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.

Design and Navigation

Good websites begin with a good design that is simple to use. The graphic design and content on the homepage should grab the consumer's attention, and the interior pages should be easy to navigate. Information must be easily found and should be expressed in the "language" of the customer, rather than the company's internal lingo.

Here are 10 simple tips to consider when deciding on how the site will look and how customers will navigate through it:

• Immediately tell visitors on the site what the company does.
• Get users to the information they want in two clicks.
• Consider including headers and links that give the store's name, and show a "tree" branching from the homepage to the current page. Visitors should know where they are within the website at all times.
• Allow visitors to find answers to questions easily.
• Incorporate sufficiently large fonts and images, as well as audio descriptions where appropriate, so that content is accessible to users with disabilities.
• Pay special attention to the quality of information, and ensure that the text is written well and spelled correctly.
• Use buzz words sparingly.
• Include a link to the homepage on every page so that in one click, users can be led there.
• Develop visuals that are useful, not flashy and distracting. Useful visuals include illustrations or photos of products, graphics that separate categories of products, or maps with directions.
• Determine which technologies are appropriate and which are overkill. For example, developing a landing page in Macromedia's Flash technology--one that allows for complex animation and graphics--may be a nice design feature. It will become prohibitive, however, if users have dial-up, a traditionally slow internet connection speed.

Product Marketing on the Website

The most important step merchants can take to sell almost any product online is to include a lot of photos. Online shoppers expect to see what a product looks like, especially since they can't pick it up and examine it before making their purchases. Merchants should use photos showing their items from a variety of angles and, in some cases, position them next to something else to show the relative size (a cell phone the size of a lipstick, a bench that's knee-high).

When formulating a product marketing strategy, consider the following:

• Avoid over-describing or over-selling offerings on the site. Information should be useful to the shopper, bringing out all the positive benefits of the product or service in a conversational tone.

• Offer complementary products or partnerships to bolster a store's offerings. Businesses that don't carry a wide variety of products often partner with other merchants to offer complementary items.

Attracting New Customers Online

There are several methods to open up a site to new visitors--search engines and e-mail communications have become popular choices in an online marketer's arsenal.

Search engines. With hundreds or thousands of competitors, how can a business get its product upfront in online search engines? Gaining a listing in the first page or two of a search engine's results is often considered the "Holy Grail" of e-commerce. So, how do merchants get to the front of search results? There are two approaches to ensuring that links to your company's website appear high on a search engine page: "natural search" and "paid search."

To rank highly in natural search, the content on your company's website should include the keywords a consumer might type to search for what you offer. These keywords should also be included in the links to your website from other websites. For example, if you own an online jewelry store, you may want your company's website to show up when a consumer searches for the words "diamond earrings."

There are various strategies to improving your company's rank in natural search. Most are legitimate, but there are some vendors that don't comply with the rules and regulations that the search engines have in place to ensure honest marketing. If you decide to work with a third-party to implement a natural-search strategy, be sure to check references, look at other companies they've worked with, and make sure they are forthright about their policies on working within search engine service agreements.

For paid searches, companies get to the top of search listings the old fashioned way--they buy their way there! A company called Overture, for example, allows businesses to suggest keywords that relate to their products and services, to create a description and even to choose a geographic area that they want to reach. The company's listing appears high in the results of search engines like Yahoo! and Lycos, and the merchant is charged a fee each time a visitor clicks on the listing to get more information.

One of the most popular search engines, Google, also has a cost-per-click pricing plan based on keywords. Here, business listings (called Sponsored Links) with short descriptions appear next to the list of related search results, attracting attention and clicks.

Business owners should explore a variety of search engines to see which kind of program works best for their products or services.

E-mail marketing. If done correctly, e-mail marketing can deepen customer relationships and add a personal touch to the sales process. Carried out improperly, an e-mail campaign can turn a customer off to your business forever.

E-mail newsletters for customers who "opt in" (request or otherwise sign up for them) are a terrific marketing tool for online businesses. Rather than being a hard-hitting price-and-product flyer, an online newsletter ideally provides useful information and/or news relating to the company's lines of business. A popular outdoor and camping-gear store, for example, sends its customers a newsletter with information on camping trips and outdoor activities. As an incentive for opting in on the company's website, the store offers new subscribers a coupon for 10 percent off their next order.

In fact, e-mail newsletters commonly are used to promote special offers or discounts to their subscribers. They are an inexpensive way to place a company's brand and products in front of a highly receptive customer base that already has demonstrated interest by signing up for the newsletter. And because it's in digital form, the business has no printing charges for an unlimited number of newsletters, a big advantage over paper publications.

Understanding Technology Needs

Now that your business has a plan and a strategy for its online store, what do you need to build it? Just as with a brick-and-mortar store, the first two lines on the checklist are a name and a location. In cyberspace, they're usually the same thing. The address of the online business is expressed as a URL (Uniform Resource Locator). Usually the address is a name that ends in dot com (.com), which indicates a "commercial" site, or dot org (.org) for an "organization." If a business is lucky, its address will be the same as its company name or a close reflection of it.

