What is e-commerce? Do I need it? Is it contagious? So many questions surround this topic that LoveToKnow Business decided to get the facts from someone who develops e-commerce solutions everyday.
Web E-Commerce Expertise
Berend Roeters is the director of design services for Traverse Global Communications in Traverse City, MI. Founded by Michael and Christine Henton nine years ago, this once-small Web hosting company has grown considerably, now hosting 6,000 clients and providing a full range of Web services, including search engine optimization, e-commerce solutions, Web design and logo design.
What is e-commerce?
Quite simply, as a method, it's selling something over the Internet. Best example would be eBay: the implementation of an online store, where products are listed for sale, which includes photos and descriptions of the products and a payment mechanism.
When you get into the types of e-commerce, there are three facets:
- An online auction site, again, such as eBay.
- A small business with inventory, such as one of our clients, Hats and Haberdashery, a designer resale women's clothing store.
- A drop shipper, which is a very prevalent business model now. These businesses don't actually own inventory, but list a lot of items and act as middlemen. The market is very saturated with these sites.
What's attractive about e-commerce?
It's a different platform. The tactile element is gone, sure, but customers can see many pictures of an item and take their time shopping. In fact, statistics have shown that impulse purchases are slightly curbed, as there's not such immediacy to the shopping experience. Customers get up and leave the computer, then come back later and continue shopping if the site has what they want.
Online shopping is more convenient for the business owner and shopper alike.
How does a business owner determine if e-commerce is a smart solution?
There are three main things to consider:
- E-commerce usually works best for a company that has an inventory. Unique items do not always work as well for e-commerce simply because of the labor involved. For example, let's say a custom jeweler puts an individual piece on the site and then it's gone: there's a lot of labor without immediate replenishment. Whereas a company with a standing inventory level and the ability to reorder has a nice flowing process.
- Look at cash flow and what you'll get back from the store. Establishing and maintaining the site requires consistent funds, so make sure your products and services offset these costs.
- If you're providing something that is already available at 10 locations in your local area, that's one thing. However, in the world of e-commerce, you're a mom and pop ice cream shop next to a million Baskin-Robbins. If you're determined to go online, look for some unique way to present your business.
So one of the main challenges of e-commerce is competing in a larger market?
Definitely. You may be a big fish in a local pond, but in the world of e-commerce, it's back to guppy status. Your market is the entire world and competition is ratcheted way up.
It's a buyer's market in many ways. For example, if I go online and search just for women's clothing, I've one heck of a catalog in front of me. So our client, the designer resale clothing shop, had to create a niche for themselves in the worldwide marketplace.
The more specialized the item you're selling, the easier it is to get noticed. It all falls back to search engine optimization and what gets picked up. So many businesses I've seen don't consider how important this is.
How would someone start an e-commerce venture?
- Set expectations, goals and objectives and be prepared. Step back from your hopes for a moment and be realistic.
- Look at costs going in and how much it will take to realize an opportunity of return.
- Have a good idea of what information you'll present, the products you'll sell, all the pictures, the cost of each item, the weight for shipping, what your shipping scheme (weight-based vs. price-based) might be. Also, does your business have an existing merchant account or will you follow the e-commerce model of collecting and processing credit cards online.
Before implementing anything online, these questions need to be answered.
When would a business owner need to come to a company like yours?
Whatever you're really good at, that's what you should do. Some business owners can maintain the site on their own, and that's an option for every business. If you have the time and inclination, we'll make suggestions. Our company provides a one-hour free consultation and we will advise clients as to what we think would be the best route.
However, we also have clients who depend on us for all of their updates and maintenance, and we'll sell them X number of hours per month for this service. For some businesses, the cost of setting up an in-house Web development support team is prohibitive, whereas outsourcing or finding the right partner may be a better option. Paying us for a half-hour of work, for example, is a better alternative to stressing a budget for an in-house IT team to run a Web site.
We have all levels of clients. We have a photographer with a one-page Web site featuring pictures of homes for sale and we have multi-thousand dollar projects with more application-related and database interaction elements.
Even if a company decides not to delve into e-commerce, is it still necessary to have a Web site?
Absolutely. A business should always have a Web presence, even if only to display products and services and provide a location.
And it's so inexpensive to create a site. A Web site with the standard information on a couple of pages can be put up generally for under $500. For example, our company develops a five-page site for a one-time "starter kit" fee of $450 and a $10 a month hosting fee.
Where will e-commerce be in five years?
eBay has really refined how people purchase -- look at pictures, do price comparisons on other sites and read reviews. Sites like Pricewatch.com already speed up this process on computer items.
So if the products are all the same, what a customer will end up buying is a company's level of service, product quality, warranty and guarantees. It will have less to do with the price and more to do with the quality and service behind the product. So companies will have to up their game.