By Anil Gurnani, ONCR
If you read, or even so much as glance at, any computer magazine or business section of the newspaper, you can’t help but notice the latest buzz words plastered about the pages – “Internet Commerce”, “Virtual Malls”, “Web Storefront”, “Online Shopping Carts”, “E-Commerce”, “CyberCash”, “DigiCash”, “CyberCoin” among many others.
A new world is being created out there right now – the World
Wide Web - with digital building blocks rather than traditional brick and
mortar construction. And it’s growing
like crazy. Real estate on the Internet
is being developed quickly. Banner ads
on the Internet are expected to touch the $6 billion mark by 2000. Large companies are investing big dollars
into building their web presence. Many
of them offer some form of Internet commerce.
K-Mart and WalMart are both putting up web storefronts where consumers
can purchase merchandise online. Barnes and Noble launched their bookstore on
the Internet following the lead from an Internet start-up Amazon. And it’s not only the big ones. Many smaller businesses have also joined the
foray into electronic commerce. Web
sites offering commerce are springing up everywhere. If you own a small
business, or are managing a large corporation, undoubtedly, the thought has
crossed your mind – “maybe I should launch my business on the web”. In this article and the series that follows,
I will cover the major issues that you and your company will undoubtedly face
as you build your electronic commerce presence on the web, and further
articulate on how to successfully navigate through the often complex world of
E-Commerce.
You may already have a promotional or informational web site, but it’s often tough to make the leap into launching your business on the web because you are not sure what you’ll gain by doing so. But here are a few things that will help you make that decision.
a.
Do you already have an established business outside the web?
If you already own a profitable business, it’s often easier to establish it online. If you already have your basic infrastructure in place – i.e. supplier chain, customers, order fulfillment process, and inventory control, and an advertising budget, you shouldn’t have any trouble establishing your business on the web. You can easily set up a storefront, and start including your URL in all your media ads and external communication material. Also, get your URL registered with the major search engines. If you do not have an existing business, and you want to launch your business exclusively online, be prepared for some rough times. Like traditional business, an online business goes through its initial phase where it doesn’t make any money – and all you have are bills and expenses piling up. If you have an existing business that is profitable, you can support those bills/expenses from your cash flow until the online business itself becomes profitable. But if you are starting out on the web, expect to invest a substantial amount of capital to get going.
b.
Is your product a novelty, in the sense that it may be hard to find in
some places?
This is a factor that can bring you instant success on the
web. The World Wide Web has an enormous
reach (It’s “world wide” after all).
Coupled with this is the price factor. If you have a specialty product
that has a small price tag, typically between $10 and $50 per unit, you have a
grand formula for success. Launch it
online, register with all of the search engines, and watch the orders flow
in. Of course, you must have the
necessary means of fulfilling those orders or else those orders will stop
coming in just as quickly as they started.
The Internet is a very large community - yet at the same time a very closed one.
News on the Internet spreads faster than wild fire. When you put up your web- based store, many
people will simply try it out by ordering one or two products. After they
develop enough confidence in your ability to deliver, they will start placing
larger orders. Examples are CDs and/or
videos - especially those catering to non-English speaking people. In many places of the world (including places
within the
c.
What is your target audience – i.e. who is actually going to be buying
your product?
People from all places, in all parts of the world, are now accessing the web by the hundreds of thousands, but you still need to ask yourself this question. If your target customer is going to be somebody who’s not likely going to have access to a computer a majority of the time, obviously it’s not going to pay to place your products online. On the other hand, if you expect that your products will be well received by the online community, you should consider making the move and expanding your reach.
d.
Are you willing to learn, or hire the expertise needed to work on your
web site?
A web site that rarely changes is definitely going to lose customers and traffic quickly. The nature of the web today is all about dynamic content and information. The ease at which pages can be modified and updated with fresh content provides visitors with new experiences upon every visit. And with more-and-more databases getting hooked into the web for serving up content, the dynamic nature of the web increases evermore. If you are not familiar with the process of creating HTML pages or tying a database into your site, you will need to either learn how to do it, or hire someone who can manage it for you on an ongoing basis. It is a common misconception that the web design/development work ends after the site is up and running. This is not the case. If you have a web site, it will need regular updating and maintenance. You will want to change the design and the content often to keep people and customers interested and coming back. So be prepared to learn at least the basics of web page layout and design. There are a number of products out there that can help you do this easily. Or be prepared to hire a “Webmaster” who can manage your site on a permanent basis.
e.
Do you have the capital?