Staking a Claim in Cyberspace

Businesses can register and claim a URL for a small annual fee. Two of the most popular sites for obtaining a URL are www.register.com and www.networksolutions.com. The URL, however, is simply the address--the entrepreneur will need a piece of property that the address defines.

That plot of cyberland is the space on a computer where all the electronic files that compose the web site will reside. Numerous commercial "hosting" services, called Internet Service Providers (ISPs), will rent businesses space on their large computers (called servers) for a nominal monthly or annual fee. Some mid-size and larger companies host their sites on their own in-house web servers, but they remain responsible for maintenance of the site and the hardware to be sure it's accessible 24/7. An ISP can also speed the time it takes for online shoppers to download your web pages.

Online Shopping Carts

Another requirement for efficient online store operation is a virtual shopping cart. This actually is an electronic order form that serves as the first step in the fulfillment process. Its purposes are to securely:

1. Enable shoppers to browse and select items, and then later decide which ones they want to purchase.
2. Display a summary of items that the shopper has selected.
3. Provide links to information for the shopper to consider before confirming the purchase, such as the return policy or the description page for each product.
4. Allow the shopper to change the quantities ordered or remove items before checking out.
5. Enable the customer to navigate to the checkout process or to return to the store to choose more items.

This shopping cart software allows merchants to accept orders for multiple products from their websites. It automatically calculates and totals the customer's order, including tax and shipping charges. Some shopping carts are even integrated with the fulfillment capabilities of UPS or the U.S. Postal Service to make the order acceptance and shipping process much smoother.

There are several services that offer secure online shopping cart technology. PayPal, for instance, offers a free shopping cart program to its merchant members. At checkout, shoppers indicate that they want to make their purchases through their PayPal accounts, and the process rolls out automatically. Other application service provider (ASP) companies also keep the merchant's shopping cart on a third-party site, where it is secure and regularly updated. Securenetshop.com and GoMerchant.com provide this type of service for a monthly or annual fee. Popular software packages that can be purchased include Miva Merchant and QuickStore.

Turning Shoppers into Buyers

Online shoppers are finicky. Those who aren't experienced customers--who haven't yet discovered the convenience of two-day delivery or easy returns--tend to be skittish during the entire shopping experience. A well-planned, secure shopping cart should make the checkout process easy, clear and flexible for the shopper.

Jupiter Research found that 54 percent of internet shoppers have stopped buying from certain online stores in the middle of a transaction because they have concerns about service, delivery, shipping or handling. Other estimates range as high as 60 to 90 percent abandonment of shopping carts on some e-commerce sites. Sometimes it's because of confusion; other times, frustration over the process or lack of information. Some shoppers just use the cart as a place to hold items they're considering and, in the end, never buy.

When setting up an online shopping cart for a business, consider the following tips:

• Don't force the shopper to go through a lengthy process of logging in, creating passwords and filling out voluminous forms. Privacy issues and complexity of the process can lead the buyer to end the process before even registering.

• Include a link to a page detailing customer service policies, such as warranties, delivery guarantees, return policy, and shipping fee structure.

• Provide "help" tips, a frequently-asked-questions (FAQs) page and a toll-free phone number for consumers to use if they have problems or questions relating to checkout.

• Offer assurance that credit card information is protected through encryption and a highly secure online transmission process.

• Allow customers to call up information about the items being purchased without having to leave the checkout page, with links to windows that contain the product information page.

• Make it easy for buyers to add or remove items, change quantities, or select different models and styles of a product once they are on the checkout page.

• Indicate the progress buyers are making during the checkout process, revealing the number of steps involved, showing which step they are on at any given time and allowing them to return to earlier steps to make changes.

• Show the shipping costs at the front end of the checkout process. For some products, these costs determine whether the shopper will buy online and the quantity they will buy.

• Clearly indicate a button or link to move on to the next checkout step and make it more prominent than other links on the page.

• Provide multiple options for payment, including credit cards, checks or an online payment service.

Accepting Payments Online

Cash flow can make or break a company, especially in its early stages. That's why many online businesses often encourage credit card payments, although it's also helpful to give buyers alternative opportunities to pay with checks and money orders. Offering a variety of methods for shoppers to pay online increases the opportunity for these buyers to pay in the method they prefer.

Accepting payments online increases revenue and cash flow because money goes into the account immediately. Even more compelling is that there are more than 1.2 billion consumer credit cards worldwide. Credit card payments aren't returned for non-sufficient funds--and credit card holders tend to do more impulse buying than those who write personal checks.

Businesses have several options when setting up an e-commerce function and accepting payments online, which include:

Processing payments through a merchant account. To accept credit cards online, a small-business owner must first apply for a bank merchant account and then find a way to process transactions. At a brick-and-mortar store, the processing takes place when a card is swiped through the card reader. At an online store, the processing is done when a shopper types in the credit card information, which is then verified by a merchant account processor.

