Intro to E-Commerce
As seen in
What You Should Know Before Opening Your Business' Web Site by William Van Winkle
You’ve heard the hype: E-commerce is the easiest way to boost your company’s bottom line. World Wide Web addresses for companies are all around you, on the radio, television, billboards, and even buses. Creating a Web site for your company gives your advertisers a potential audience of millions of consumers, with more pouring in daily. It gives someone across the ocean access to your goods and services as easily as someone across the hall. All you have to do is post information to your Web site, and, theoretically, the world will find a path to your door.
Of course, the whole process isn’t as easy as it sounds. No matter what medium you use, marketing takes hard work. With a solid knowledge of the basics of starting your E-commerce venture, as outlined in this article, you can start building a business that extends beyond your local area to the world of the Web.
E-commerce is booming. Wired News recently reported that spending by online consumers rose 97% in the second quarter of 1998, with $423 million in ad revenue for the same quarter, up from $214.4 million for the same period in 1997. According to Forrester Research, online sales should reach $300 billion in 2000 and $488 billion in 2002.
Many companies have seized their share of the online sales pie. Jeff Bezos started the legendary retailer Amazon.com (http://www.amazon.com) in a Seattle garage in 1994. During the first 16 months of operation, with no advertising except by word of mouth, the company grew 34% per month. Today, Amazon.com has more than 100 employees and a 17,000-square foot warehouse facility.
Amazon.com, the legendary online retailer, is one of the leaders in E-commerce.
With hundreds of millions of Web pages in existence, the Web is a big place. Simply creating a product page and posting it is just the beginning. Strategic promotion is essential to getting noticed. Further, not all products or services are suited to an online presence. As with former gold rushes, the Internet has its share of washouts. In mid-1996, Utne Reader opened its online version, the Utne Lens (http://www.utnereader.com), aiming to rack up some serious ad revenue. Unfortunately, readership of the non-mainstream publication never even reached 50% of the expected amount—a fact prospective advertisers were quick to note. In the end, the Lens lost thousands of dollars and laid off half its staff.
Ground Zero
You probably have pondered E-commerce for your business. What exactly can it do for you? How much time and money will it cost? Where do you start?
The first E-commerce lessons is understanding the large difference between increasing sales and increasing profitability. A company might use internal Web pages and E-mail to streamline in-house efficiency, thereby saving thousands of dollars without posting a single ad for sales purposes. By the same token, generating a sudden influx of orders from online marketing without having the internal capabilities to support such an increase may ultimately cost a business more money in cancellations and ill will than it generates.
So, before assuming E-commerce is all about sales, it’s important to examine other aspects. E-commerce as a whole falls primarily into four categories:
Information access. The Internet is filled with information sources, of which the World Wide Web is only the most prominent. Companies are always gathering information. They may need to obtain industry statistics, a new vendor, or facts about the competition. Customers also may need to seek product details from you.
Communication. As mentioned above, even E-mail plays a large part in improving a company’s regular operations. Previously, a graphics company might design artwork for customers, paying to print and then send the mockups to the client. Now, the company can send the same files as E-mail attachments so the recipients can easily print them. This saves expense and time for both parties.
Shopping. Most people think of retail buying when discussing E-commerce. But shopping can also apply to purchasing supplies from vendors. Ordering by telephone can lead to inaccuracies and misunderstandings, which would not occur when ordering from well-organized online forms.
Virtual enterprises. It is becoming increasingly common for non-competing companies to share information about common customers. Some companies, such as DoubleClick (http://www.doubleclick.com), make their business from gathering such “communities” and coordinating ad programs.
In preparing an E-commerce plan, you should take all these facets into account, while designating a focus for the online effort. Should your Web presence support existing customers or attract new ones? Should the public access it? Would your business benefit by becoming a primarily online venture?
Round Peg In The Round Hole
Jeff Bezos didn’t know he was going to start a bookstore while still a Wall Street executive. He only knew Web traffic was growing 2,300% annually and somewhere in the chaos was a product that would succeed. He made a list of top candidates; books took the number one position because they met several ideal criteria:
- High profit margin
- Millions of individual products in the category
- Negligible return/failure rate
- Established market presence and penetration
- Easy to warehouse with minimal vendor requirements
- Ability to offer significant discounts off retail
Further, think about your target group’s habits. Travel bookings are one of the biggest online growth businesses for two reasons. First, travelers want information about their destinations. Why settle for a pamphlet when the Web can provide photos and live video with only a few mouse clicks? Agencies, which offer such resources in a convenient format, stand better chances of landing the sale. Second, travelers are mostly urban professionals, long on cash and short on time. Travel offices close at the end of day, but Web sites stay open all the time.
