No Road Necessary
A Sourdough Express truck pulls a trailer with a bulldozer on the Parks Highway south of Cantwell. Sourdough Express trains many of its drivers internally, starting them on the paved roads and gradually moving them up to the harder roads like the Dalton Highway.
The Last Frontier’s massive, transient population of military personnel, its rural geography, and its depth and breadth of artisan products makes it a prime location for the development of e-commerce businesses.
“Alaska and Alaska products—particularly quality artisanal products—have cache. This also holds true for cloud funding, tourism, and across other e-commerce platforms,” says Juliet Shepherd, who is currently looking at the scalability of businesses in the Interior as part of her job as the project manager of technology-led development and cold weather testing for the Fairbanks Economic Development Corporation (FEDC). “Everyone and their mother wants to engage with Alaska businesses. Alaska is very high profile right now—and particularly accessible for someone wanting to engage in e-commerce.”
The Enterprise Guide to Global Ecommerce anticipates about a 246 percent increase in worldwide e-commerce sales, from $1.3 trillion in 2014 to $4.5 trillion in 2021. Among the mammoths growing the e-commerce market are familiar names such as Amazon, eBay, Groupon, Etsy, and Shopify. But even on the podium of largest e-commerce platforms one finds a few lesser known names: Jingdong, a Chinese company with more than a quarter billion users, and Alibaba Group, which operates in more than 200 countries.
“There are lots of competitive e-commerce channels, channels from other countries such as China and Russia that are worth exploring thoroughly before supplying identifying financial information or business data and metrics,” Shepherd says.
“Platforms from these geographic areas may be very interested in Alaska, but might not be good for Alaska businesses. More due diligence needs to be done to better understand these platforms and associated risks—which may not be immediately apparent to business owners or consumers.”
FEDC is making the effort to clarify the risks associated with using foreign e-commerce platforms. It expects to have more information about such options in the near future. With that said, there are other companies that FEDC is far more confident about.
The Amazon Effect
“Amazon has made a concerted effort to engage Alaska businesses. Part of this is through Amazon Exclusives, which makes it much easier for businesses to sign-up and reach more customers,” Shepherd says.
Through Amazon Exclusives, one of the company’s programs available to small and medium-sized businesses, sellers can have their products featured on Amazon, potentially garnering a great deal more traction. Amazon Exclusives is designed to give customers access to innovative products from up and coming brands in several categories. However, sellers who are part of Amazon Exclusives can only sell on Amazon, their own websites, and physical stores.
In some ways, Amazon Exclusives magnifies the primary advantage of e-commerce: the ability to increase a business’s reach beyond a local community or the tourist that may pass through a traditional brick-and-mortar establishment.
“With Amazon Marketplace, anyone, anywhere in Alaska with a product to sell has the opportunity to instantly reach hundreds of millions of Amazon customers worldwide,” says Brian Bailey, head of brand consulting at Amazon. “Amazon Marketplace removes many of the unique geographical challenges that Alaska-based businesses face with services like Fulfillment by Amazon.”
Fulfillment by Amazon allows businesses to add products to the Amazon catalogue and then send bulk amounts of the products to Amazon’s fulfillment centers, which will then pick, pack, ship, and provide customer service for the products.
“Working with the Small Business Administration and the Small Business Development Center, we’ve been able to meet with local small business owners and entrepreneurs and help them get started selling on Amazon,” Bailey says.
“We are encouraged by the responses we have heard from small business and entrepreneurs in Alaska about the opportunities that e-commerce brings for them, and we’re excited to continue engaging with the community. There are also a great variety of Alaskan businesses selling on Amazon already, such as handcrafted items, that bring even more selection to Amazon customers.”
Currently, there are more than 1,400 Alaska-based small businesses selling on Amazon.
“We see opportunity to have more Alaskan businesses join the marketplace. Small- and medium-sized businesses add unique products to Amazon, which is also a win for Amazon customers looking for great selection and prices,” Bailey says. “Small businesses in Alaska, whether they’re in larger or smaller communities, have the opportunity to reach more than 300 million active customer accounts worldwide by selling on Amazon.”
Opening Sales Channels
Shepherd concurs that e-commerce opens the door to much larger markets outside of Alaska.
“This is often necessary to reach critical market share for businesses to grow and scale—particularly with locally manufactured and Alaska goods.
Shepherd notes that there are a large number of micro-businesses in Interior Alaska that FEDC understands broadly utilize e-commerce.
“As e-commerce has become the norm for many large corporations, we’re seeing more small businesses explore e-commerce as a new way to connect with customers,” explains Jeremy Field, the Pacific Northwest regional administrator for the US Small Business Administration (SBA). “With some of the businesses we’ve met, it’s an opportunity to exponentially expand their customer base. When you have a brick-and-mortar business, you only reach customers in your immediate area. When you expand into an online marketplace, anyone in the state, Lower 48, or world can be your customer. This creates a great opportunity for Alaska businesses,” he says.
However, the question of whether or not an Alaska business should jump into the e-commerce market is something Field says is left to a discussion with advisers at the Alaska Small Business Development Centers (SBDC).
“Every business is different and has different goals, target audiences, and strategies for success. Determining if your business is more suitable for e-commerce or brick-and-mortar is a great discussion to have with one of our SBDC advisers,” Field says, noting that SBA partially funds SBDCs so they can provide one-on-one business advising at no cost.
