By Dan Nielsen The Record-Eagle, Traverse City, Mich. WWR Article Summary (tl;dr) Dan Nielsen of "The Record Eagle" in Traverse City says sole proprietors wield great individual power. However, he is quick to point out that big online players that act as umbrella organizations wield the real power of the internet. Companies that deal in money and logistics have their hands in just about every online transaction.
The Record-Eagle, Traverse City, Mich.
The individual has always had the power to create and operate a business as a sole proprietor -- but today's technology allows one person to reach a worldwide client base. The difference in business growth potential is enormous.
Sole proprietors typically dealt locally until a few years ago. The internet now empowers the everyman/everywoman to reach buyers everywhere. It has helped artists, crafters, creators and assemblers reach new levels of financial success with greater ease and speed.
But just because they're sole proprietors doesn't mean they work alone to achieve their goals.
Online services play a crucial role in all internet commerce. Three things are essential when doing business online: buyers, delivery and money.
Many sole proprietors in the early days of the internet still did business the old-fashioned way. They set up a website to attract customers. They shipped stuff from their place of business. Some accepted paper checks through snail mail. If an online concern is to grow, that old way of doing business quickly becomes cumbersome.
Many entrepreneurs who sell online discover that doing everything themselves can be overwhelming.
A graphic artist, for example, can run into a series of issues when going into business for him or herself.
Creating a website is relatively simple, but attracting a collection of online shoppers is not. Printing artwork personally can be very time consuming and costly (large-format printers are pricey). The next logical old-school route is to have a commercial printer down the street handle printing. But as sales grow, the artist may spend too much time running back and forth. And handling orders and money can be both time-consuming and awkward.
The modern way to handle all of those problems is to sign up with an online service -- such as CafePress, Zazzle, RedBubble or FineArtAmerica -- that already has an audience base, can print, frame and ship the items directly to the buyer, and handles all the money. The graphic artist creates the art, sends it to the service and receives a monthly check.
That all makes great sense for an artist. It allows him or her to concentrate on creating art while all those business tasks are shuttled off to the online service.
The drawback is the price, as it is for any service -- it is a cost of doing business. Each service the entrepreneur outsources is one more channel of possible profit that is lost. Many artists find the tradeoff well worth the cost.
Those online services themselves interact with credit card processing services to handle the money.
Business connections have been necessary since money took the place of bartering. And as soon as money entered the picture, creative minds discovered the best ways to get a piece of it.
The big money throughout history typically has gone mostly to a secondary tier of business. The workers closest to the task at hand make a wage, sure. But the companies that handle the secondary layer of logistics frequently make more.
Most goldrush miners in California and Alaska went home with less cash than the entrepreneurs who set up general stores or restaurants near the gold fields. Cowboys went home broke in the wild west, but saloon owners got rich.
The internet is no different. Individual folks who sell services or goods aren't always the people who put the most money in the bank. It is instead the companies that help those individual producers communicate and transfer money that pile up the biggest profits.
The internet is a tangled web of interconnections, and the second tier is very busy indeed. Amazon empowers many local booksellers. Lyft and Uber empower a new generation of independent cab drivers. Services like Airbnb and Roomorama empower folks who want to rent rooms. Credit card companies empower Amazon, Uber, Airbnb and all the other secondary services.
It all comes back to connections -- and money. That's the way the economy works.
Sole proprietors wield great individual power. But the big online players that act as umbrella organizations wield the real power of the internet. Companies that deal in money and logistics have their hands in just about every online transaction.
Small businesses and sole proprietors were the pioneers of internet commerce. But business always tends to grow where opportunity for profit exists. It's all in the percentages. Online operations that find a way to charge a small percentage on a large number of transactions can generate huge profits.
The internet's childhood of sole proprietors in the 1990s gave way to a couple of decades of growth that nurtured a powerful second tier of Amazons and Ubers. We now are in the internet's middle age.
If the trend continues toward bigger and bigger players, perhaps a corporate giant will someday create an aggregator of retailers, an app that allows users to buy anything from any vendor on the planet. It would be a search engine that encompasses all internet knowledge -- and money.
The company that does that will possess ultimate power over the internet's financial destiny. Come to think of it, perhaps Google already has achieved that dubious honor.