Creating Stores on the Web
Creating Stores on the Web
Chapter One: Frequently Asked Questions
Let's cut to the chase. If you're like most people, you have questions, and it's likely that some of them are answered right here.
An aggressive one! Running an online store takes the same kind of personal traits necessary to run any business. You have to be committed, a bit of a risk taker, willing to work long and late hours, and driven to succeed. Being a little crazy doesn't hurt either. Online stores are a new frontier.
You also have to be organized and able to deal with setbacks without flipping out. You have be committed to providing better customer service than your competitors. And if you ever want to grow past a one- or two-person operation, you need to have vision and a clearly defined plan.
It also takes someone who is willing to learn and change. Internet commerce is a growing field that will mature over the next few years. Be prepared to grow with it.
There are so many variables, it's tough to put an exact figure on it. Will you hire a lawyer and an accountant or will you try to deal with incorporation and tax issues on your own? Do you plan to work out of an office or your home? Will you have any employees? Do you plan to start with a large inventory of products or will you order as demand warrants? Can you build your own Web site or will you hire someone to do it for you? All of these factors will determine how much money you spend to get your store launched.
Tronix's entire initial investment was about $12,000. Of course, we didn't have much of a cushion for inventory, but in our case we only stocked what had already been ordered.
Okay, there's a bit more than that. You'll need to download the top two Web browsers: Netscape Communicator (or Navigator) and Microsoft Internet Explorer. You'll have to choose e-mail and newsgroup reading software, a File Transfer Protocol program to upload files to your site, a visual design and HTML code editor, image editing software, a point of sale program, shipping and tracking software (available from the various shipping companies), America Online, CompuServe, a scanner, and possibly a digital camera.
To find out what your options are, check out Chapter 6: Launching Your Online Store.
You'll also need a good deal of equipment for shipping purposes. Packing materials, boxes, a shipping table on which to pack boxes, a scale to keep shipping charges accurate, etc. For more about shipping-related needs, see Chapter 17: Everything About Shipping.
That largely depends on the volume of business you're doing and, of course, the size of your home. If you're just getting started, don't have an overwhelming inventory, and don't have the money yet to spend on an office, working out of your home may be your best--or only--option.
Also, if you have an empty basement or garage in which you have absolute privacy and which is capable of being wired for phones and a cable modem, using this space to limit your overhead might be a good idea. However, as your business grows, you'll probably need an office for a number of reasons.
One is the separation of work and the rest of your life. No matter how hard you try, you'll never be able to escape work if it's just a few steps away. Although starting any small business requires a strong commitment of both time and effort, you need to be able to get away from it or you'll eventually grow tired of your so-called life and bag the whole thing. And no matter how many times you tell your kids to stay away while you're working, eventually one of them will skin his or her knee and coming running for your help. Or they'll just decide they're bored and want to play.
Additionally, as your business grows you just won't have the space to run your store out of your home. You also have to be aware of local zoning laws.
So, to answer your two-part question, yes and yes.
That's the beauty of running an online store. You can do it yourself. Tronix started that way and is still a one-person operation (with a friend occasionally helping out). Sure you'll need some help getting started--a lawyer, an accountant, and someone to design your site if you decide you can afford it or realize you don't have the ability to do it yourself.
Other than that, you can go it alone and add employees as growth warrants. You'll work long and hard, but that's a given for any small business owner. And no matter how big your business gets, you'll never need to hire someone to staff the cash register and lock up on Saturday night.
That depends on what you sell, how organized you are, how well you publicize your store, etc. Much like a traditional store, your future is in your hands. Some people start a small community restaurant and they're happy to remain at that level. And some become McDonald's.
The opportunity to make money on the Web is expected to grow dramatically as the public becomes more aware of its advantages and less concerned about placing credit card orders. Commerce on the Web is expected to grow from $2.6 billion in 1996 to more than $220 billion in 2001, according to a report by International Data Corporation (www.idc.com). The report, the highlights of which are available on IDC's Web site, also said the number of devices accessing the Web will grow from 32 million in 1996 to more than 300 million by the end of 2001.
The opportunity to make a lot of money is there and is only expected to increase.
There are plenty of both. First the bad news:
When you run an online store, you're at the mercy of your Internet Service Provider. If the ISP goes down, you go down. It is also easy for competitors to get started and is, therefore, a very competitive field. Since e-commerce is still relatively new, your pool of customers can be small, and you have to really reach out to those potential customers. Since you don't have a storefront on Main Street, people aren't going to just walk by, poke their heads in, and buy something. If you don't make yourself known to potential customers, they may never find you. And if you treat one of those customers poorly, word can spread very rapidly on Usenet.
You can also fall prey to stores that have the ability to stock larger inventory, provide better customer service, and do more extensive marketing, but that is also true of traditional stores. You either need some technical ability or the money to pay someone who does. There are security and fraud issues, and running an online store can be extremely time-consuming.
Now the good news:
Your startup costs are potentially much lower than those of a traditional store owner. Operating on the Web allows you to have an immediate international sales presence from wherever you decide to set up shop. Speaking of which, you can set up shop anywhere in the world provided you have good Internet access. There is no need to relocate. You can also create a personalized shopping experience. Depending on your budget, there are a number of high-end software products that help guide shoppers to the items they want. You have the option of providing electronically distributed goods for immediate fulfillment. Small operations with slim inventories can more effectively tively compete with larger companies. As long as your ISP doesn't go down, you can be open 24 hours a day, 365 days a year without hiring anyone.
