Exploring E-Commerce

Sales stagnant? Give them a boost by adding an online presence to your business.

As with any business move or expansion, considering an online presence can raise a sometimes dizzying list of questions for an entrepreneur. Exactly what must be put in place to make it happen? How does an online presence change the market for the business? What are competitors doing? How will people shop? What kind of security is required? How will customers pay online? We put together this guide, a primer of sorts, to help answer those questions.

Small businesses that have little or no e-commerce capabilities on their websites will learn about taking the next step in converting their marketing sites into selling locations that extend their customer bases, images and sales in entirely new ways. Those entrepreneurs not yet online will discover how the Internet is likely to transform their businesses and introduce them to markets far beyond those which are currently in reach.

Why Go Online?

The most amazing aspect of e-commerce is its ability to impact sales and marketing efforts immediately. By going online, suddenly a neighborhood bakery or a homebased consulting service expands its reach to a national, or even international base of potential customers. Web-based sales know no international boundaries.

Forrester Research, which analyzes online trends and statistics, projects the online retail market for U.S. businesses to be $230 billion by 2008. That's a full 10 percent of anticipated total U.S. retail sales.

Not only is the internet increasing the number of potential customers that a company can reach, but it's also driving profitability, according to research from IPSOS, commissioned by PayPal. The survey discovered that, far from being an extra "expense," internet operations boosted businesses' bottom lines.

  • Of small businesses that sell online, 64 percent said the internet has increased their revenues or sales.
  • 48 percent felt the internet helped to expand their geographic reach in the United States.
  • And 73 percent saved money by decreasing administrative costs.

Cash flow is of significant importance to a new business--online or brick and mortar. The study found that small business owners who conduct business online feel it allows them to receive payments faster and conduct business easier.

When entrepreneurs move online, they establish themselves on a level playing field with larger competitors. On the internet, even the smallest online retailer can be as attractive and as functional as the largest big box store--without the need to have a physical presence on every street corner. Often, small shops project a "boutique" feel that attracts shoppers, who perceive smaller businesses as more distinctive than larger stores.

What It Takes to Go Online

There are two resounding traits that help entrepreneurs overcome the challenges of starting a business and reaping the rewards of their labor. Just like opening a physical store, setting up shop online takes passion and demands a high level of optimism. The passion is the desire on the part of the entrepreneur to find something he or she loves to do and make a career out of it. Positive thinking allows a person to stay focused in the face of cynicism from banks, peers and competitors. A "yes, I can" attitude quickly translates to "Wow, it's working" as an online business opens its doors to the world.

Moving a business online doesn't have to be an arduous process. To set up an online business, entrepreneurs should apply their passion and positive thinking to three key areas:

1. The planning process: Everything an entrepreneur needs to know, consider and decide before starting an e-commerce site.
2. Developing a marketing strategy: Determining how to get the word out and how to maintain good relationships with customers.
3. Understanding technology needs: The tricks and tools that make it all happen.

The Planning Process

First and foremost, every small-business owner needs a well-thought plan. The internet is the best place to find information, learn from peers and effectively manage resources to formulate a plan that is perfect for a particular business and its owner.

The plan should look at every aspect of the proposed online business with a critical eye. There are several important questions to address here.

  • Does the web make sense for this business? We've already established that the web has immense power to transform a business. With that said, sometimes a product just doesn't seem to lend itself to online sales--at least at first glance. Businesses like amusement parks, bowling alleys and utility companies either require the customer to be on-site or offer a product that is largely intangible. But even for those types of businesses, customers have come to expect an online presence. A company can sell tickets or offer discounts through its website, show images and videos of its facilities, set up online games that relate to and increase demand for its offerings, or enable customers to make payments over the internet.

What are other companies doing? Just as with their brick-and-mortar stores, online entrepreneurs must understand the competition if they hope to survive. A competitive analysis will help equip online business owners with the information needed to promote and differentiate their online businesses.

The leap for entrepreneurs who open their doors on the internet, however, is learning not just what other competitors in their physical geography are doing to spark sales, but also what the competitors who share their cyberspace are offering. Say you want to sell beauty products online. A keyword search for "lipstick" in Google, eBay and online shopping portals offers a glimpse at which competitors come up most often and highest on the list. Then, a look at those competitors' product selections, pricing structures, promotional offers and target audiences can help shape your own storefront to stand out from the gaggle of competitors.

