Broadband Wales Observatory
Case Study Report
Clippers (HG) Ltd.
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|
MONTHLY FINANCIAL
METRICS
|
|
DESCRIPTION
|
BEFORE
Broadband
|
AFTER
Broadband
|
IMPACT
on Profit
|
|
Cost of Internet
Connection:
|
£15
|
£24
|
£-9
|
|
Home Working:
|
NA
|
NA
|
NA
|
|
Employee time on tasks:
|
£95
|
£35
|
£60
|
|
Operational Overheads:
|
£200
|
£0
|
£200
|
|
Sales Revenue:
|
NA
|
NA
|
NA
|
|
Direct Costs:
|
NA
|
NA
|
NA
|
|
TOTAL MONTHLY BENEFIT:
|
|
£251
|
|
INTERNET CONNECTION
CHANGES
|
|
DESCRIPTION
|
BEFORE
Broadband
|
AFTER
Broadband
|
|
Internet Bandwidth:
|
56Kbps
|
2Mbps
|
|
Internet Users:
|
1
|
2
|
Key Benefits of Broadband
- Broadband uptake within the customer base has resulted in a
corresponding growth in retail sales.
- Improved system integration between On-line catalogue and
internal accounts system.
- Every day use of the Internet for eBanking, on-line purchasing,
email and Web research is a faster and generally more rewarding
experience.
- Increased use of digital photography for customer support.
- Customer service is quicker and more controlled with greater
use of email.
Document Information
Investigator:
Name: James Willatts
Primary Unit of Analysis
Organisation: Clippers (HG) Ltd.
Contact
Name: Geoff Owens
Job Title: Company Secretary
Address Line 1: The
Firs, Devauden
Address Line 2:
Town/City: Chepstow
County:
Post Code: NP16 6PL
Tel: (0)1291 650543
Fax:
Publication Date: October 2006
Publisher:
Broadband Wales Observatory
eCommerce Innovation Centre (eCIC)
Cardiff Business School
Cardiff University
Cardiff Business Technology Centre
Senghenydd Road , Cardiff, CF24 4AY
Wales, UK
Tel: +44(0)2920 647028
Fax: +44(0)2920 647029
The Broadband Wales Observatory is an integral project of the
five-year, multi-million pound, Broadband Wales Programme
www.wales.gov.uk/broadband.
Acknowledgements
The Broadband Wales Observatory would like to thank the
Primary Unit of Analysis Clippers (HG) Ltd. for agreeing to
participate in this Case Study.
Executive Summary
Clippers (HG) Ltd. was solely offering a repair and service
facility for animal clipping equipment returning a modest growth
for a number of years. It had been an objective for some time to
diversify into retailing clipping equipment in addition to their
established revenue stream. The growth of retail had been very
modest until Clippers (HG) established a Web site with an on-line
catalogue for about two years. The growth that followed coincided
with the adoption of Internet usage by their retail customer base
at a time when exchanges were rapidly being enabled for broadband.
The combination of these two factors has resulted in their trade
pattern changing to 80% retail and turnover increasing in the
region of 1,000% over several years. Different pockets of growth in
on-line sales appeared across the country as exchanges were
enabled, typifying how much easier sourcing goods on-line becomes
with a fast connection.
Ironically, Clippers (HG) have only been using broadband for a
little over two years as their exchange was late being enabled. The
eCommerce applications were already in place before the
availability of broadband along with the integration of on-line
catalogue and accounts system. Although this played an important
part in automating the ever increasing workload, Clippers (HG) knew
that broadband availability was imminent and that it would
significantly improve performances when it did arrive.
Since adoption, broadband has made the whole Internet
experience much more usable for the company. Processing orders,
customer service and on-line banking is far less clunky and prone
to errors than previously. Web site maintenance, a daily activity,
has seen a significant reduction in time and errors and on-line
purchasing is a much quicker activity when required. It is now
possible for more than one member of staff to use the Internet at
the same time as well as a fax service that makes use of broadband
adding to improved automation.
In summary, broadband has had its biggest impact in a way that
was perhaps unexpected, through the uptake by their customer base.
Clippers (HG) business strategy had a strong emphasis on automation
but the previous dial-up connectivity was too slow so broadband
becoming available was a big relief. The importance of broadband to
facilitating growth and maintainability for a micro business in
this instance has been vital.
