Electronic Commerce (e-commerce) is the buying and selling of goods and services over computer networks (predominantly over the Internet). It's changing the fundamental dynamics of how consumers and businesses shop, and by all accounts, e-commerce is a very big market. In fact, the U.S. Commerce Department predicts that goods and services sold over the Internet will soar to $300 billion by 2002 from about $10 billion in 1997.
That growth is fueled in part by a tidal wave of new users, ushered into the electronic market by faster and faster Internet access service. In addition, the increasing sophistication of online payment systems, and the advent of digital cash, secure transactions and authentication (methods for confirming that a user is who he says he is), are all contributing to the growth of e-commerce.
- But e-commerce is not right for every business. To be successful, e-commerce businesses must be fully staffed and able to provide buyers with a satisfying experience-including:
- 1) easy ordering process,
- 2) responsive customer service,
3) timely and accurate fulfillment of orders, and
- 4) accurate billing.
- In addition, successful online merchants are able to get repeat business from customers who flock to the Web for the sake of convenience, price or novelty.
For small businesses, the technical savvy and resources required for online promotion, order-taking and fulfillment can be significant. Just like a plan for your business off the Web, an e-commerce business plan is necessary to grow your business and will help you determine when and how your company should begin conducting sales over the Internet. The e-plan should include objectives, start-up costs, a market analysis and market strategies. Questions to be answered include:
-How will customers be handled? (i.e. who will be responsible for online promotion and maintenance of the site, order taking, and fulfillment? Will these duties be handled in-house or will you outsource them?)
-Which services/products will you sell on the net?
-Who are your customers and how will your site benefit them?
-How will prospects learn about your site?
-Do you need to hire more employees? Can you?
-What will be the return on your investment-increased sales, prospects, and/or customers? Greater customer satisfaction through better service, thus yielding more repeat sales? A competitive advantage?
There are generally two types of e-commerce Web sites:
Passive: A basic Web site is created simply to let online users know what products are available. This is more like an advertising medium. A customer still has to contact the store by phone, e-mail or in person to place an order. This type of site can be relatively easy to launch; however, the potential for increased revenue is limited since the customer must still contact the retailer personally to transact a sale.
Active: Another type of Web site actively allows the customer to place an order online over the Internet. If this type of Web site is chosen, special software and hardware must be installed. To sell directly from your Web site, you first must have a user-friendly front end that enables customers to find and order your products. You also need a back-end infrastructure that supports transaction processing, fraud screening, order fulfillment, warehouse integration, sales tax calculation, customer support and other critical business processes. Additionally, you will need to obtain merchant status to be able to accept credit cards.
The type of site you choose will depend on your industry, the needs of your customers and your company resources. One way to determine how far and fast your company needs to implement e-commerce is to test the waters. Get a sense from your customers about what they want by taking one or more of the following steps:
- E-mail alerts. Send a regular electronic newsletter to a controlled list of preferred customers, notifying them of new products or service offerings, special offers, new ways to use your product, etc. Embed links back to your Web site for more detail. Measure customer responses regularly.
Customer service. Start off with a simple list of Frequently Asked Questions and answers on your Web site, and supplement it with a system for answering additional questions via e-mail.
Online catalog. Allow customers and prospects to browse a selection of your products on your Web site, including product specs, prices, availability and delivery schedules. Even if they can't order online, they can send in orders by e-mail, fax or phone.
Once some of these features are up and running, analyze the feedback you're getting. Are prospects sending in questions about your products or services? Do customers enter orders based on the e-mail alerts? Do they ask for direct online ordering from the Web site? Why or why not?
If, after all your planning and research, you decide to sell items directly from your Web site, you will need to determine whether 1) to build an in-house system for online ordering, or 2) to outsource with an e-commerce service provider. For many online retailers, especially small companies and start up entrepreneurs, outsourcing can be a much more cost-effective, lower risk alternative. Outsource providers can supply everything you need to sell and distribute your products via the net, covering any or all of the following areas:
-Sales tax collection
-Channel sales tracking
-Call center services
Search the Web to find e-commerce out sourcers. Prices and services vary widely so shop around and check references of various service providers.
Online Credit Card Transactions
Payment by credit cards for online orders can be handled manually or may be automated. Manual credit card processing is a good option only if you already have credit card capabilities for your business and are simply testing the e-commerce waters. For manual processing, e-commerce sites are set to send e-mail at the time orders are placed that contain credit card information. That information is then processed manually through your existing credit card system. Sales volume must be rather low for this type of payment system, however, or you'll find yourself spending more time processing credit card orders than managing your business. A significant drawback of manual payment processing from the perspective of the consumer is that e-mail based credit transactions are not encrypted. Therefore, it is up to the merchant to reassure customers that they are operating in a secure environment.
Automated online credit card transactions make payment of online orders easy for both the merchant and the customer. In addition, online credit card information is encrypted- in each step of the process, making it very safe for consumers. However, it is a more expensive option than manual processing. Your Web site must be designed to conduct automated transactions which may require special software, and you must work with various services providers (merchant banks, credit card gateways, ISP's, etc.) to enable secure and timely automatic processing of credit card transactions.
Like regular malls, cybermalls are collections of online stores where mall merchants benefit from the promotional and support services of the mall owner. Usually cybermall Web sites host Web pages of online stores that have something in common-the type of product or service, geographic location, etc. thereby creating a one-stop shopping experience for the consumer. For merchants, there are various advantages and disadvantages of locating their Web site in a cybermall.
Availability of the mall's built-in purchasing system, including secure credit card processing and shopping cart software
Bundled web site development and maintenance services
Online and offline advertising by the mall owner to increase traffic to the site
Existence of "anchor sites" (just like a real mall) so other shops benefit from traffic the anchor site attracts.
Lack of traffic to many cybermalls (Web browsers have access to many search tools to find the products/services they need so they may not need to rely on malls to find worthwhile sites)
No control by mall merchants over other companies located in the mall. Other mall sites (i.e. "tenants") may not be a good fit and may not attract desirable types of customers)
Costs to join cybermalls may include high monthly rental fees as well as commissions on sales
There are literally thousands of cybermalls, many of which draw little or no traffic. Before getting a Web site (or link for an existing site) in any cybermall, verify the following:
- --On and Offline Promotion. Successful malls will use both online and offline marketing methods. Ask specifically how the mall is promoted.
--Verifiable Traffic. Find out how many visitors are visiting the mall's home page each month-these represent potential prospects for your storefront. Also, make sure you're not paying too much for expected traffic in comparison to how many other storefronts in the mall are competing for that traffic.
--Secure Credit Card Transactions. It is imperative to ease the consumer's mind about security. Without online security, your sales potential is dramatically impaired.
--Themes or Categories. Check into the categories in the mall. Do any fit your business? Are there several stores in that category? If not, you may be placing your site in a mall with the wrong demographics.
--Maintenance Fees. Check into fees for updating and maintaining your site. Are the fees reasonable? Are there updates you can do yourself?
Portions excerpted from, Small Business Computing and Communications, August 1999 and Home Business Magazine