One of the things the SBA has done to help small businesses access e-commerce resources is bring in experts from industry leaders, such as Amazon. “In fact, Anchorage was the first city to have free e-commerce training for small businesses provided by the SBA and Amazon,” Field explains.
“We like to connect small businesses with the experts and resources they need to be successful so they can start, grow, and expand their business,” he adds.
Heather Kelly founded the startup food company Heather’s Choice in Alaska, taking full advantage of the e-commerce business model.
Testing the E-Commerce Waters
Among Alaska businesses taking advantage of e-commerce are three Anchorage-based companies: Heather’s Choice Meals for Adventuring, LiquidAlaska Design, and The Ulu Factory.
Heather’s Choice is “a backpacking food startup company dedicated to making delicious, ultralight, nutrient-dense meals and snacks for adventurers,” and Ulu Factory produces the iconic Alaska all-purpose knife, which was traditionally used by Inuit, Yupik, and Aleut people.
Another entrepreneur is Dennis Zaki of LiquidAlaska Design, which designs e-commerce websites, among numerous other services.
“The most important factor for a good e-com site is one that has good navigation and a simple checkout. This is from years of my own research, client feedback, and customer feedback,” Zaki says. “The easier it is for a visitor to get in and out, the more likely they are to purchase and return again. We all have developed the attention span of a mosquito when we go online. We know what we want and we want it right now.”
Zaki notes that with Alaska’s current economic crisis, it’s become even more important for business to reach beyond the Last Frontier’s borders to grow.
Zaki founded LiquidAlaska in 2002 after a long career as a chef.
“I wanted a job that I could work when I wanted to work and not just five days a week and a rigid schedule. Now, I work one hundred [hours] a week and I couldn’t be happier. We’ve built more than 400 websites since 2002 and about 25 percent of those are e-coms,” Zaki says.
The flexibility that Zaki found when he established LiquidAlaska is often the same attribute that attracts entrepreneurs to e-commerce.
There is also the ability to easily monitor the business during the day and remain untethered, Shepherd explains.
“With the military being the largest economic driver in the Interior, service men and women have spouses often who have e-commerce businesses, which can remain constant as they change locations. Also, with a high percentage of government jobs [federal, state, and local], where workers are limited to traditional hours and forty-hour workweeks, many are able to supplement wages with side businesses which tend to be micros,” Shepherd says.
However, part of the increase in e-commerce in the 49th State is because of its vast variety of unique products, especially with regard to the Chinese market.
“China is expressing increased interest in Alaska since the Governor’s trade mission, which effectively brought Alaska, Governor [Bill] Walker, and Alaska Gasline Development Corporation into the living rooms of most Chinese households,” Shepherd says.
Joining Walker on the ten-day Opportunity Alaska: China Trade Mission were twenty-six Alaska businesses and groups, including the e-commerce company Bambino’s Baby Food, as well as brick-and-mortar establishments such as Chena Hot Springs Resort and Holdings.
“I was honored to lead this trade mission and watch so many Alaskan leaders work to grow their businesses and bring jobs home,” Walker said. “Perhaps what impressed me most was the consistent push to build an Alaska brand that makes the world realize the quality of our fresh seafood, the natural beauty of our state, and our many opportunities for economic growth.”
Shepherd strongly cautions e-commerce businesses that want to jump into the deep-end with Chinese platforms.
“In an era of ever increasing cybersecurity risk, ensuring transactional and data security is a must. Understanding the political, economic, and business climate, as well as the cultural, regulatory, and language barriers in doing business across borders—before linking accounts, sharing data, or engaging in e-commerce—is critical,” Shepherd says.
Nonetheless, Shepherd recognizes that even access to a small share of these large markets has the potential to result in sizable returns.
But even when dealing with acceptable risk, there are statewide implications of the growth of e-commerce.
“While e-commerce has turned up the heat on nearly all retail categories, it’s hit a boiling point for some. The electronics and appliances category has lost ground with the state recession, but it’s taken a bigger beating from online purchasing,” writes state economist Neal Fried in an April economic trends report by the Alaska Department of Labor and Workforce Development.
Nationally, e-commerce is up about 5 percent in all retail sales, from 4 percent in 2008. By 2020, conservative estimates put the online share at about 12 percent.
“While there are no data for Alaska, its e-commerce trends are likely similar. Even without knowing the specifics, it’s safe to assume that if the Internet didn’t exist, Alaska retail employment would have grown more during the past decade and recession-related losses would have been smaller,” Fried writes.
Despite the impacts on brick-and-mortar businesses, Amazon is optimistic about the positive impacts e-commerce will have in Alaska, saying that the Last Frontier is “full of opportunity.”
“As I mentioned, we have collaborated with great organizations to-date and talked about how technology can empower small businesses. The Small Business Administration and the Small Business Development Center are great resources, for example, and are doing great things to build the Alaska economy,” Bailey says. “We will continue to find ways to engage with the Alaska community and innovate on their behalf.”
This year the Alaska Railroad is celebrating 100 years of transportation people and cargo around Alaska. While the railroad is one of the states oldest transporters, it certainly isn’t the only one, and in this issue of Alaska Business we also check in on the Marine Highway, Span Alaska, and the White Pass & Yukon Route. For those interested in Southeast, our focus on that region provides updates on Kensington Mine, Tongass FCU, the troll fishery, and Juneau’s growing landfill.