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Alice, you broke my heart!

Alice.com logoNot often these days a new shopping startup comes around that gets me excited. Modista looked cool but was not very useful. ShopSavvy was useful but I only used it so much - my shopping is mostly online. BeatThat had a cool idea but implementation fell short - too few products. All these services offered something novel but they all lacked the scale.

Alice.com is a new startup launched by the same folks who sold Jellyfish to Microsoft in 2007 and pocketed $50 mln, and it really promises to be something big. On the outside Alice is a neatly built shopping site to buy household essentials with thousands of names in stock and free shipping on everything. On the inside, Alice is an open platform for manufacturers to sell the kind of products they want at the prices they set, the first of a kind from what I know.

How Alice helps consumers

The shopping part of the site is very clean. Products are presented in a nice grid view, each one is provided with an image, details, and even price comparison. Some items come in several packaging sizes and if they do you can easily cross reference them. The overall interface reminded me of Endless.com, the shoe store by Amazon. It is very clean and very nicely organized.

As you add items to your cart you can also add them to your list of things to buy regularly and select the refill frequency. Alice will then send you a reminder when you are about to run out of toilet paper, toothpaste, or whatever else you added to your list. As I already mentioned, shipping is free on all orders, something a bargain hunter will certainly appreciate.

The closest competitor to Alice is probably Amazon, and I have to admit Alice stands favorably so far. Even though Amazon offers a greater variety of brands, Alice has the most popular ones covered and the package size assortment is much better. Amazon typically forces you to buy large amounts while with Alice you get same package size you will typically find in your local grocery store.

One more complain I have about Amazon is the third party and “soon to be in stock” offers which flood search results and really degrade your shopping experience. I wish there was a way to filter them out on demand. Alice on the other hand only lists in-stock products and all of them qualify for free shipping (did I already mention it? ;-) )

On top of the typical shopping functionality Alice offers some bells and whistles like Budgeting (these are in essence your monthly expense stats by product category) and Neighborhood (a basic set of social tools like friends, profiles, chat, walls, etc). There is not much going on yet in the Neighborhood except for the chat area which is dominated by the former JellyFish members some of whom have ported their screen names to Alice.

How Alice helps manufacturers

However it is not the bargain hunter and online shopper in me who was more excited by the Alice’s launch. It was me - the entrepreneur. What Alice is doing in the CPG market now is what Zecco have tried to do with online stock trading. This article explains a lot of details about why this is different from what has been done so far. In the words of Brian Wiegand (Alice.com CEO) himself:

We’ve created a platform that allows the major CPG manufacturers to actually become the retailer and sell directly to the consumer,” Mr. Wiegand said. “Retailers increasingly have become manufacturers. So the next logical step is for manufacturers to become retailers.

I am eager to see if the idea stands and if Alice grows enough to successfully compete with the traditional players and to become profitable. According to this Reuters post, the startup makes money off of manufacturers “by giving the companies spending data, advertising space and distributing samples for them to targeted customers”. My understanding is that with the traditional model the store makes money via price markup and so the revenue comes from the consumers.

Will this new model bring shoppers lower prices and better service? It is hard to say. Initially the answer is definite yes since everyone including the manufacturers is vested into the success of this enterprise and are willing to sacrifice some of the revenue in exchange for great initial impression. What will drive prices down later on? It could be the transparency that Alice built into the platform, or it could be the volume (if the site really takes off). Whether Alice.com is successful or not, I already feel it is promising to be a very interesting experiment!

Zecco is no longer free, will it survive?

Things are not going well for Zecco, an online stock brokerage that launched last year with an innovative free trades concept. At least not well enough to use the original idea as a sustainable business model.

The company just announced that they are changing the pricing structure and starting October 1, 2007 will charge new customers $4.50 per trade for all trades in excess of 10 per month. In addition, minimum balance of $2500 is required to be eligible for the free 10 trades. Existing customers will go away without the balance requirement but that will change with the new year as well.

This is going very much against the original idea that generated so much buzz back in 2006 and made Zecco heavily dependent on visitors traffic to bring the revenue consisting primarily of per click ads and interest from the cash in customers account. If you trust Alexa, the traffic has been slowly creeping up but obviously not fast enough to support free trades. My guesstimate is that the startup has been slowly burning cash since these trades are costing Zecco money. Hence this recent announcement.

Zecco Alexa chart

10 free trades with $2500 minimum balance still looks like a very attractive offer compared to other alternatives however as I mentioned earlier, my problem with Zecco is not pricing but the lack of feeling that I deal with a well established business. Customer support has also been an issue.

Let’s assume that free trades Zecco initially offered were a kind of marketing trick to build customer base. What will happen now? Zecco is definitely going to lose a lot of customers and advertising generated revenue will drop, but some people will stay and will bring extra revenue from trade commissions. The real question is will that extra revenue make it worthwhile for Zecco to continue offering the service, and it looks like I am not alone asking these questions.

YP buys LiveDeal, Zecco goes wild, other news

LiveDeal is acquired by YP Corp.