This can be a time-consuming process, but it's invaluable research that costs hours rather than dollars. In this instance, time is money that will be returned many times over.

If there are already businesses in this space, it's important to differentiate. Perhaps offer a more comprehensive set of products or services. Maybe the business will have a customer service or technology advantage, or consider tailoring the product to a niche market.

  • What types of resources will the business need? The doors of an online business never close. By not running a 24/7 operation, online business owners may fail to fulfill orders in the manner promised--a surefire way to lose customers and miss the chance to build loyalty. Internet businesses need to operate full time, so entrepreneurs must be realistic about how much help they will need.

Typically, online business owners find that their hands quickly fill up with the chores and challenges involved in simply running their businesses. They'll often turn to web experts, or professionals who coordinate online business tasks every day. With the numbers of well-trained web professionals out there today, consider these possibilities when looking to hire:

  • Hire someone who will be dedicated solely to web management, if the nature and size of the business supports it.
  • Hire temporary employees to help set up the business and bring them back periodically to make changes to the site, expand online capabilities or launch new ventures.
  • Outsource the development, design and hosting of the website and rely on an outside organization to keep it up to date and to manage growth.
  • Use an "e-commerce in a box" product to set up an e-commerce site. These products typically charge a monthly fee (around $25) and provide an online store with virtual shopping carts (locations where shoppers electronically place the items they want to buy). They also include online catalogs, customized product pages, tools that help merchants list their products and services on online auction and shopping sites, secure online payment options, discount coupons for customers, and technical support.
  • Who is your target audience? Anytime a business opens its products or services to a new market, management must consider the geographic, demographic and socio-economic factors that determine how it will approach the consumer. Some offerings, such as toys, school supplies or nursing services may be targeted primarily to a specific age group. Other products or services, like snow blowers or swimming pool supplies, could target a specific set of geographic areas. Every audience is unique, so merchants should tailor their marketing and communications in a way that connects consumers to their businesses.
  • How far will the business cast its net? In a global economy it's entirely possible that a small business owner could start the morning with an e-mail from Milan, asking if he'll accept payment in Euros with a CartaSi credit card. Online entrepreneurs must understand that, from day one, they are international businesses with display windows and checkout stations in every corner of the globe.

A business could tell its customers that it ships only to North American locations or accepts only U.S. dollars. But it may turn out that the overseas market is the company's very best sales opportunity. Therefore it's important for the online business to determine how it will work with customers in foreign nations. How will shipping be handled? Is the company prepared to convert currencies? How will the business communicate with customers who speak different languages?

Online businesses should consider not excluding an eager marketplace just because it seems difficult to serve. There are several services that make it easier for international visitors to order from a U.S. store. PayPal, for instance, accepts payment on behalf of merchants in U.S. dollars, Canadian dollars, Euros, Pounds Sterling, Japanese Yen, and Australian dollars. The major U.S. credit cards accept purchases from foreign countries and make the necessary monetary conversions for the buyer.

  • What about shipping charges? Online shopping breaks down most often over shipping charges. Imagine this: A customer sees a great price for just the product she's been searching for. After entering the information on the electronic order form, she is startled to see a huge shipping fee tacked onto the price. The result? By barely lifting a finger, the shopper clicks off the site and goes elsewhere.

Some online companies absorb shipping charges; others include them in the listed price and offer "free" shipping. All the major postal carriers have websites that allow merchants to calculate the shipping charge for any item, based on weight and location.

Shipping efficiency and pricing can be major competitive advantages or hand grenades in an online store's shopping cart. Try to make a profit on shipping charges--your store is more likely to lose the sale than gain the margin.

  • What are the elements of the customer service policy? Because customers expect to be able to contact a company with questions, special requests or problems related to ordering, online businesses should offer an e-mail address or phone number for customer service inquiries. Not only is customer service a great way to build loyalty, but it's also a valuable feedback mechanism--customers are all too ready to sing your praises or call out improvements that need to be made to your product, service or image.

An important aspect of customer service is deciding how quickly the business will respond to customer inquiries and complaints (phone or e-mail). This response time should be realistic and consistent. If the policy says all phone calls will be answered within two minutes or returned the same day, that timeline becomes a pledge to the customer. Nothing frustrates an online shopper more than sending an e-mail to an address listed on a shopping site and waiting hours, days or interminably for a response. To keep customers on the site, businesses must keep them in the loop.

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