Take a lesson from the Utne Reader’s online magazine, the Utne Lens. Don’t count your readers, or your advertisers, until you actually have them.
Starved For Attention
Just like a real store, you won’t sell a thing if no one knows you’re there. The word-of-mouth phenomenon that propelled Amazon.com into stardom is a rare exception to the rule that mandates advertising. There is, however, a free online-advertising method.
Most Web surfers make frequent use of search engines or Web directories, such as AltaVista (http://www.altavista.com), Yahoo! (http://www.yahoo.com), and Infoseek (http://www.infoseek.com). It costs nothing to register your site with these directories and engines; you just provide a brief description and key search words for their catalogs. Often, when prospective shoppers want information on a product or subject, they turn to a favorite search engine and select the first applicable link. Making sure your site appears in the first few hits is an art form unto itself, but most engines offer advice on how to most effectively enter your site.
Banking on searches, however, is a dicey proposition. Rather than rely on customers stumbling across your site, a more rewarding approach is to draw them in with advertising. Promotion of Web sites typically falls into three categories: banner ads, spam, and conventional advertising.
Banner ads. Virtually all major commercial sites now feature banner ads, little billboards, often animated, which hype a company or product. Banner rates, however, are currently falling because the number of sites offering banner space is growing faster than the number of companies wanting to place ads. The effectiveness of banner ads is estimated to be roughly 1%, meaning one in every hundred viewers will click a banner to investigate its source. Of this 1%, a smaller number will proceed on to make actual purchases.
Spam. This controversial advertising method refers to the mass mailing of unsolicited E-mail messages for commercial purposes. Spam is infamous for promoting the get-rich-quick scenario and other disreputable schemes. Most ’Netizens, or Internet users, take a dim view of spam and will even resort to attacking the sender. Advertisers, however, continue to utilize spam for its affordability. Because of this, any sales are perceived cheap successes. If you are considering spamming, you should take into account the negative sentiments it is bound to generate.
Conventional advertising. As the Internet and its uses continue to grow in the public awareness, more and more traditional advertising will be employed to promote Web sites. Nearly all product brochures sport Web addresses as a reference for additional information. Even most mainstream movie trailers now mention a matching online site. TV commercials, billboards, and radio spots include Web addresses for additional promotion. In this regard, the Web is just one more way of maximizing an existing ad campaign.
These aren’t the only means for getting noticed. From the early days of Web commerce, online malls promised exposure and promotion to those who would join and “rent space” under their name. Unfortunately, Web malls have failed to deliver because individual sites can promote themselves just as effectively, if not better, than a mall. This illustrates a good example of the Internet’s faultier to mirror real life. Few people get online to go window-shopping. Users have at least some idea of their target product, and the first impulse is to turn to a search engine, not a mall, to find what they need.
What made malls enticing was the prospect of finding complimentary items side-by-side, rather than having to go hunt them down individually. To pursue this, companies begun grouping into “communities.” For example, you might sell imported coffee beans, while your friend sells espresso machines. Your products are complimentary, not competing. Rather than pay full price for ad space on a high-traffic site, the two of you split the rate and place your product links side-by-side.
Also remember the Internet is more than just the Web. Some business representatives will frequent topic-specific newsgroups (a sort of online bulletin board) or chat rooms. If they find people in need of information or advice, the rep can offer assistance, thereby indirectly promoting the company or product. This method is effective for building word-of-mouth support, but carries two drawbacks. First, reps must be careful not to come on too strong and appear to be trolling for business. Second, such case-by-case communication is slow and sporadic, not necessarily effective for reaching large numbers of potential clients.
Whatever method(s) you choose, it is important to remember the ’Net’s unique culture. Before the advent of the Web, virtually everything online was free and the atmosphere was one of mutual respect and philanthropy. The rise of E-commerce is gradually eroding these traits, but there still remains a strong undercurrent. Advertisers should remember that ’Netizens object more to the flagrant appearance of commercialism rather than the commerce itself, which is understood to help maintain the ’Net.
Got Attention? Keep It!
Design and appearance, while not always critical to a site’s success, are influential. Do you go for heavy text, heavy graphics, or an even mix? Should you integrate advanced features, knowing some browsers may be unable to recognize them? Many considerations will shape your decisions, and your site will probably undergo several changes before you settle on a suitable design.
First, everybody has an opinion about what is attractive. Floods of color and labyrinthine layers of detail may catch the eye, but simplicity is the mark of a professional. You want pages that enhance commerce, not those that show off digital art. If you want colors that stand out from the background, use them sparingly. Similarly, a page covered in text and options does not point the viewer to a specific offering or course of action.
