YOU'VE DECIDED TO HANG OUT A VIRTUAL SHINGLE. NOT A BAD idea, considering that industry analysts predict online business transactions will more than triple in the next four years, with revenues growing from $120 billion to $1.3 trillion. Constructing and maintaining an electronic storefront, however, can be particularly intimidating for a small business. With so many e-commerce products and services available, it's easy to get lost, literally and virtually.
Before launching a site, it's a good idea to seek advice from an attorney with experience in the field. While this may seem like an expensive proposition at first, it could save you money and legal hassles in the long run should you decide to, say, expand the business, sell it, or take it public. "First, companies should consider exactly how and when they are going to start making money," says Paul D. Swanson, an attorney at Los Angeles-based Morrison and Foerster (www.mofo.com) who specializes in Internet legal policy.
Obviously, building the right foundation for a profitable e-business requires careful consideration and a solid strategy. It's also important to note that a full-service transactional Website may not be right for your business. If you aren't offering products or services that lend themselves to the Web, or if selling online is not a key objective for your company, consider setting up a "brochure" site instead.
A brochure site simply promotes your business and helps create foot traffic at your office or store. With this site you're not selling products or services online, but instead are providing basic information to customers, such as your business address, the types of products and services you offer, directions to your offices, and contact information.
There are several basic steps to complete before transacting business on your Website. You may consider selecting separate vendors for each step (such as site design, setup, and transaction processing) or you might prefer a vendor that provides an all-in-one solution, such as Microsoft's bCentral (www.bcentral.com) or IBM's e-business hosting service (www.ibm.com/services/web hosting). Choosing one vendor that offers a suite of e-commerce services can simplify the process and save time and money.
So, before you jump on the cyber-bandwagon, we suggest the following guidelines:
CHOOSE A DOMAIN NAME
Your name in cyberspace defines your business. Once you've chosen an appropriate dotcom address, make sure it's available. If your dotcom is taken, first consider using keywords or a combination of keywords to represent your company and services. If those are taken as well, consider a dotnet or dotorg domain, or one of the seven top-level domains recently approved by ICANN (www.icann.com), the Internet agency that catalogs and maintains a database of domain names.
You can also obtain a domain name directly from one of many registrars, such as Network Solutions or Register.com. They charge roughly $35 a year to register and hold the name. An Internet service provider or your e-business service provider (eBSP) will sometimes perform this task for you. For a list of approved registrars, go to rs.internic.net.
BUILD YOUR STORE
Once you decide on a name, now comes the hard part: getting the site up. If you have the skills and want to create your site yourself (either by purchasing a related software package or by using a downloaded store-building package), don't forget that you will not only have the task of construction, but also the ongoing responsibility of maintaining and updating it--as well as addressing browser compatibility issues. You might consider hiring a Webmaster to maintain the site if you plan to go full steam.
For many smaller businesses, outsourcing is the most viable and cost-effective option. Establishing your own operation is complicated and can take several months. With a hosting service, setup can take less than an hour. It will also speed the time it takes customers to access information on your Website, improving their experience and creating, hopefully, repeat visits.
Even with a Web-building service provider, however, you still must consider several issues to ensure that the site meets your vision and needs. What products/services do you sell? What do you want your site to look like? What sorts of customer service tools are important? What forms of payment do you plan to offer? How are you going to calculate tax and shipping charges? Are there any legal implications for the products you sell (for example, are special licenses or permits required)?
Next, just because a particular product sells well in retail stores, doesn't mean it will sell well online. Many products cannot be sold easily over the Internet because of high shipping costs, product-liability issues, or the need for personal salesmanship if they're big-ticket items. Before opening your store to the public, make sure you've evaluated your products' suitability for online sales.
After making these decisions, start developing a product catalog. You'll need to provide information about each product, such as description, color, size, and price (and combinations of all these factors). Make sure the catalog is expandable, so that you can add to it as your business grows. Some providers charge by the size of the catalog, so read the fine print and make sure their services are expandable as well. After the product catalog is completed, your Web-building vendor can publish your Website online.
If you decide to outsource the construction of your site, it's important to have an agreement in writing, says Swanson. "The agreement should include clear due dates for deliverables as well as acceptance/rejection policies." And most important: Make sure you own all rights to your site's content--and copyright it.
CASH OR CHARGE?
You've got your product; you've got your catalog. Now sit back and watch the money roll in. Not so fast. First, you have to provide your customers with payment options. You'll need software, a merchant account, and payment-processing services. You will also need cash register software to help calculate sales taxes as well as shipping charges.
In order to accept payments, you must first open a merchant account. Sizing up the dozens of different merchant banks to find the right one can be an exhausting process, but a fully integrated solution will help you apply for and obtain a merchant account online in a matter of days. Once you have established an account, your merchant bank retains the services of a payment-processing company to "acquire" transactions of your customers, secure the funds from the customers' credit card issuer, and place that money into your merchant account.
If you want to accept payment by check, PayByCheck.com offers both electronic check processing (ECP) and paper drafts. ECP transactions are settled through the Automated Clearing House (ACH) network. If you're in the business of selling content rather than goods (say you're an online publisher or musician), another payment option is Qpass (www.qpass.com), which facilitates payment for online content.
