Setting Up Shop

E-commerce is booming. Here's how you can get in the game.
Magazine Contributor
9 min read

This story appears in the August 1998 issue of Entrepreneur. Subscribe »

Being small and agile was one reason Holt Educational Outlet, a developmental-toy discount retailer, was able to initiate an e-commerce strategy relatively quickly. The 20-year-old catalog retailer in Waltham, Massachusetts, which has a warehouse that also functions as a retail store, decided to delve into the Internet last year. Unlike large companies that mire a Web project in meetings and paperwork, president and CEO Paul Holt's 50-employee firm took action quickly by hiring an executive who was excited about the Web site idea and ran with it.

David Lord, the company's new CFO and chief information officer, wanted to make Holt a major presence in the educational-toy market on the Internet. "We redeveloped our business plan and decided that e-commerce would be our core strategy," Lord says. "Because we wanted to compete with the big guys and grow nationally, and because we knew we didn't have the kind of money to invest in our own stores across the nation, we believed if we put the proper e-commerce plan in place, we might just be fast and aggressive enough to grow quickly."

Lord hired a team to help run his department and implement the company's e-commerce strategy. The team chose Microsoft as its main platform and bought several state-of-the-art servers. It also bought Microsoft e-commerce software and signed up for multiple IT phone lines, i.e. more powerful lines for faster connections. Finally, it integrated its accounting software into Microsoft's site server.

The Web site, which Lord says cost about $50,000 (not including employee salaries), was launched last October--nine months after Lord was hired. When a customer orders a toy from the site, the system enters the information into Holt's financial system, then fulfills the inventory, processes the accounts receivable information and completes the credit card transaction.

Holt says all the hard work has been worth it: His company is now considered a major player in its industry, with projected sales of $2 million this year. And it recently entered into an agreement with Playmobil USA, which provides Holt with the exclusive first rights of distribution to sell some of its toys online. Playmobil also benefits from the agreement through an aggressive Internet marketing campaign that utilizes banner advertising and online database marketing generated through Holt's Web site. "We'll be able to give Playmobil information about people searching for its products," says Lord. "Playmobil doesn't have to hire a customer service firm to question customers [about] the products they like; we can put a question on [the site] and have 5,000 answers for them."

Besides its success with Playmobil, Holt's Web site offers special features that children and adults are signing up for by the bucketload. For example, the site's search engine, Toy Detective, lets shoppers track down specific toys by criteria such as age group, type of toy and brand name. And the site's Toy Register lets children preregister for their favorite toys and receive via e-mail personalized news geared toward their interests.

Many small companies such as Holt are doing everything they can to jump on the e-commerce bandwagon. They understand that having an online store means a small company can look big without having to spend big bucks. If you're thinking about becoming one of those companies, where do you begin? Following are some products and services to give you a head start.

Melissa Campanelli is a technology writer in Brooklyn, New York, who has covered technology for Mobile Computing & Communications and Sales & Marketing Management magazines. You can reach her at

Choices, Choices

If you want to launch a Web site for your company, you can hire a Web site hosting company to house and maintain the server equipment, or you can start from scratch. If you choose the do-it-yourself route, there are several kinds of servers available that are geared toward small businesses. These include Microsoft's Internet Information Server 4.0, (, IBM's new Netfinity 3000 (, and Hewlett-Packard's NetServer E 50 (,). All three servers are priced between $2,000 and $3,500.

But buying the server equipment is only the beginning. You'll also need to choose a network infrastructure; the type you select will depend on the size of your business, how tech-savvy you are and how often you plan to modify your catalogs. Some good midrange packages that allow users to connect a virtual storefront to a database and generate reports are Cat@log Builder from The Vision Factory (, iCat Electronic Commerce Professional Suite 3.0 from iCat (, and Microsoft Site Server 3.0 Commerce Edition ( These packages cost between $1,495 and $9,995 and include features such as indexing, searching, and a virtual shopping cart (where your customers can drag products to a shopping cart icon before adding them up and paying for them).