Background to the Welsh Assembly Government Policy Area,
Industry Sectors and Rural Wales
The areas of Manufacturing, Agricultural and Machines can by
definition cover a number of different areas. For the purpose of
this report a rural perspective will be taken to look at how the
agricultural related industries embrace Information and
Communications Technologies (ICT) in relation to broadband.
In respect of Welsh Assembly Government Policy Areas,
Manufacturing, Agricultural, Machines feature primarily under the
Rural Development Plan for Wales
[1]. Between 2000 and 2006 key objectives of the
plan included creating stronger agricultural and forestry sectors
which they operate in and to improve economic competitiveness of
rural communities and areas. In respect of Wales, the rural
communities have a number of different industry sectors operating
within retail and tourism. These play an important part in the
rural trade and are some times synonymous with the agriculture
industry in general, an area that employs 9% of the Welsh
workforce. The employment percentage, particularly for the
agriculture industry highlights the importance in respect of Wales.
However, concerns about the industry declining, coupled with the
'foot and mouth' disease outbreak in recent years that had huge
consequences across the UK, further emphasises the importance of
future developments in rural communities.
The future strategy for the rural community from 2007 – 2013
is driven by European policy to a certain degree although Wales put
forward independent findings along with other European Union (EU)
countries to contribute to the outcome. The EU Council decision was
formulated on Community strategic guidelines for Rural
Development
[2], which
is a major component of the Rural Development Plan for Wales. ICT
diffusion and broadband uptake feature in a number of places as
part of the guidelines and objectives laid down by the EU Council
decision.
Defining Rural Wales is a problem area for the Office of
National Statistics (ONS), with a definition for statistic analysis
appearing to evolve through the OECD definition and the 1991
Census. There are nine local authorities in Wales that
represent rural Wales, which are: Isle of Anglesey, Gwynedd, Conwy,
Denbighshire, Powys, Ceredigion, Pembrokeshire, Carmarthenshire and
Monmouthshire. The Gross Domestic Product (GDP) for Rural
Wales
[3] is less per
head than the rest of Wales, £8,756 in comparison to £10,374 (Wales
average). The total GDP for Wales (1998) was £29,541 million.
Although Rural Wales is a policy area it features a number of
industry types and Standard Industry Classification (SIC) codes
where national trends are monitored through the ONS. Of particular
interest in respect of this report are the areas of 'Manufacture of
Machine and Equipment not elsewhere classified' and 'Wholesale and
Retail Trade' where Rural manufactured products may be sold
on-line. The ONS
[4] reports on the growth of on-line sales
(nationally) for both SIC codes mentioned above. Sales over the
Internet in relation to 'Manufacture of Machine and Equipment not
elsewhere classified' have increased from 0.2 in 2003 to 2.4
billion in 2005 and Wholesale and Retail Trade' from 6.4 to 25.8
billion. It is difficult to separate these figures in respect of
the Welsh rural community, but where in use, broadband would have
had an impact.
Despite the rural community having a number of industry types,
the agricultural sector, or more specifically the geographic
locations of businesses in the agriculture sector, provides the
best representation of broadband uptake in the rural community. The
State of the Nation report
[5] provides a survey of adoption, and the
agriculture sector has the lowest uptake of Internet access in
Wales (less than 25%). In addition to this, the agriculture
industry has the smallest percentage of broadband adoption (19.1%)
and the highest usage of dial-up access (64.2%). This low uptake is
a probable contributor to a lower number of Web sites being
implemented (less than 35%) in the agricultural industry, as it is
widely acknowledged that broadband adoption influences these other
areas.
To encourage adoption the Regional Innovative Broadband
Support (RIBS) project of the Welsh Assembly Government has helped
increase broadband availability to businesses in the rural
communities, but it may take some time for the benefits of this to
be appreciated fully in rural trade.
Use of Broadband
When considering ICT and broadband and then industry sectors
within the rural community, one significant phrase becomes apparent
and that is 'diversification'. The biggest impact of broadband in
the rural communities is probably diversification into different
sector specific activities or in a way where technology is embraced
to achieve improved gains.
