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Startup Spotlight: Chumbo.com

Chumbo.com is an excellent example of a traditional retail business that has successfully transferred itself into an Internet business
Written by Wendy McAuliffe, Contributor on
Based on the business models of companies such as Dell and Gateway, Davis Prais, President of Chumbo.com, has set up an e-business that enables customers to purchase software from an online selection by simply clicking on the Chumbo icon. The site also offers unbiased reviews of products by ZDNet, in order to enable the customer to make an informed purchase. TechTrader spoke to David Prais about the challenge of setting up an e-business, where the largest competitor is the high street. What factors motivated you to transfer a traditional retail business into an Internet business? The software business in the United States and worldwide is highly fragmented. In the physical world, no one in the entire chain was making any money, and there was a lot of customer dissatisfaction. Customers were entering shops possessing very little knowledge of software, whereas the Web offered the ability to pull in reviews and provide third party information. Chumbo.com has been able to turn a loss making industry into a profit making one, where customers leave satisfied. Do you perceive yourselves to be mirroring the path that egghead.com has taken? We have taken a very different path to egghead.com. Ninety per cent of its sales are now accounted for by hardware, whereas we are only a software e-business. Egghead.com are now losing more money than they were historically. We also spend much less money on advertising than they do, and more with OEM’s. How has your experience gained at Dell and Gateway influenced your e-business plan for Chumbo.com? Microsoft owned the desktops, which effectively made them own most of the market share. With Chumbo.com we went back to the desktops, and Gateway, IBM, Compaq and Apple are now our major clients. This gives us a customer acquisition that is much lower. How does your business plan aim to compete with your high street competition? What traditional retail values have you specifically tried to translate to the Internet? Our real competition is the high street. The convenience factor is far greater on the Internet. We only download small programmes -- most people don’t have the bandwidth to cope with it. We also tend to be cheaper than any deals that can be found in retail stores. What is the current state of the e-commerce market? It is very healthy and growing very rapidly. In Europe we are seeing the immense growth that we saw in the US. In terms of the prospects of the business, I don’t think that the e-commerce market has been over-hyped. How does your UK content differ from your content that is sourced from the US? The e-commerce industry in the UK is very different to how it exists in the US. The UK is far more nervous about the adoption of e-commerce owing to the telephone costs here, and so its content has to be a lot less graphical in order to reduce download times. The smaller geography of the UK also means that a lot of things are on our doorstep, which reduces the convenience factor of e-commerce. We are also more cautious in regards to consumer information in the UK, and so have been very careful in following English legislation. Where did your initial funding for Chumbo come from? I provided the initial funding for Chumbo.com along with my partner Tim Burton. Zomax Optical Media, an outsource service provider to software publishers are also keen on getting involved now. We have additionally just completed a round of funding from the largest name on the Internet! Do you foresee a stock market floatation in the future? We’d be crazy if we didn’t look at this as an option in the future.
Startup Spotlight is a new weekly feature on ZDNet UK News and ZDNet techTrader, featuring the bright sparks of the UK's high-tech startup industry. For more of the faces behind the news see the Startup Spotlight archive. What do you think? Tell the Mailroom. And read what others have said. See techTrader for more technology investment news, plus quotes and research. Take me to the e-commerce special.
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