Although the costs associated with setting up a traditional business dwarf the total costs involved in setting up a web based storefront, it’s still a significant investment. Especially if you are new to the web, and have been enticed by those ads that offer $25 (or less) per month web hosting accounts – you are in for a surprise. Those $25 per month accounts expect you to know everything, and to do everything all by yourself. You will need to do it all including web page design/development, any store front integration, setting up your merchant account, accepting credit cards online, automating the order taking/fulfillment process, automating the credit card payment settlements, and the list goes on. In fact, even very basic support for a few of these things will cost much more than $25 a month. For example, the average price charged for web hosting including support for online credit card transactions runs around $100 per month. In summary, it’s not as inexpensive as it appears to be – there are lots of hidden costs so be careful. It takes anywhere from one to four months before you start seeing any reasonable traffic on your site, and anywhere from three to six months before you start recognizing any revenue from the on-line business. And profitability may take much longer.
OK, so now that you have made the tough decision to launch your business on the web, what do you need to get started?
Quite a number of things have to fall into place before you can actually do any business on the web, so hold that excitement!
Authorizing credit cards over the Internet is not a necessity, but it will greatly reduce your workload. In order to process credit card transactions online, you’ll need a merchant account and a payment service that lets you authorize credit cards over the Internet. CyberCash is one such service. Although it’s not the only one, it is perhaps the most popular one out there today. Many banks give you merchant accounts that come with the CyberCash processing option, but it’s a good idea to check with your merchant banker to make sure that they work with the CyberCash payment service.
After you have your merchant account ready to go, it’s time to look for a Web Presence Provider (WPP) or Internet Service Provider (ISP) that will host your web site. There are a large number of WPPs out there, so it’s important that you do your homework. Just a quick search on Yahoo for “Web Presence Providers” will bring back some 10,000 listings with more new startups springing up every day. It’s not exactly easy to find the right WPP for your particular needs. The larger ones are too busy with backlogged work and don’t have time for smaller accounts. The earlier pioneers tend to be anchored with older technology (T1 lines) and therefore offer slower access. The new startups have cutting edge technology (FiberOptic OC12’s), but don’t necessarily have the experience and expertise to setup and administer web sites that involves integrating with technology like CyberCash and SSL.
The process of selecting the best WPP for your business goes hand in hand with the process for choosing the software for creating your storefront. Many WPPs “bundle” in a shopping cart package (and other simple tools like guest book, email forms, order forms, among others) with the account. However, you are responsible for customizing it to fit your needs. All shopping cart packages are not created equally, so it’s wise to get a good grasp on the one your provider offers before you decide to sign up. Price alone is not the criteria here. There are services to choose from that start as low as $50 a month, and go as high as $5,000 per month. Depending on your requirements, you’ll need to choose the service that best fits your need and your particular budget.
Allaire’s HomeSite is an authoring tool that lets you create advanced web sites from a simple, user-friendly environment. Coupled with ColdFusion Studio and ColdFusion application server, also from Allaire, developers are able to create sophisticated, dynamic, database-driven sites and storefronts housing some of the most advanced functionality for serving up electronic commerce. If you plan to use any of these products, find out from your WPP if they support the Cold Fusion platform. With the growing popularity of Cold Fusion, many WPPs and ISPs are offering Cold Fusion hosting. Also, check to see if they allow you to edit your own HTML pages, and any HTML files that they install - for example, pages that belong to a shopping cart program they provide. Some basic questions to ask when evaluating shopping cart programs are: Can I customize the look and feel and to what extent? Can I throw in some “Order Now” buttons anywhere on the site? Can I use it in a frames based design (where one frame constantly displays the shopping basket while products display in another frame) ? Can I use images instead of dull looking buttons on my site? How do I edit items that I want to place on sale? Does it integrate with CyberCash, or some alternate payment processing mechanism, for authorizing credit cards online? Can I customize the tax rate for different products? Can I customize shipping cost formulas? Can I use a fixed formula for shipping cost based on the dollar amount purchased? The list actually goes on-and-on. It really depends on what your specific needs are for your particular business.
Also there are a number of shopping cart packages available off the shelf if you’re not inclined to build your own. If you go for a packaged solution, the first thing to find out is whether or not it will work on the platform that your WPP provides for your site. If the package that you are purchasing will work only on Windows NT, for example, and your web site is on SGI-IRIX, that package is not going to do you any good.
