Dated: 12 November 2003
In last month’s issue, we whetted your appetite in Part 1 of this article. Now, we presented the second and final installment in which we will look at The Lure of E-commerce, Easy and Hard Aspects of E-commerce, Building an E-commerce Site and Implementing an E-commerce Site.
The Lure of E-commerce
The following list summarizes what might be called the "lure of e-commerce":
Lower transaction costs - if an e-commerce site is implemented well, the web can significantly lower both order-taking costs up front and customer service costs after the sale by automating processes.
Larger purchases per transaction Amazon offers a feature that no normal store offers. When you read the description of a book, you also can see "what other people who ordered this book also purchased". That is, you can see the related books that people are actually buying. Because of features like these it is common for people to buy more books that they might buy at a normal bookstore.
Integration into the business cycle - A Web site that is well-integrated into the business cycle can offer customers more information than previously available. For example, if Dell tracks each computer through the manufacturing and shipping process, customers can see exactly where their order is at any time. This is what FedEx did when they introduced on-line package tracking - FedEx made far more information available to the customer.
People can shop in different ways. Traditional mail order companies introduced the concept of shopping from home in your pajamas, and e-commerce offers this same luxury. New features that web sites offer include:
The ability to build an order over several days
The ability to configure products and see actual prices
The ability to easily build complicated custom orders
The ability to compare prices between multiple vendors easily
The ability to search large catalogs easily
Larger catalogs - A company can build a catalog on the web that would never fit in an ordinary mailbox. For example, Amazon sells 3,000,000 books. Imagine trying to fit all of the information available in Amazon's database into a paper catalog!
Improved customer interactions - With automated tools it is possible to interact with a customer in richer ways at virtually no cost. For example, the customer might get an email when the order is confirmed, when the order is shipped and after the order arrives. A happy customer is more likely to purchase something else from the company.
It is these sorts of advantages that create the buzz that surrounds e-commerce right now.
There is one final point for e-commerce that needs to be made. E-commerce allows people to create completely new business models. In a mail order company there is a high cost to printing and mailing catalogs that often end up in the trash. There is also a high cost in staffing the order-taking department that answers the phone. In e-commerce both the catalog distribution cost and the order taking cost fall toward zero. That means that it may be possible to offer products at a lower price, or to offer products that could not be offered before because of the change in cost dynamics.
However, it is important to point out that the impact of e-commerce only goes so far. Mail order sales channels offer many of these same advantages, but that does not stop your town from having a mall. The mall has social and entertainment aspects that attract people, and at the mall you can touch the product and take delivery instantly. E-commerce cannot offer any of these features. The mall is not going to go away anytime soon.
Easy and Hard Aspects of E-Commerce
The things that are hard about e-commerce include:
Getting traffic to come to your web site
Getting traffic to return to your web site a second time
Differentiating yourself from the competition
Getting people to buy something from your web site. Having people look at your site is one thing. Getting them to actually type in their credit card numbers is another.
Integrating an e-commerce web site with existing business data (if applicable)
There are so many web sites, and it is so easy to create a new e-commerce web site, that getting people to look at yours is the biggest problem.
The things that are easy about e-commerce, especially for small businesses and individuals, include:
Creating the web site
Taking the orders
Accepting payment
There are inumerable companies that will help you build and put up your electronic store. We'll discuss some options in the next section.
Building an E-commerce Site
The things you need to keep in mind when thinking about building an e-commerce site include:
Suppliers - this is no different from the concern that any normal store or mail order company has. Without good suppliers you cannot offer products.
Your price point - a big part of e-commerce is the fact that price comparisons are extremely easy for the consumer. Your price point is important in a transparent market.
Customer relations - E-commerce offers a variety of different ways to relate to your customer. E-mail, FAQs, knowledge bases, forums, chat rooms... Integrating these features into your e-commerce offering helps you differentiate yourself from the competition.
The back end: fulfillment, returns, customer service - These processes make or break any retail establishment. They define, in a big way, your relationship with your customer.
When you think about e-commerce, you may also want to consider these other desirable capabilities:
Gift-sending
Affiliate programs
Special Discounts
Repeat buyer programs
Seasonal or periodic sales
The reason why you want to keep these things in mind is because they are all difficult unless your e-commerce software supports them. If the software does support them, they are trivial.
Implementing an E-commerce Site/p>
Let's say that you would like to create an e-commerce site. There are three general ways to implement the site with all sorts of variations in between. The three general ways are:
Enterprise computing
Virtual hosting services
Simplified e-commerce
These are in order of decreasing flexibility and increasing simplicity.
Enterprise computing means that you purchase hardware and software and hire a staff of developers to create your e-commerce web site. Amazon, Dell and all of the other big players participate in e-commerce at the enterprise level. You might need to consider enterprise computing solutions if:
>You have immensely high traffic - millions of visitors per month
You have a large database that holds your catalog of products (especially if the catalog is changing constantly)
You have a complicated sales cycle that requires lots of customized forms, pricing tables, etc.
You have other business processes already in place and you want your e-commerce offering to integrate into them.
Virtual hosting services give you some of the flexibility of enterprise computing, but what you get depends on the vendor. In general the vendor maintains the equipment and software and sells them in standardized packages. Part of the package includes security, and almost always a merchant account is also an option. Database access is sometimes a part of the package. You provide the web designers and developers to create and maintain your site.
Simplified e-commerce is what most small businesses and individuals are using to get into e-commerce. In this option the vendor provides a simplified system for creating your store. The system usually involves a set of forms that you fill out online. The vendor's software then generates all of the web pages for the store for you. Two good examples of this sort of offering include Yahoo Stores and Verio Stores (if you’d like to speak with someone at Verio, Gregorio Gonzalez, 877-273-3190 ext. 4672 has been helpful). You pay by the month for these services.
- By Marshall Brain
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