From the March 2006 issue of Startups

So you want to set up an e-commerce site. While it may seem daunting at first, don't fret. The following is an overview of different ways to go about it. Simply pick the one that's right for you, and log on.

Going Solo
Many experts and entrepreneurs believe that building your own website is a no-brainer, thanks to the inexpensive, easy-to-use and sophisticated e-commerce services available.

"If you're a one- to two-person firm, [you have] someone on your staff [who] can design a website and you only sell a few products, there's no reason not to do it yourself, particularly with the out-of-the-box solutions available nowadays," says John Jantsch, a marketing coach, author and creator of the Duct Tape Marketing system for small businesses.

Jantsch, who lives in Kansas City, Missouri, built his site, www.ducttapemarketing.com, in 2001 and says you can create a robust site for less than $150 per month, plus a few hundred dollars for software. Popular tools include Microsoft's FrontPage, for $199, and Macromedia Dreamweaver 8, for $399.

After setting up your website, you'll need a shopping-cart software program or service so you can take orders, calculate shipping and sales tax, and send order notifications. This costs about $29 to $79 per month. The most popular options include GoEcart.com, 1Shoppingcart.comand ShopSite Inc.

Your next step should be to obtain an internet merchant account from your bank, allowing you to accept credit card payments online. If your bank turns you down, try others--and consider offering to move all your accounts to that bank to up your appeal. Or you can perform an online search for "credit card processing" to find a variety of companies offering accounts to budding online businesses.

You'll also need a payment gateway account, which is an online processor that hooks into both your customer's credit card account and your internet merchant account. The gateway verifies information, transfers requests and authorizes credit cards in real time. Leading providers to smaller merchants include Authorize.Net, CyberSourceand VeriSign.

An even less expensive way to get started accepting online payments is to use PayPal, an account-based system that lets anyone with an e-mail address securely send and receive online payments using a credit card or bank account. PayPal is free, but the company charges 2.9 percent plus 30 cents for every transaction under $3,000. The company also has a product called PayPal Website Payments Pro, which offers basic shopping-cart functionality and costs $20 per month plus transaction fees.

Of course, you still have to actually host your site. You can do it yourself on a computer that can be dedicated as a web server and that has a broadband internet connection, but such systems are costly and have limited capacities. Your other option: Use a web-hosting company. Many entrepreneurs swear by some of the bigger names in web hosting, such as Affinity Internet, Go Daddy Software, Hostway, Interland, iPower, Network Solutions, 1&1 Internet, Verioand Yahoo!. But some entrepreneurs prefer small, local hosting providers since they offer a direct contact--especially important if your site has an outage. Whether you use a large or small provider, basic hosting services--as well as domain-name registration and e-mail accounts--cost about $10 per month.

There's also a free option: Microsoft plans to launch a beta version of Microsoft Office Live early this year, providing small businesses with their own domain name, a website with 30MB storage, and five e-mail accounts, each with 2GB storage. Visit www.microsoft.com/office/officeliveto check for availability.

The Hosts With the Most

If you'd rather not build your site yourself, there are many hosted web or e-commerce solutions that can help. Web-hosting companies generally offer a combination of site-building tools; product catalog tools; shopping-cart technology; payment, shipping and marketing strategies; tracking and reporting capabilities; domain registration; and hosting.

eBay offers a storefront solution called ProStores. ProStores--which is available to everyone, not just eBay sellers--offers a full-featured, customizable web store. Unlike eBay Stores, ProStores sites are accessed through a URL unique to the seller and have no eBay branding. ProStores sellers are responsible for driving their own traffic, and items on ProStores sites sell only at fixed prices. The cost of a ProStore ranges from about $7 per month with a 1.5 percent transaction fee to about $250 per month with a 0.5 percent transaction fee.

Hosted solutions generally start at about $30 to $40 per month, plus setup fees of up to $50 per month. Some companies also charge transaction fees. Keep in mind, $40 will only get you basic functionality--bells and whistles cost a few hundred dollars per month.

Jacquelyn Tran, founder and president of Perfume Bay Inc., a Huntington Beach, California, company that sells cosmetics, skin-care products, perfume and home fragrances on its website, uses a full-featured e-commerce service from Yahoo!. Tran started Perfume Bay in 1999 and now offers more than 30,000 types of products, with 2005 sales of $8 million. During startup, Tran hired a web designer to build her site. Her total startup cost was high, coming out to $50,000. "This included advertising, a custom-built shopping cart--everything," she says.

A few years later, Tran decided to sign on with Yahoo! Merchant Solutions (then called Yahoo! Stores). "The pro-gram was easy to use, fairly customizable with a lot of great features, and fully integrated," says Tran, 28. "This was very important because we depend on having a really easy-to-navigate site." She also found a web designer through Yahoo! to help set up the new site. Tran saw a difference almost immediately: "We got more orders," she explains.

Tran chose Yahoo! Merchant Solutions' most expensive offering: Yahoo! Merchant Professional, which costs $300 per month, plus a one-time setup fee of $50 and a fee of 75 cents per transaction. Hiring a web designer costs an additional $2,000 to $10,000. Still, that's a lot less than it cost Tran to set up her customized site. "Looking back," she says, "I wish I had gone to Yahoo! first."