LiveDeal.com, an online classified ads service I reviewed in October, has been acquired by YP Corp., a publicly traded company operating the Yellow Pages site YP.com. From the press release published yesterday at BusinessWire:

Under the terms of the acquisition, LiveDeal shareholders received 15,968,514 shares of YP common stock. LiveDeal will remain an independent entity and a wholly owned subsidiary of YP and the two companies will leverage one another’s content, sales teams and technology to strengthen their individual product offerings

The deal is valued at around $12 million and is just a drop in the series of acquisitions flooding the news these days, a clear sign of a hot IT market. Other noticeable acquisitions:

and in the rumors:

Zecco removes minimum balance requirement

The secret promotion at Zecco is not a secret any longer. I just received an email that they have removed the $2500 minimum balance requirement making the deal even sweeter.

Zecco is a financial portal offering $0 commission stock trading. If you are thinking of opening an account at Zecco, as I am, check out this and this review at Sun’s Financial Diary to get an idea of what to expect.

After reading the reviews myself, I stand by my previous conclusion that $0 commission trades are a good deal but Zecco has a long way to go improving their service and customer support. Is the trouble worth savings? You will have to choose this for yourself.

Discovery Channel to close stores

After a series of recent revenue losses the network decided to close its mall-based and stand-alone Discovery Channel Stores to focus on its e-commerce platform and partnerships with large retailers.

Discovery Communications announced on Thursday that it will close its 103 stand-alone and mall-based retail stores, cutting 1,000 jobs, or 25 percent of the company’s global workforce, in the process

The overhaul is expected to be complete by the end of the third quarter. Does store closings mean we will see close-out sales is yet to be seen and I sure will be keeping an eye on it.

Source: Discovery closing stores, slashing 1,000 jobs at Reuters (via WiseBread)

Secret promotion at Zecco, sign of bad times?

Zecco LogoFirst rumored and then confirmed, this new promotion is in fact ongoing at Zecco. If you open a trading account before May 1, 2007 your minimum required balance will be $1000 instead of the usual $2500 currently displayed on Zecco website.

Here is the email that Golbguru of Money, Matter, and More Musings received from Zecco customer service after he lingered with funding his new account:

Thank you for opening an account with Zecco Trading. This is just a friendly reminder that you have not funded your account and we wouldn’t want you to miss the opportunity to take advantage of our extraordinary offer. For the next 2 weeks, we’ve lowered the minimum to open an account from $2,500 to $1,000.

Zecco is an online trading portal that launched in September 2006 and vowed to disrupt the US brokerage industry by offering free trades. So far they stick to their word and the trades are really free. In fact they recently added another product to the family: zero commission IRA trades.

The trades do cost Zecco money. While the fee at wholesale rate is not nearly as high as we pay (it turns out around $2), Zecco still has to recoup the expense via other revenue sources. What sources? Advertisement seems to be the main revenue stream that comes to my head. This is why the team is so eager to build an active community around the website. To get things started they even offer revenue sharing for guest bloggers.

So what happened? The Alexa chart below pretty much shows it. The idea hasn’t really picked up. After the initial splash during the launch the interest leveled out.

Zecco Alexa Chart

I just called Zecco and spoke to a customer service representative. Apparently this new promotion is something they don’t openly advertise except in the emails they send to current account holders. The reason? I am not really sure.

While I do like the new Web2.0-ish business model that Zecco pioneered for online trading, I seem to get extremely conservative when the matter comes to trusting someone with thousands of dollars, my dollars. The feeling of a well established business with a proven record is what’s clearly missing with Zecco. Might it be that I am not alone with my doubts and this promotion is a sign that things are not going that well for Zecco?

Zero commission IRA’s from Zecco

Zecco, an online financial portal offering free stock trading, has just expanded its portfolio of products this week by offering zero commission IRA’s for your retirement savings.

Just as with the stock trading, Zecco puts certain limitations on your IRA account. Only your first 10 trades a day and first 40 trades a month are free and there is a $30 annual fee which is based on the charges coming from the clearing firm acting as a custodian for Zecco. As Jeroen Veth, Zecco’s CEO explains

While typical online brokerages can afford to absorb this cost and make it up in commission charges, Zecco Trading doesn’t have that luxury.

Zero commission may sit well with some but it doesn’t sound convincing for me. I usually don’t trade my IRA daily or even monthly and the maintenance fee of $30 sounds somewhat steep considering the fact that custodian fee for my current IRA account with a mutual fund is just about $10.

It should also be noted that the IRA accounts Zecco offers are not exactly mutual funds although they are just as diversified. They are based on ETF’s, or exchange-traded funds. These are similar to mutual funds in the sense that they are also combined of other companies’ stock but unlike mutual funds they are openly traded on stock exchange like stocks are. You can find more about pros and cons of EFT’s compared to mutual funds from this overview.

IRA from Zecco

I wrote earlier about Zecco and Bank of America offering free online stock trading. As online technology advances and such heavy-lifters as Google step into the lucrative financial sector, online stock trading becomes more and more competitive niche to be. Brokerages keep reducing rates and I will not be surprised if one day my Firefox installation download cames with a free stock trading plug-in. ;-)




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