One opinion from a successful rural trader
[6] gives further emphasis to the
importance of broadband to rural trade: "
It's a fact
that many small businesses' are started by entrepreneurs migrating
from the towns. This brings enterprise and injections of finance
indirectly to rural economies. Hence, possibly through an indirect
route one could claim that the Internet and broadband enablement
injects capital into rural areas."
The Benefits of Broadband and the BBW Programme to the Welsh
Economy
[7] reports on
the value ICT and broadband can bring to the agricultural sector.
These include a number of general benefits of improved access and,
specifically to agriculture, better access to regulatory and
compliance requirements, access to equipment facilities and advice
on improving farm management. In addition to this is the importance
of customers' of the rural sector industries having broadband, as
it facilitates rural trade diversification.
The use and benefits of broadband in the rural and
agricultural communities is best summarised by a few different
examples, typifying either the use of broadband or the obvious
progression that availability would bring:
- PMR Ltd. – The Machinery Ring www.pmr.org.uk is an
on-line resource in Wales providing farmers, machine
manufacturers/suppliers and agricultural contractors the ability to
collaborate to be more efficient with resources. This business
appears to have used the Web to promote their services, something
that becomes more realistic with broadband.
- Ifor Williams Trailers www.ifor-williams-trailers.co.uk
is an example of an established agricultural trade related
manufacturer (Wales based) which has evolved through reputation to
become a leading UK supplier. A simple effective Web presence will
have probably helped them develop sales channels made possible by
an improved on-line customer base.
- The Royal Welsh Agricultural Society www.rwas.co.uk/default.aspx
plays an important part in promoting agriculture in Wales through a
massive annual showcase, the Royal Welsh Show. The society Web site
is an important aspect to facilitate the on-line agricultural
community.
- Agritradingnet www.agritrading.net is a
directory or simple marketplace Web site that allows agricultural
businesses to match requirements with products or services. A
growing on-line community facilitated by the growth of broadband
will benefit from such Web sites and the increased amount of
opportunities available.
The Rural Development Plan for Wales considers the needs for
rural Wales in general, which includes different industry sectors.
Broadband uptake is lower in the rural communities due to the
delays in exchange enablement. However, success is being seen
through diversification and some aspects of eBusiness adoption, but
rural diversification should see future growth as broadband is
exploited further.
Background
Clippers (HG) Ltd. has been operating for thirteen years and
started trading by offering blade sharpening, high quality
rebuilds, repairs and servicing of animal clipping equipment. The
business is run by Geoff and Andrea Owens but it was only in the
latter years that Geoff decided to devote his engineering and
manufacturing experience to the business in a full-time capacity by
taking early retirement.
The business was started when an opportunity was identified
relating to clipping equipment, particularly in the local area.
There was a significant demand for high quality repairs and
rebuilds of clipping equipment as well as blade sharpening. However
this level of skill needed an engineer's approach, something Geoff
had plenty of experience in, which provided the foundation for the
business to trade. In addition, Andrea possessed the necessary
accounting skills and knowledge of the electrical industry which
were equally important. Geoff and Andrea looked at the local market
thoroughly and realised that in the early days of trading that the
potential was huge and that they were only servicing about 1% of
the UK market. In addition to this, their competitors were
generally not from the locality, something that added further
strength to their business case.
Clippers (HG) did not formulate a thorough business plan until
about five years ago after experiencing small but steady growth for
several years. Part of the plan was to not only grow in the
servicing and repair market but to diversify into retailing the new
equipment that they would typically service. To accommodate the
growth, Geoff and Andrea did not want to expand beyond themselves
and one part-time worker, but rather streamline and automate
operations as much as possible.
The impact that the use of the Internet and broadband has had
for Clippers (HG) could not have been anticipated when their
business plan was formulated. The Internet and broadband were
expected to play their part but the growth of on-line sales
relating to their customers obtaining broadband has vastly exceeded
expectations.
Pre Broadband
In recent years, but before broadband was implemented,
Clippers (HG) were still predominantly focused on servicing,
repairs and sharpening, but retail was starting to grow. In order
to maintain their existing market position and small growth in
annual turnover, advertising in various magazines such as Horse and
Hound was necessary. This would typically cost them £200 a
month.
Clippers (HG) would deal with their main suppliers by phone or
fax. Sourcing new items would typically be a manual effort such as
searching through Kellys directories.