Sebastian Moser, U.S. director of technical development at Chesterbrook, Pennsylvania-based 1&1 Internet, says that before you sign on, make sure your hosted e-solution offers:

  • A full wizard-driven setup: Most merchants need a proper wizard-driven system that takes you from start to a fully operational, production-ready e-commerce storefront.
  • Many templates: An e-commerce solution provider should have many different templates to meet the needs of its varied customers and their products.
  • SSL encryption: The system should include the option of SSL encryption-a protocol for transmitting private docu-ments via the internet. This means your customers' credit card information and address is transmitted securely.
  • A database-driven system: This allows a system to be inte-grated with your customer database, so you can send out promotional e-mails.
  • Payment beyond paypal: PayPal serves the needs of a lot of e-tailers, but not all of them. The best hosted e-commerce vendors offer several payment gateways.

The eBay Way

Before starting an e-commerce site, many companies test the waters by selling on eBay. They have good reason: Today, the eBay community includes 168 million registered users worldwide. "The most obvious reason a new business chooses eBay is the access to our enormous customer base," says Jim "Griff" Griffith, dean of eBay Education.

To sell on eBay, you need to register and create a seller's account. Listing an item is an easy five-step process, but Griff suggests you do your homework first: Research eBay to learn what the market value is for your items and what eBay sellers of similar items are doing on the site.

When you list an item on eBay, you're charged an Insertion Fee ranging from 25 cents to $4.80, depending on the item's selling price. You're also charged a Final Value Fee if your item is sold. Final Value Fees start at 5.25 percent of the item's closing value.

You may also consider opening an eBay Store, which costs from $15.95 per month to $500 per month. eBay Stores let you sell your fixed-price and auction items from a unique destination on eBay. You can create customized categories, add your own logo or choose one of eBay's on-line images, and list item descriptions and selling policies.

Your eBay Store is promoted in several ways: Your listings and user ID include a "red door" icon inviting buyers to visit your eBay Store. The eBay Store Directory can also guide buyers to your Store. And you receive your own personalized web address to distribute and promote.

One company that has made the most of its eBay Store is Jeff Atchison Enterprises Inc., dba Dad's Toys. The Dardenne Prairie, Missouri-based company, which started in 1999, sells high-end gadgets such as flat-screen TVs--many of them on eBay. Founder and president Jeff Atchison set up a basic eBay Store in 2002. Why? "To add credibility to my listings," says Atchison, 41. "It shows people you are more of a permanent presence on eBay." It also allows Atchison to keep all his listings organized on one website that can easily be viewed by customers. Tactics like this have helped Atchison grow his company to an estimated revenue of $2.1 million last year.

Ready, Set, Sell!
10 tips to optimize your website for online sales

Once you've got your website up and running, you, an in-house IT staffer or an IT consultant should optimize it for best results. Lisa Schneegans, executive vice president of Praxis Software Solutions, a Minneapolis provider of internet solutions for small and midsize companies, suggests 10 ways to optimize your website:

  1. Test your site early and often. Plan ahead to ensure your site can handle heavy shopping traffic.
  2. Test your content for misspelled words, broken links, busted pictures, etc.
  3. Make sure images load quickly. A slow-loading page may drive customers away.
  4. Install, verify and test all patches and upgrades.
  5. "Load test" your site to see how much traffic it can support. A web maintenance service can tell you how you do.
  6. Create sample transactions. These can simulate expected customer traffic and web transactions. By running "synthetic" transactions periodically--say, every five to 15 minutes--you'll know if there is a problem before your customers do.
  7. Check the performance of your network provider. You can do this by looking at a site that is simi-lar to yours in your area but connected to another network.
  8. Add cross-sell and upsell opportunities throughout your site. This means, for example, suggesting table linens on the dinnerware, silverware and glassware pages. Offer "Top Gift Suggestions" or "Bestsellers" to improve sales and drive impulse purchase opportunities.
  9. Make it easy to find and contact live customer service. Providing an easy-to-find phone number on the site helps online shoppers feel more secure. Clearly state your company's return policy.
  10. Make your search function more effective. Your search function should accommodate common misspellings by returning similarly spelled items or your site's most popular search terms.

Taking Shortcuts
If you don't want or need a full-blown e-commerce site, check out the following quick, low-maintenance ways to sell merchandise and services.

Craigslist.org: Craigslist.org allows you to post items for sale for free. More than 10 million people use Craigslist each month, and there are more than 6 million classified ads and 1 million forum postings each month.

Gorage.com: Want to avoid paying auction commissions? Then try Gorage.com, an online garage sale, classified ads section and storefront shopping alternative that offers flat-rate pricing for listing items online, allowing sellers to avoid paying auction commissions. The pricing structure is based on the number of "selling spaces" a user chooses, which together make up the seller's "gorage." Gorage.com pricing plans start at $5, which gets you up to 10 selling spaces for 30 days, and they run all the way to $600, which buys over 2,000 selling spaces for 30 days. Gorage.com charges no auction commissions, which can help you save money and pass on savings to customers.

SwapThing.com: Have a limited amount of cash? Tired of being outbid in auctions? Then try SwapThing.com, a site that lets you swap or sell everything from music, art, trading cards, old schoolbooks--even personal services. You can list items for free; the site charges each party $1 for every item swapped or sold.

Melissa Campanelli is a marketing and technology writer in New York City.