Ease of navigation throughout a site is imperative. If it is not readily obvious to visitors how to reach any given piece of information within three or four mouse clicks, you should institute a search engine. Most Web surfers are a busy, impatient lot who lack the inclination to explore a site thoroughly. Results must be easy and immediate.
Also consider your visitors’ download times. Undoubtedly, you’ve been annoyed by waiting for a graphics-intensive page to download. Once you begin designing your pages, however, you too will have to fight the urge to stock your site with luscious, persuasive pictures. In general, if you feel a page must be rich in graphics, it’s still best to minimize your viewers’ wait time through three possible methods:
- Use thumbnails, which are miniature versions of the image. It is an accepted Web convention that clicking a thumbnail will bring up a full-size version.
- Offer a text-only version of the page. Most Web programmers are able to display a message, such as “click here for text version,” which sits patiently as the graphics on a page load. Visitors who are uninterested in the graphics can bypass them and proceed to the text version.
- Reduce your graphics palette. Most Web graphics begin with a 256-color palette. Your graphics, however, may only use five or six colors. All the remaining unused colors are taking up space and bloating your picture’s size. Several programs will automatically remove unused colors from your image’s palette. Typically, you can reduce any given graphic by 20% to 70% without noticeably impairing the graphic’s quality. You can download an effective shareware example of this from CyberView at http://www.cyberviewcd.com/cvimage/index.html.
It is important to plan what your site will offer visitors. Remember, there must be incentives for readers to return. Offering information is easy, virtually free, and all but mandatory; but it is also one of the weakest incentives in your arsenal. A more effective marketing tool is the giveaway. Just as with the ubiquitous “free cruise” displays in malls and restaurants, contest participants need only fill out an entry form. The cost of your prize is likely nothing compared to the value of the qualified mailing list you will accumulate.
One of the Internet’s advantages is it has allowed the advent of demoware, also known as trialware, which is free scaled-down or limited-time versions of a company’s product. While such promotions are best suited to software, the concept can apply to a much broader range of products. Are you a photographer? Provide a handful of high-resolution images for visitors to download and distribute freely. (Of course, make sure your name and information is unobtrusive, but visible somewhere in each photo.)
Last, you should strive to achieve more than just repeat visits. Ideally, you want to build a community of fans who will not only sustain your business but also go out and promote it for you. This is where the ease of communication inherent in the Internet comes into play. Many companies offer chat rooms or billboards staffed by company representatives. Visitors can ask questions, share experiences, and even voice criticisms. Smart businesses don’t fear such negative opinions because it lets the customer vent frustrations and move toward a positive conclusion.
Anatomy Of A Storefront
Many companies begin their online storefronts as product catalogs. Designing such lists, even with graphics, is fairly simple and requires little study. Visitors might be encouraged to call, fax, or send an E-mail message with their orders. This basic approach is suited to providing product information, but generally fails to yield actual orders. The object is to close the sale on the spot, not to encourage “be-backs.”
Actual stores differ greatly from such catalogs. Of course, providing a navigable list of products is the first step, equivalent to displaying your wares on racks or shelves. But beyond this lies several features that are required in any full-service online shop.
Shopping carts. A shopping-cart system is a routine that monitors and compiles a user’s selections as she or he wanders throughout the site. For instance, your music-shopping spree at CDNow.com (http://www.cdnow.com) might begin with a visit to the R&B section. You select three discs worth $40 and proceed to the checkout section where your order is finalized. Then, you recall you wanted to buy your friend a birthday present. You cancel the checkout and head to the pop-music section, adding two more discs to your cart, bringing the total to $65. A well-designed site should make adding items to a cart as easy as an impulse purchase. Checkouts, however, should be very clear about final quantities and dollar amounts, offering ample opportunities to back out or make changes.
Billing. Billing encompasses several points. How will shipping charges be computed? What types of payment are accepted? If customers purchase on net terms, does your software print reports for your Accounts Receivable staff?
Searching. As mentioned above, if your site is going to feature many pages or you offer a deep product line, make sure to offer search routines. Most companies place such engines on their home page. Some place them on every page, illustrating that redundancy can often generate convenience.
Database integration. For easy accounting, database integration is key. Many systems swap information with your regular accounting system, making sure orders placed online are subtracted from available inventory. If your commerce solution does not include database integration, you’ll need to perform these functions manually.
CDNow.com is a great example of a site with an easy-to-use shopping-cart function.
Security. Security is a hot topic in E-commerce. Shoppers are still reluctant to offer credit card numbers online without adequate assurance their information will be tightly encrypted (coded) and adequately guarded at the vendor’s site. Secure transactions, often utilizing the secure sockets layer (SSL, a method for encrypting data) protocol, are one of the first features new shoppers will look for.