Clippers (HG) initially had two PCs and made use of a
spreadsheet application for managing accounts. Internet access was
through a 56Kbps modem with a limited amount of usage made at
first.
By 2002, and with the awareness that broadband availability
was increasing, Clippers (HG) looked to grow their retail market
further by diversifying through the Web. An investment in a Web
site with on-line catalogue was made and followed by a more
appropriate accounts application.
To try and achieve their objective of growth in the retail
market, Clippers (HG) needed to invest time into Web marketing.
Advice was sought from various organisations including Business
Connect Wales who helped them move forward.
At this stage the investment in a Web site and On-line
catalogue had cost in the region of £600, in addition to Payment
Service Provider charges of 3.5%.
Early in 2003, improvements to the Web site were made to
increase visibility in Search Engines. As there was an
initial learning curve surrounding Web marketing when the Web site
was first deployed, an investment of £1,300 was made by
commissioning a Web developer with a particular emphasis to help
promote retail sales.
Clippers (HG) soon started benefiting from their Web marketing
efforts, although the need for broadband was becoming much greater
in order to make such Internet activities easier. Their use of the
Web for marketing, research, email and catalogue updates was
increasing all the time but the connection was very slow and
clunky, making the whole Internet experience very tedious.
Obtaining broadband was going to be a problem because at the
time rural exchange enablement was not a priority. However, the
uptake of broadband across the country was occurring when Clippers
(HG) were concentrating on the growth of retail sales. It was at
this time of rapid broadband uptake across the country, that
Clippers (HG) saw the greatest benefit of broadband - that is the
uptake within their client base. The initial Web site marketing
activities were sufficient to get the Web site 'sticky' enough and
there has been very little effort since. The growth of broadband
uptake and the one off effort of Web marketing was enough to result
in a surge in retail sales that was barely manageable for such a
small company. Broadband has also made sourcing and purchasing
products on-line so much more usable. This, factored with the
timing of their retail strategy was fundamental to their
success.
In all reality, Clippers (HG) knew that they should have spent
some more time on Web marketing, but this additional time they
simply did not have. Equally, they did not have time to monitor Web
site statistics to help them profile their new and potential
customers. They did, however, notice pockets of sales increase in
certain areas relating to the roll-out of broadband enabled
exchanges across the UK.
In early 2004, and as a way of coping with the huge surge of
orders, an additional investment was made in an integration
facility to link the accounts system to the on-line catalogue.
Despite problems with the implementation, the integration facility
was very important to the overall workflow of the business. Without
the integrated system Clippers (HG) would have needed to employ
additional staff, something at the time they wished to avoid. The
cost of the accounts system and integration module was in the
region of £7,000 with an annual maintenance charge of £400.
Post Broadband
Broadband became available on the local exchange in July 2004
and Clippers (HG) requested an installation as early as possible.
Initially, a 512Kbps line connection was chosen but at a later date
they were able to upgrade to 2Mbps. There was actually a cost
increase in adopting broadband as the single line dial-up access
was unlimited for £15 a month, whereas the cost of broadband was
eventually in the region of £24 a month. The cost increase even in
relation to some of the intangible benefits of broadband was
trivial.
Change, Impact and Benefits of Broadband
The impact the Internet coupled with broadband has had on
Clippers (HG) is summarised in Figure 1. Business growth, adoption
of eCommerce and the availability of broadband are illustrated to
show the impact on the business. Activities to trade and compete in
the on-line world did start before broadband, but the increases in
customers having broadband as well as Clippers (HG) obtaining a
service, have both made a significant impact.
Figure 1 – Turnover Increase in
relation to eCommerce and Broadband
developments
Figure 2.
[8]
shows the roll-out of broadband enabled exchanges across the UK and
its constituent countries. The similar pattern of increase of
exchange enablement when compared to the growth of Clippers (HG)
turnover in Figure 1 is clear to see. The relationship between
on-line trading at the start of the broadband revolution and growth
of sales has been hugely significant.
Figure 2 - Percentage of Exchanges
Rolled Out Across the UK
The adoption of broadband, when it was eventually possible,
caused a small increase in their Internet connection cost, but it
has speeded up and improved the reliability of many operational
tasks. In addition to this, it is possible for two staff to use the
service at the same time, something now essential to the
company.
