From the December 1997 issue of Entrepreneur

When internet commerce first came on the scene, companies were jumping on the bandwagon and creating Web sites with an "if you build it, they will come" attitude. Many businesses found out the hard way that hanging out a shingle on the Internet doesn't guarantee visitors, let alone sales. All you have to do is witness the death of major Internet malls like IBM's World Avenue to realize the Internet commerce business model is still a work in progress.

"There have been extremely high expectations of Internet commerce that have lessened considerably," says Michael Sullivan-Trainor, program director of Internet research with IDC/Link, an information technology research firm in Framingham, Massachusetts.

Entrepreneurs who are succeeding in the world of Web commerce are those who have developed new business models or services particularly suited to the Internet. For example, Amazon.com offers consumers a channel to buy hard-to-find books, while Auto-By-Tel connects automobile buyers and sellers online. Retailers like Lands' End and Wal-Mart and technology companies like Dell Computer have been able to reach consumers who are ready and willing to shop online. Internet commerce that connects companies with regular suppliers or customers to encourage business transactions and sales electronically is where experts predict much of the future growth will come from.

Although business models are continuing to develop (and fail) for online ventures, it's still a good idea to take a look at Internet commerce opportunities for your business. Online commerce provides a new avenue for sales, broadens your customer base and opens a whole world of opportunities. However, in today's changing online business environment, it takes a thorough understanding of your target audience, knowledge of both traditional and Internet marketing techniques, and a little finesse to compete.

Built To Last

Building an online commerce site is a complex undertaking, and creating and managing one requires technical know-how and careful analysis of your business's resources. Generally, there are three ways you can establish an Internet commerce presence: Use a turnkey firm, an Internet service provider (ISP) or do it all yourself.

Some Internet marketing and retailing companies specialize in creating all-encompassing online commerce sites. Most offer a comprehensive solution that includes everything from analysis of your target market and design of your site to the actual site development, implementation of electronic payment processing, and overall site management. Most are very professional and take the dirty work out of your hands, but they generally cost thousands of dollars.

One company that specializes in the creation and management of Web commerce sites is Digital Boardwalk (http://www.digitalboardwalk.com ). It will build your site and provide a variety of services to help with promotions for your online store. Digital Boardwalk will even fulfill the orders for you (if you ship them your product) so you're never involved in daily operations.

Yet for many small businesses, turning to an ISP is probably the most practical solution. Some ISPs handle the design, order and payment processing issues. However, if you already have a Web site and just want to add commerce services or if you have the technical know-how to design the site yourself, ISPs can provide value-added services such as ordering and credit-card processing.

Keep in mind, few ISPs specialize in extensive commerce services, so consider your needs carefully before selecting a company, advises Sullivan-Trainor. Ask about the reliability of the ISP's hosting services and what kind of security methods are used for processing payments. Also be sure to check out other sites the ISP has built. Besides just being able to post an online catalog, it should have the marketing and technical savvy to draw customers to your site and keep them there so they'll buy again and again.

If it's business-to-business commerce you're interested in, choose an ISP specializing in the development of secure and reliable "extranets." Extranets connect companies' Web sites (and aren't accessible by the general public), so business transactions with partners and suppliers can be conducted online. A good way to find ISPs with the most suitable online commerce services is to check out the buyer's guide of ISPs at http://www.thelist.com

If you or your employees have the technical expertise, you can build and host a commerce site yourself. But before you do, cautions Sullivan-Trainor, become knowledgeable about custom programming, standard commerce and security issues, and third-party hardware and software vendors.

Web commerce development and management programs aimed at small businesses have hit the market recently. Tools range from templates that design online catalogs and software that performs sales reporting and inventory management to more advanced programs that integrate customer databases with your inventory data to display personalized promotions targeted to your site visitors' purchasing habits. The cost of these programs ranges from a few hundred dollars to several thousand, depending on how advanced their capabilities are.

A more entry-level application is Internet Business Breakthrough ($249) from Breakthrough Software. It has 50 easy-to-use, pre-designed templates to create, organize and publish an online store. Order forms and processing features to take orders electronically are included; you can also publish your site on the Internet with the click of a mouse button if you use one of the authorized ISPs that Breakthrough Software partners with.

IBM has a popular program called Net.Commerce for more advanced business-to-business and retail-oriented sites. Flexible design templates, "Shopping Carts" to take electronic orders and Address Books to indicate where a product should be shipped are included. There are also features to help you build a customer registration process complete with user passwords, import product databases and manage your inventory. Net.Commerce can be used with the Netscape Enterprise Server or IBM's Internet Connection Secure Server (included); the price begins at $4,995 per server.

Safety Net

With consumers still wary of buying online, there's a movement underway to improve security. "Security is a [concern] that everyone on the Internet shares," says Rebecca Duncan, senior analyst of information security with Datapro Information Services Group, an information technology research and analysis firm in Delran, New Jersey. "We're seeing a lot more interest from commercial vendors to work with security vendors."

Encryption systems are one way to make online transactions more secure. While the concept is quite technical, here's a basic explanation of how it works: Encryption software takes text (such as an order with a credit card number) and scrambles it. Then, "public" and "private" keys are used to encode and decode the message. The public key can be distributed and is used to encrypt messages. The owner's private key is closely held on his or her computer, and only when put together with the message encoded with the public key will the message revert to clear text (without the private key, the public key is useless for translating the message).

Furthermore, there are "digital certificates" and "digital signatures." Digital certificates are endorsed by a third-party that guarantees certain information in the message is accurate. Digital signatures confirm that the message was sent by the authorized user and wasn't tampered with en route.

Systems that include these features are complicated to design, so entrepreneurs need to work closely with security vendors to set up the process, Duncan says. VeriSign (http://www.verisign.com ) and GTE CyberTrust (http://www.cybertrust.com ) are two leading companies that offer such security products.

There are a lot of things to consider when building an Internet commerce site. Those who decide to jump in would do best to keep on top of the latest technology advancements and keep in mind that with a little work, a mountain of sales may be just around the corner.

Contact Sources

Breakthrough Software Inc., 2087 Landings Dr., Mountain View, CA 94043, http://www.breakthroughsoftware.com

Datapro Information Services Group, 600 Delran Pkwy., Delran, NJ 08075, http://www.datapro.com

IDC/Link, msullivan-trainor@idcresearch.com