For some online stores, the point of sale is not online. Many shoppers are "just looking," using the Web to browse through a site, researching and comparing values, but ultimately placing their order over the phone. Some folks are still wary of entering their credit card numbers onto a Website, even though security is assured.
There's a misconception that credit card-driven e-commerce is fundamentally unsound because it's possible to hack through browsers and attack the payment system. Consumers don't realize that it's a lot riskier to hand your credit card to a clerk in a store. Here's why: To accept credit card orders on the Net, a business must have a secure server, that is, one running software capable of establishing a secure connection with a customer's browser using the Secure Sockets Layer (SSL) protocol. This technology encrypts all transmitted information. If this technology isn't in place, potential customers won't (and shouldn't) enter their card information at your site.
Therefore it's important to make sure that whether you host your site yourself or use an eBSP, customer information is protected. If you outsource your orders, make sure that the company you use has security in place as well.
Another measure that may ease customers' stress is making a phone number available for ordering, should they opt out of the online process. An 800 number (or any tollfree number) is essential. It helps convey to the shopper that you are a reliable source; and having someone on the other end of the phone to provide customer service helps boost confidence.
KEEP IT SIMPLE
As a small business on the World Wide Web, you might be tempted to launch the flashiest site, with lots of bells and whistles--sound, video, animation, the works--to draw attention to your site. Think simplicity instead. That is, think of the consumer who wants to shop your site on their slow 486 PC with a dial-up connection. Will they get frustrated and leave your site without making a purchase? Flash animation and graphics are great, but if your site doesn't load in, say, 20 seconds, or requires the customer to download plug-ins, you'll likely lose the sale.
Cluttered Web pages that are difficult to navigate can also cause an online store to fail. If you're serious about building a successful e-commerce site, make sure that your site works to your advantage. Avoid overengineering it by identifying the most basic goals of your online store and implementing those first.
Once the basic elements are in place--design, payment options, security, and customer service--you can always add on the bells and whistles later. By then you should have established a solid customer base.
Editor's Note: This is the first of a three-part series on doing business online. Next month, look for Part 2, which will focus on marketing and selling your products online.
Before you start selling online, make sure you've covered all the bases. Here are a few things you should do:
File a d/b/a (doing business as). Register the venture's name at the state or federal level.
Get a tax ID number. You'll need a tax ID number when filing returns, and it's useful when setting up a merchant account.
Set up a merchant account. A merchant account is required to accept credit card payments online. Some of the services we review in this article have partnerships with banks that can get you started.
Be prepared to deliver. Shipping can be time consuming and costly. Make sure you have a relationship with a shipping company and an order fulfillment firm before you begin selling.
Setting up a dream house
Company: The Dream House Location: Atlanta, Georgia
Gaile Southern has been able to combine her creativity and entrepreneurial drive to develop a thriving e-business called The Dream House (www.thedreamhouseonline.com). She markets gift baskets, styled in various designs, for business and social occasions.
Southern started out fashioning silk floral arrangements and topiaries as gifts, or for use as centerpieces, wreaths, and wedding decorations. Her creations were a so well received that friends urged her to begin selling them.
As sales increased, she daydreamed about diving full force into the business. In 1997, she finally acted on her dream and launched The Dream House. But first she did her research, then took the following steps.
Step1 Through classes at the Small Business Development Center at the University of Georgia (www.sbdc.uga.edu), Southern learned that since she was entering a very competitive business (a $54 billion a year industry, to be exact), it was important to develop strategies to set her products apart from the competition's.
"I did everything by the book," she says. "it was fun watching it all unfold. There is more to this than just throwing some items in a basket and sticking a bow on it."
Step2 Setting up a Website was a foregone conclusion. Southern researched Web-hosting services for several months before choosing Verio, a partner of America Online. There were several plans, ranging from basic text with no shopping facilities to shopping carts enabling the purchase of up to 250 products. She chose a midrange plan, which offered a secure shopping cart with data encryption to protect credit card transactions. There was also a 24-hour support line as part of the package.
For customers, ordering online is a breeze. And for Southern, it couldn't be easier. She's alerted by e-mail when an order is placed or her guest book is signed. She fills the orders from her 1,200-square-foot home office and ships them via UPS.
Southern consulted with an attorney during all phases of setting up her business operation, including the content of the Website where the company's policies are clearly spelled out.
Step3 She chose a local team, Cannon Fire Graphics, to build her Website. In addition to featuring photos and descriptions of available products, the site offers a reminder service. Southern prefers not to use banners or links to other businesses because she believes it is distracting. She does, however, include links for worthy causes, such as missing children organizations and breast cancer awareness education.
The Dream House's clients have included BellSouth, a local magazine that presents gift baskets to celebrity interviews, and attorney Johnnie Cochran.
As the business grows, Southern plans to introduce home accessories and eventually open a retail location called--what else?--The Dream House.
Free or fee? How the e-commerce packages stack up
E-commerce can involve a highly complex combination of options. There are Website building and hosting issues, as well as security and billing technologies, to name a few. Don't jump in feet first. Let a store-hosting service worry about fending off Internet hackers, as well as hardware and software issues that only the top computer networking gurus can handle. This way you can concentrate on selling your product while delegating much of the technical chores to others.
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|Date:||Apr 1, 2001|
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