Internet Connection Metrics Summary
|
Service Description
|
Before Broadband
|
After Broadband
|
Change or Comments
|
|
Type of Internet Connection (Dial-up, ISDN,
ADSL, Cable, Satellite, Wireless, Leased Line):
|
Dial-up
|
ADSL
|
|
|
Bandwidth Mbps or Kbps
|
56Kbps
|
2Mbps
|
|
|
Number of Internet Connections:
|
1
|
1
|
|
|
Date of Connection:
|
|
July 2004
|
|
|
Service Provider:
|
BT
|
Zen Internet
|
|
|
Total cost per month for Internet
connection(s):
|
£15
|
£24
|
-£9
|
|
Number of users/employees using Internet
connection(s):
|
1
|
2
|
|
Financial Metrics
Summary
|
|
Monthly Apportionment
|
|
Financial Measure
|
Before Broadband
|
After Broadband
|
Impact on Profit
|
|
Operational Overhead
Costs
|
|
|
Advertising in Magazines
|
£200
|
£0
|
£200
|
|
TOTAL
|
£200
|
£0
|
£200
|
With broadband display advertising in magazines is no longer
required as sufficient sales are generated from their broadband
enabled customer base.
The main business functions of Clippers (HG) impacted by
broadband are described below:
Orders
On-line orders now equate to about 85% of all orders. About 25
hours a week are now spent on dealing (similar to before) with
orders, although the integration of their accounts system and Web
catalogue was essential to keeping this amount of time the same.
The growth of customers with broadband has been the biggest impact
on orders received by Clippers (HG). The Internet has appeared to
generate a market that, previously, did not exist. There are
customers that do not read any of the traditional animal grooming
magazines who find their products via the Web. Additionally, places
like the Highlands and Islands of Scotland are generating new
customers where access to shops with clipping machinery is
difficult, so the Internet and broadband have been important to
such customers.
Marketing
Once the early efforts deployed to Web marketing started to
show returns, predominantly for retail, traditional advertising
ceased completely. No further effort has been needed to maintain
the level of growth although, admittedly, if they did have more
time they would deploy some of this to Web marketing. Since the
growth of broadband within their customer base, the on-going
advertising costs of approximately £2,400 per annum have completely
ceased. The one off Web marketing costs to date are £1,300.
Customer Service
Time spent on dealing with customers, both in terms of
transactions and customer support, increased, but needed managing
if Clippers (HG) were to avoid employing further staff. Customer
service needed to be quicker and more controlled, something
facilitated by broadband. Email made customer service more
manageable and the general uptake of broadband nationally has meant
that the use of images to identify or diagnose requirements occurs
more frequently. In addition, faxes are stored and sent
electronically over their broadband connection. Clippers (HG) feel
that enquiries are always better answered by email because the
customer can dwell on what has been said rather than half
remembering a phone conversation. Equally, they are able to put
more thought into what is written and can compose higher quality
responses to enquiries.
Dealing with Suppliers
Since the introduction of broadband and the sub sequential
improved experience of using the Web, greater use has been made of
on-line purchasing. This is partly due to convenience but also the
opportunity it has presented in access to greater numbers of
suppliers and cost reductions. Certain cost reductions have
occurred when procuring some types of parts but this activity has
occurred over time and not just since the introduction of
broadband. However, the saving through on-line sourcing over a 2 –
3 year period has realised a saving of about 15% on spare
parts.
Web site Maintenance/Publishing
The increased demand for on-line sales has been synonymous
with the amount of effort needed in keeping the Web site up to
date. Before broadband, updating the Web site required the same
amount of changes as it does now but on a dial-up link. The process
was very clunky and sometimes prone to errors. Since having
broadband a typical Web site update is much quicker and can take 8
– 10 minutes rather than 30 to 60 minutes previously.
Employee Task Metrics Summary
|
|
Monthly Apportionment
|
|
Task Description
|
Before Broadband
|
After Broadband
|
Impact on Profit
|
|
Web site Publishing
|
£95
|
£35
|
£60
|
|
TOTAL
|
£95
|
£35
|
£60
|
Banking
The cost of on-line banking has not necessarily been impacted
by broadband but it is much quicker to do. Although the amount of
activity in this area has seen an increase, the amount of time has
remained the same due to the speed of connectivity. The huge
increase in sales transactions has allowed Clippers (HG) to
negotiate a reduced transaction charge with their Payment Service
Provider from 3.5% to 1.75%.