During most online checkout flows, a shopper is asked which method of payment is preferred. If the shopper selects a form of credit card payment, he or she will be redirected to a secure page within the store to enter the credit card information. After the shopper selects "submit," the credit card information will be sent to the correct merchant account, where it will be verified and either accepted or denied by the merchant account service provider.

Merchant accounts may have drawbacks for some small-business owners, however. Most charge set-up, monthly and per-transaction fees. Additional fees may also be involved if a business owner has a pre-existing account for a physical store, and wants to convert that account to accept payments online. Moreover, some banks won't approve small online businesses for merchant accounts, considering them high-risk operations.

It may take 30 days or more for a merchant account to be approved and the integration process can be burdensome for business owners to do it themselves. Fortunately, the growth of online sales has given rise to an entire industry of merchant service bureaus that will grant a merchant account and everything else needed to accept online payments.

Integrating an online payment service. If a business doesn't have access to a merchant account or the fees are just too high, one solution is an online payment service, like PayPal. PayPal allows businesses to accept credit-card transactions and payments safely and conveniently. It also allows buyers to send payments directly from a bank account.

When a buyer indicates the desire to use PayPal during checkout, that person will be directed to sign into or sign up for a PayPal account to then complete the transaction.

For merchants there may be benefits for offering PayPal. There are no setup charges, monthly charges, minimums or gateway fees. PayPal charges a per-transaction fee, which ranges from 1.9 percent to 2.9 percent plus 30 cents per transaction. PayPal also actively fights chargebacks on behalf of online merchants. If a transaction meets all of the requirements of PayPal's Seller Protection Policy, then the merchant will not be liable to for the chargeback by the customer.

Ensuring Transaction Security

Online entrepreneurs have a responsibility to do all they can to ensure their websites offer a safe shopping experience. But they don't need to be information technology security experts to have a secure site--the techies already have developed security measures that any online small business can adopt.

There are services in this space that bring together all the security measures that an online small business needs to have in place. PayPal enables businesses to set up a website that accepts credit cards without seeing or having to store the account numbers of its customers. This makes buyers feel even safer because they don't have to share their personal or financial information online. Gateway services like Authorizenet.com, CyberSource or Chase Paymentech Solutions will also handle credit card and electronic check payments securely.

Developing a Privacy Policy

Consumers' fears of identity theft and the aggravation over spam make privacy policies essential for online businesses. Customers expect merchants to boldly exhibit their privacy policies on their stores' sites, with links from the catalog pages and the shopping cart.

A privacy policy should describe how data, such as the customer's personal contact information and financial details, is collected and used. Consumers should be given the opportunity to opt out of having their information sold or distributed and of receiving e-mail newsletters or other company communications.

An online business must post its privacy policy--and stick to it! This type of policy shows that the business takes customer privacy seriously and will use information it obtains in a responsible way.

Businesses can obtain a "seal of approval" for their privacy policies through a company called TRUSTe. For an annual fee, this California-based organization awards use of its seal to e-commerce sites that adhere to its privacy principles and comply with its verification and dispute-resolution processes. If a business doesn't have a privacy policy, TRUSTe offers models that can be adapted and even a privacy policy writing "wizard" to help with the process.

Starting an online store may seem like a daunting challenge, but the reality is it's never been easier. Today, many of the processes of moving a business online have become standardized and even automated. Business owners discover an entirely new meaning in their business lives when--through the process of building an online store--they realize they've optimized their new-found markets and won the trust of internet consumers.

The Internet, in fact, can work for any entrepreneurial personality. If an entrepreneur thinks life is just a bowl of cherries, we'll find him selling cherry bowls. Never have entrepreneurs had such a clear, easy and relatively inexpensive opportunity to reach a global marketplace for so many products and services. It's amazing how a business can thrive when its customers only need to lift a finger.

10 Steps to Move a Business Online

1.Competitor landscape review. Look at competitors online and decide how you will differentiate yourself from them.
2.URL. Register a domain name.
3.Web development. Hire a web site developer or buy web development software, then determine site design and navigation.
4.Technology. Buy a server or find an outsourced Internet service provider.
5.Payment. Find a secure online order solution, including shopping cart and payment service.
6.Protection. Fight viruses and protect the site and computers with anti-virus software.
7.Marketing. Develop a marketing plan, which includes determining and publishing customer service policies.
8.Contracts. Establish alliances with crucial partners, such as product suppliers, search engine optimizers, fulfillment services, shippers, web technicians, marketing or public relations firms.
9.Product. Create an online catalog or listings.
10.Maintenance. Keep inventory, catalogs and listings up to date for your customers.

This article was adapted from The Entrepreneur's Guide to Doing Business Online, a 30-page PDF produced by Entrepreneur and PayPal.Download the entire PDF guide here.