit for the Web site and split the revenues,"

he said. "And hopefully they would learn through their participation with

us and be able to offer some additional services to their clients, particularly

in helping small businesses to develop Internet marketing and e- commerce

strategies and integrate them into their business plans."

Unfortunately, the effort, though successful in showcasing how a strength-in-numbers

approach to Internet marketing could work for rural enterprises, has not

panned out, due in large part to scalability and funding challenges.

"The problem is that you're dealing with highly variable funding, and

it's not enough, and you're dealing with very, very small community organizations

that frankly just do not have the staff or the capacity to deal with this

kind of technology," Civille said.

Though the Public Webmarket still exists as a kind of online education

center for rural e-commerce, the organizations associated with it have decided

to go their own ways in the past two years.

VegeNet, for example, a program run by Na'alehu Main Street, which promotes

economic development on the Big Island of Hawaii, is hoping to use its communal

site as a way of bringing local producers together with major restaurants

and food retailers located within the state and hopes to add an auction,

similar to eBay.

ACENet wants its site to act as a business incubator, whereby small

companies get their Internet baptism, learn the essentials of Web marketing

and e-commerce, and then graduate to their own sites. On the other hand,

the Blue Ridge Web Market, which now hosts more than 100 firms, is a true

retail outlet, drawing in shoppers and tourists looking for products that

sport the Appalachian flavor. Likewise, Civille's organization is transitioning

to a grassroots effort, building a bio-regional [tk] site for small retail

and craft businesses in and around the Puget Sound area.

No Easy Course

Whether regional public Webmarkets will provide what they promise in

the way of economic development is a big question, especially when participants

say just getting started is a hurdle.

The challenges lie in three areas: infrastructure, educating small businesses

and developing a marketing strategy that brings in just the right number

of suppliers and buyers.

Technologically, one of the toughest issues is finding an affordable

and stable Internet service provider to host a site. The original Public

Webmarket, for instance, had to switch hosts early on, and other fledgling

sites have suffered when their commercial hosts sell to new owners.

The earliest regional public Webmarkets, however, have managed to dodge

the issue. MAIN is a nonprofit ISP, while ACENet runs its site through the

Southeastern Ohio Regional FreeNet via a T-1 line owned by Ohio University.

Nonetheless, both those organizations have had to weather flack from

commercial ISPs, which complain that the idea of so-called charitable organizations

recruiting and working with private-sector firms undermines fair competition.

In fact, a nonprofit community network in Oregon had plans for a public

Webmarket terminated after a competing ISP protested to the Internal Revenue

Service, a move that resulted in a year-long audit.

Another technological challenge is juggling staff resources. Staff workers

need to not only be able to run an e-commerce site but also be able to help

less computer literate entrepreneurs design and maintain sites.

Bowen said initially his staff custom-designed all business sites, but

after those 35 got up and running, he realized that he had to find a way

to take the burden off of his staff. So his top programmer created a template

that provided a common look and an easy way for businesses to add or update

information.

"Now all you have to do is type in text describing your business and

scan in images of your products. Then there's a box for information describing

the product," Bowen explained. "That makes it really easy for them — as

well as for us."

Na'alehu Main Street, the state-funded economic development organization

that runs VegeNet, hopes to help Webmarket start-ups by packaging the server

software, operating system and a Web production tool linked to a database.

"A lot of these smaller community organizations just don't have the

technical expertise to get this type of thing up and running," said John

Derry, project manager of VegeNet. "We want to help them out, and it's just

a matter of putting the knowledge and expertise together in a form that

is easily distributable and scales well, too."

Teaching small businesses to be Internet savvy is another trick altogether,

but many of the organizations involved find it easier. Na'alehu Main Street,

for example, has set up a computer lab that enables farmers to work on their

Web sites.

Borgstrom said her organization's mission involves not just linking

companies to markets, but linking them to each other. For instance, her

site has an electronic mailing list called FoodNet that brings together

about 250 food sector firms. "In this way, they become technical assistance

providers for each other," she said. "It's critical that we teach these

companies the requisite skills they need to not just expand their customer

base but to eventually run their own Web sites."

In the end, the success or failure of public Webmarkets will fall on

how well they market themselves — both to customers and businesses. Civille

said the trick is to pull together the right mix of products. "You've got

to have that aggregation of unique products and site visits," he said. "Otherwise,

no one will visit the site and eventually the businesses will move away."

To be effective, observers say, the marketing strategy has to be integrated

with other community resources. The Blue Ridge Web Market, for example,

is working with the local convention and visitors bureau and tourist sites

to build a stable of cross-reference links that will attract buyers interested

in Appalachian crafts and products. The site also is advertising in regional

newspapers and posting banners on major Internet portals.

ACENet, on the other hand, said providing regional cultural, historical

and tourist information will play a big role in drawing buyers — those who

weren't necessarily looking to buy. "The big thing, though, is to teach

the companies to promote the site as well," Borgstrom said. "If everybody

does their part, it will be a lot easier to get the word out."

A Brighter Future

For all of the opportunity that awaits small businesses on the Internet,

economic development experts believe they still need a number of advantages

and breaks if they're going to compete effectively. "What we're doing is

totally opportunity-driven," Borgstrom said. "Small businesses can continue

working the way they are in their own small markets and probably do OK,

but to thrive they've got to get more sophisticated about what the Internet

can do for them and develop electronic commerce capabilities."

Civille said local governments need to get involved, and he expects

that community-minded venture capitalists will begin to provide investment

capital.

Jane Patterson, senior advisor to the governor of North Carolina for

science and technology, said higher-level guidance likely will follow as

well.

"States have really been paying attention to their schools, their libraries

and their own interexchange with citizens, but I think now you'll start

to see states thinking about how they can help these Webmarkets for microenterprise

businesses become more successful. They have lots of ways to encourage small

businesses. And I think that commerce departments will begin throwing their

resources at developing these public Webmarkets and educating businesses

on Internet marketing."

— Heather Hayes is a free-lance writer based in Stuarts Draft, Va.