Financial
Clippers (HG) understandably are concerned about publishing
exact financial figures, but the growth in turnover that is
directly attributable to the growth in their new customers having
broadband is there to see. Clippers (HG) also make the point that
the progression of Internet applications in general plays an
equally important part in this uptake. One key aspect of their
business strategy was to grow but remain efficient with a
particular emphasis on keeping to two members of staff. Also of
significance is despite the huge growth, operational overheads have
remained relatively similar, although the cost of sales has changed
considerably.
The final matrix below best summarises the impact that the use
of broadband has had for Clippers (HG) in respect of the
applications that make use of the Internet:
|
SUMMARY CHANGE IN USE OF INTERNET
APPLICATIONS
|
|
DESCRIPTION
of Application
|
BEFORE
Broadband
|
AFTER
Broadband
|
|
Email
|
Used frequently
|
Used frequently and much easier for two staff in a multi-user
environment.
|
|
Multi-user access to
Internet
|
No
|
It has now been possible for two people to use the Internet
simultaneously making on-line activities more efficient.
|
|
Web based Research
|
Yes, but restricted to one person at a time on dial-up
access
|
Sourcing suppliers is more a Web based activity that has seen
cost savings on purchases.
|
|
Web site Publishing
|
Yes, but slow and clunky
|
The amount of changes needed has increased but with broadband
it is so much quicker and less clunky. Additionally, higher
resolution graphics are now less of a penalty.
|
|
Large File Downloads
|
Yes but to lesser extent
|
A greater willingness to exchange photos for customer
enquiries and support.
|
|
On-line Selling
|
Yes
|
The significant growth of on-line sales started
before broadband, but the introduction of broadband has made
managing on-line selling more efficient. However, the growth of
broadband for the customer base has been hugely significant.
|
|
On-line Purchasing
|
Yes
|
Procurement maybe the more appropriate term.
Both sourcing and paying suppliers on-line has increased.
|
|
Automated Fax
|
No
|
Automated electronic faxing is now undertaken
(over broadband) and further helps the automation of placing orders
with suppliers.
|
|
eBanking
|
Yes
|
The eBanking connection since having broadband
is a lot quicker and more reliable.
|
Conclusions
Clippers (HG) had a business strategy where the key principles
have remained the same from when it was formulated. There was an
aim to diversify into retailing to achieve an additional revenue
stream but, at the time that this idea was being formulated, the
Internet as a channel had not been given much consideration. At the
same time another important aspect of the business strategy was to
grow without having to invest heavily on employment. Without prior
knowledge, an investment was made in a Web site with an on-line
catalogue facility to help progress retail sales. In respect of
broadband, the timing of this approach into retail has been hugely
significant. Some early investments were made in on-line marketing
and retail sales started to grow synonymously with broadband
exchange enablement across the country.
"Broadband uptake within the customer base has been the most
significant impact to the growth in sales. This is amplified
by the spread of broadband to remote areas".
In respect of growth for Clippers (HG), the availability of
broadband within their customer base and the timing of deploying
on-line sales as a process have been fundamental. The growth in
sales had put a strain on the internal processes, particularly when
operating in an on-line environment but the integration of accounts
system to on-line catalogue helped to reduce any bottleneck.
However, they could still not operate efficiently without
broadband, but the fact that Clippers (HG) knew that it was only a
matter of time before their exchange would be enabled was a comfort
factor. In addition to this it stopped Clippers (HG) employing
additional staff and, when broadband did arrive, not employing
proved to be a valid decision.
With broadband, the whole Internet experience is much faster,
efficient and less prone to errors, particularly when maintaining
the Web site. The time savings on regular tasks are significant and
no further financial investment has been made on marketing since
the surge in on-line orders. However, they would naturally like to
devote more time to such an important activity for future
prosperity.
In summary, for Clippers (HG), broadband has had a huge impact
on sales, made significant time and cost savings and played its
part in maintaining the overall business strategy of achieving
automation rather than further employment.
References
[6]
A quote from Clippers (HG) Ltd., a successful Welsh rural
trader
[8]
Broadband Rollout and Affordability,Prepared for the
Broadband Wales Observatory by Special Website Development Limited,
July 2006