Some other frills that come with web hosting accounts are real time audio and video used to jazz up sites. The technology is still bandwidth hungry, but works great and can add that extra spice to your site. You really need to ask yourself if it’s going to add value to your product or not? For example if you are selling music CDs or movie/music videos, it will definitely help if you put small clips of the recordings on your site for people to listen to, or watch before purchasing. However, you’ll need to weigh the costs of putting up such frills against the profits expected to return. Accounts that let you host real time streaming audio/video are usually more expensive than those that don’t offer it.
Now that you have your web site and storefront up and running, how do you go about promoting it?
Another major thing to consider is marketing your products and your site on the Internet. How do you market your products in a world where there are tens of thousands of sites and pages related to similar topics or products? The principles of marketing on the Internet are not really any different than marketing in the real world – it’s just the medium that needs to be taken into account. Exposure is the ultimate goal on the web. The more traffic to your site, the better chance of selling products and services.
The simplest thing that you can do is to exchange links with sites that compliment yours. Simply do a search on keywords that you think are closely related to what you are selling or offering, and identify all of the sites that you think could potentially drive traffic to yours. Then, make a request to their Webmaster or contact person offering them a link to their site in exchange for a link to yours. Many non-commercial sites will be happy to exchange links with you. There is also a free service from http://www.linkexchange.com that can help you increase traffic to your site. News groups and emails are another way to get exposure on the Internet. One warning though – many people would tell you to send mass-emails or send out notices on the Internet news groups. You need to be very careful when doing this. The one thing that is unanimously detested by almost the entire Internet community is unsolicited email, and misplaced postings in news groups. For example, a message selling a software product in the comp.os.unix news group will generate a lot of return flame mail. Internet news groups were created with a very specific purpose in mind, and there are policies regarding what can be posted and what cannot, on which news groups, etc. If you are unfamiliar with news groups, please read the news group “news.newcomer” before proceeding to post any unrelated messages in news group.
There are many ways in which you can announce your product and your online business to the world. To announce your product or site in Usenet News Groups, stick to the basic rules. Announce or sell only on the groups that are meant for sales-related messages. Or simply observe and look for an opportunity to post your message. For example, let’s assume that you are selling music CDs on the web. You could observe the discussions on rec.music news groups regularly. When you notice anybody asking for a particular CD to buy, send in your humble reply - “Yes, we do have that CD, and by the way, here are many other CDs that we carry on our Web site at http://blah.blah.blah”. In this case, your announcement will no longer be viewed as an unsolicited message to that news group. It’s in specific response to somebody’s question and relevant to the discussion at hand.
Also, there are a number of search engines (Yahoo, Web Crawler, Lycos, Infoseek, Alta Vista, and Excite) that will store URLs to pages on your site based on content and meta information gathered from your site. Many of the search engines employ what are called “robots” or “spiders”. These programs work through the nightly hours and collect information about every new site that springs up anywhere on the Internet. They will find your site and begin listing your site specifics in their large databases. Because there are a number of pages that contain similar keywords, these search engines use a formula to determine the relevancy of a particular site to the keywords that the user is searching on. There are a number of techniques you can employ to get your Web site to show up on the tops of these lists.
Another simple and effective way to market your site and products on the web is to provide relevant and interesting content, as opposed to just listing products for sale. For example if you were selling music CDs, put up a list of top 10 albums, top 10 singles and other interesting tidbits about the artists/CDs. Make your site interactive. For example, if you have a music CD business, put up some simple pages allowing people to vote for their favorite CDs, or give you the names of their favorite CDs so you can keep a dynamically generated page that is constantly updated as people place their votes. This approach can be used for a number of things. First, it gives people something to keep coming back to your site to see who’s on top of the list, and how their vote faired relevant to others. Second, it provides you with valuable information as to which CD or group is the most popular amongst your visiting audience. You can then adjust your inventory based on this information, or add new titles if you don’t already offer. For example, if you find that a particular CD is not selling well, you could place it on sale and start offering a discount to try and increase its sales. All of these selling techniques are taken directly from the “brick and mortar” business world, and can also be applied to the world of on-line selling.
.
Next month, I’ll talk about some specific techniques and approaches you can utilize for conducting online business that will help you create and manage your online presence in the opportunistic world of electronic commerce.
Anil Gurnani is the
Technical Director of Online Creation, Inc. – a Web development company based
in Tarrytown, NY. Online Creation offers
complete Web-based solutions including design, development and hosting for
small to medium businesses and corporations, and is the creator of the original
Cold Fusion CyberCash extension (CFX_CYBERCASH).
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