Scalability. Scalability, in features and design, is necessary if you outgrow the original site. Without the capacity to add new scripts or elements, you may later be forced into switching to a more robust commerce package, resulting in much repeated work. As construction workers say: measure twice, cut once.
Three Paths, Three Packages
Don’t be fooled. Building a comprehensive Internet-based store from scratch is a Herculean task best left to experts. For novices, just mastering the basics of Hypertext Markup Language (HTML, the Web’s programming language), is challenge enough. The scripting necessary to integrate a full stock of commerce features is downright numbing.
Fortunately, the market is flush with first- and second-generation solutions to assist you in developing a storefront. Be aware these technologies are young and far from perfect. But many do an admirable job. Several are even available to download and evaluate for free, but this often entails more work and study on the user’s end.
When you’re ready to begin construction on your storefront, budget will be a prominent factor in deciding the project’s scope and detail. Obviously, you get what you pay for, but going cheap may actually be the most reasonable solution if your objectives are simple. Following are sample products from three price categories.
Free. An admirable program with an intriguing price point, Internet Creator (http://www.internetcreator.com) from Forman Interactive uses wizards to guide users step-by-step through the process of building a commerce site. The formatting (meaning fonts and graphics) is kind of clunky, and the finished site’s overall appearance is fairly “out of the box,” but for those wanting a quick way to post an online catalog with shopping capacities, Internet Creator is a great starting point. Pages and items are represented as entries on an outline, allowing designers to shift elements around at will. The free download version includes little documentation, so users will need to experiment with buttons and options. Also, a little knowledge of HTML (and an accompanying editor) will go a long way toward refining the layout and look of individual pages. Forman offers a CD-ROM version for $99, which includes greater documentation and several templates for enhanced design versatility.
Once finished, testing your site may get tricky. While users can see all the graphics and text through Internet Creator’s built-in viewer, actually testing the commerce features requires certain proprietary scripts to be present on the Internet provider’s server. Forman’s Robert Gardos says, “The ISP must be an IC [Internet Creator] partner to support all the functionality of the IC Web site.”
Internet Creator covers most of the basics. The shopping cart is decent, the program supports multiple shipping and payment plans (including Cybercash), and users can integrate certain advanced features such as JavaScript applets. Searching and secure server functions are also provided. Higher accounting and database functions are not supported, but this should not be a concern for small commerce sites getting their feet wet.
Affordable. If time is of the essence, it may pay to have someone host your commerce site and take most of the nuts-and-bolts worries off your hands. Dydacomp Development’s SiteLINK (http://www.dydacomp.com) is part software, part service. Users pay $595 for the setup and software, plus a monthly charge of $195 for hosting and maintenance. Customers visit a company’s regular Web site and, upon clicking to go to the site’s store, are routed to the commerce section at Dydacomp’s server. (This rerouting, save for the change in address, is transparent to the user.)
SiteLINK’s canned designs are somewhat Spartan, but still attractive and functional. Features include SSL security, searching, clickable thumbnail images, an efficient shopping-cart/checkout system, and multiple billing choices. Best of all, SiteLINK has the option of integrating seamlessly with Dydacomp’s Mail Order Manager software ($1,795 for the first station), giving users complete control over inventory and accounting functions. Similar packages with these features can sell for twice the price.
Heavy. Scalability carries a stiff price. Oracle, one of the premier names in Web and database technology, was one of the last major players to market with a commerce suite. Oracle Corp.’s Internet Commerce Server (ICS, http://www.oracle.com) starts at $4,885 as a standalone “cartridge,” but is intended to function with the entire suite ($9,995), which offers, among other applications, increased flexibility in billing and charge processing.
ICS carries a level of customization not available in lower-end packages. Beyond intermediate features such as discounting and promotions, ICS also offers a Store Manager for easy site maintenance and an encrypted universal resource locator (URL) process for tracking visitor actions and habits. Complete security and accounting options are integrated, as are templates for catalog pages, transaction forms, and order processing. Oracle insists that ICS will integrate with clients running alternative systems, but clearly Oracle database customers will have the simplest time adapting the package.
Products of this caliber are generally run on in-house Web servers, another substantial expense in itself, and run on high-caliber platforms such as Windows NT, Solaris, and IBM-AIX. ICS does not offer a Windows 95/98 or Mac OS edition. A full discussion of the requirements and benefits of such top-end solutions lies beyond the scope of this article, but those interested should seek out Oracle’s Web site and invest $4.95 in a 30-day evaluation of ICS on CD-ROM. The online documentation alone may be the smartest five bucks you ever spend.
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