If you're a beginner, some popular e-commerce software packages to check out are O'Reilly's WebSite Professional 2.0 (, Forman Interactive's Internet Creator 4.0 (, Peachtree Software's PeachLink (, Yahoo! Store (,), Virtual Spin's Cartalog (, and the newly released Online Merchant from Alpha Software ( Despite their simplistic approaches, these packages allow you to import HTML text into existing pages to customize your site as your business grows. Prices range from $0 to $799, and all programs are hosted by either the vendor or a partner ISP. While site-hosting fees are usually based on the number of items in your store, all start at less than $100 per month.

Even More Options

For an all-in-one solution, check out Encanto Networks' e.go Commerce ( This miniature Web server costs $1,295 initially, plus $49.95 per month. The system's features include Web store creation, order processing and electronic payment processing.

A new addition to your lineup of options is the AT&T Networked Commerce Services' eCommerce Suite (, which bundles a set of services, including Web hosting, a secure payment service and consulting services for site design and implementation. For $695 a month and a setup charge of $500, this isn't a bad buy.

For a product designed to make your Web foray as easy as possible, check out iCat Commerce Online. This service includes tools to create a simple storefront in minutes, and it offers features such as search indexing, and tax and shipping calculations.

ICat hosts the site through major ISP facilities running on iCat-owned computers and servers. This relationship allows the system to run 24 hours per day and offers customers secure shopping as well as a CyberCash option that makes real-time credit card authorizations and encryptions. Stores selling 10 items or fewer can be created for free; fees for larger stores are based on the number of items. A 50-item store is $49 per month, for example, and a store with 3,000 products is $349 per month.

Hiring a consulting firm is another option--and for small businesses with no MIS staff and a limited knowledge of technology, this may be the way to go. In fact, according to one recent study, one of the reasons Web commerce has been slow to evolve until now is that small businesses are afraid of the many components of Web stores, which must all work together seamlessly. Consulting companies are experts at putting all the pieces together, which is especially important if you plan to link your site to legacy applications, such as inventory and accounting systems. Prices for these services vary, but to give you one example, Snickelways Interactive, an e-commerce consulting company in New York City, charges around $50,000 on average for its services.

This is just a sampling of the many options available to help you get started. With a little research, even novices can join the ranks of entrepreneurs who have made the leap online--and never looked back.

Shopping List

hether you're doing it in-house or planning to use a consultant, there are certain key ingredients required to launch a transaction-based Web site. David S. Linthicum, chief technology officer of SAGA, an enterprise application integration company in Reston, Virginia, and author of several books and more than 250 technology articles for major computer publications, explains them:

  • Web server: All Web-storefront programs or commerce servers sit on existing Web servers. Entry-level products are designed to build sites hosted by a vendor or an ISP, eliminating the need to install or administer a Web server locally.
  • Catalog builder/store administrator: Web-storefront-creation software packages allow you to generate HTML-based product catalogs using information from a database. The more powerful packages can import data from Excel spreadsheets or database files; entry-level packages typically require you to enter this information manually. Good programs also offer administrative features, so you'll be able to do such things as create promotions and promote sales items.
  • Database server: Most Web stores have at least two types of databases: a product database and a customer database.
  • Virtual shopping carts: These allow customers to select items for purchase and continue browsing through the store before placing an order.
  • Order processing/security: Processing orders involves tasks such as calculating taxes and shipping costs, and processing payments. Some products integrate these functions; others rely on third-party components. Many products include SSL (secure socket layer) for securing transactions.
  • Site analysis/reporting: All Web-storefront packages should offer the same basic site analysis tools found in Web-server software for reporting the number of page hits. More sophisticated packages allow you to generate detailed reports on sales and customers.
  • Links to legacy systems: One of the toughest challenges of Web commerce is linking your site to legacy applications, such as inventory and accounting systems. Some midrange packages offer this capacity; e-commerce or Web consultants can help you set it up.

Contact Sources

Holt Educational Outlet, (781) 788-6000,

SAGA, fax: (703) 391-8290,

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