If that isn't enough, there's a book of more reasons to follow.
You can either generate your own product descriptions or rely on the manufacturers' literature, assuming you don't make the products you sell. The content for pages dealing with company policy, common questions, what's new, shipping, etc. will be provided and updated by your company. News and reviews of products can be culled from other sources.
You'll also have to type in prices and product descriptions, even if they've been provided for you. Although you'll have to generate a large percentage of your site's content, it won't account for the majority of your total workload.
In short, yes. In medium, get a lawyer. In a long-winded answer, there are a plethora of laws that govern both the online and retail universe that will affect your business.
A lot of Internet law has yet to be developed--cases either haven't come up or are still pending. As a store owner, you need to stay on top of the news and have a lawyer who can keep you apprised of the shifting legal winds. Some good online legal sources are FindLaw (www.findlaw.com), the Cyberspace Law Center (www.cybersquirrel.com/clc/), The Cyber Law Encyclopedia (http://gahtan.com/techlaw/home.htm) by Alan M. Gahtan, CyberSpace Law (www.ll.georgetown.edu/lr/rs/cyber.html) by the Georgetown University Law School, and the Web Law FAQ (www.patents.com/weblaw.sht).
Many of the legal issues are the same as those dealt with by traditional stores: advertising regulations, export laws, customs, guidelines for shipping perishables, etc. Interstate commerce as it pertains to the Web is another unresolved issue.
The only legal advice we're qualified to give is this: consult an expert. You should never assume you are sure about anything. If you have even an inkling that you might be misinterpreting or overlooking a law, talk to your lawyer. There's nothing like a temporary shutdown and a fine to kill your cash flow.
There are plenty of lawyers out there. Some people would say there are too many. It's important to find a good business lawyer who is sensitive to your needs as a new business owner, if you're just starting out. You should be able to find a good lawyer without dragging your business down with legal expenses.
If you don't know a lawyer, ask around. Someone you know will almost surely be able to point you in the right direction. If not, ask the owners of similar-sized businesses to recommend a lawyer.
Most of the best-selling products are small items like books, CDs, video games, software, and so on. Don't limit your options to these. What you decide to sell is up to you. Something to think about is a computer-related product since the majority of people shopping online are computer owners. Tronix has been successful in selling computer games because the people who buy them are likely to be online.
You should also sell something you are enthusiastic and knowledgeable about. If you think roughing it is not having a cable modem for your Internet connection, don't sell hiking gear. And if you think punk is the only music worth listening to, don't sell violins.
Of course you may be just taking your traditional store online, in which case you'll know which of your products sell best. Now we know what you're going to ask next.
You have a number of shipping options you can make available to your customers. Depending on how quickly your customers want their products, and how much they want to pay in shipping charges, you can ship using everything from standard first class mail to FedEx First Overnight.
Shipping isn't as complicated a process as setting up your shipping accounts and figuring out which company or companies best suits your variety of needs. You'll probably patch together a quilt of shipping coverage that meets all the needs and demands of your customers. To learn more about this, ship yourself to Chapter 17.
Your marketing and sales are virtual. It's possible to run a completely virtual store in which you never see a product and never pack a box by using fulfillment companies. Expect to see an increase in these large warehouses, which store your inventory for you. Web merchants pay a storage fee and when orders come in, they simply tell the warehouse what to send and where to send it. Passing along the risk of holding inventory is the difference between being very virtual and totally virtual.
The Web isn't just a place to sell goods, it can also be an excellent distribution medium for items, provided they are electronically transferable (please e-mail us if someone has figured out how to download milk and eggs).
While most stores sell goods that have to be shipped to users, there are number of stores that don't. For example, music stores eventually will transfer your new CD to you electronically. Many software stores are already turning to ESD (Electronic Software Distribution) instead of shipping the product to the user on disk or CD. The software is downloaded directly over the Internet. Electronic distribution is not limited to music or software. Expedia (expedia.msn.com), Microsoft's airline tickets and travel services "store," sells airline tickets that are nothing more than a password to be given at the gate. This same type of password sale will eventually be used for all sorts of things like car rentals, hotel rooms, movie tickets, concert tickets and more. Eventually these items could even be transferred to so-called smart cards, which you just slide through a scanner as you walk through the terminal gate or into your favorite theater.
Three keys to electronically distributed sales are security, bandwidth, and record keeping. Security is needed to protect items like distributed music and software from being easily replicated by end-users. Also, since the product itself is stored on a server, no one wants to have a virtual break-in where a hacker can copy all the wares and distribute them for free. Bandwidth is crucial because end-users need fast access like that provided by a T-1 or cable modem to receive a full-length CD, movie or video game.
Finally, record keeping is critical because it's harder to count how many copies have been properly sold through electronic distribution. That is why companies have created sophisticated and secure systems that will tell companies how many downloads of a top software package have been properly handled by a particular merchant.
The technology is still catching up, but it won't be long before a number of major products will be bought and distributed directly over the Web.
Yes. Well, maybe. Let it be said that not everyone has to be on the Web. A store that's doing well might not do any better if taken to the Web. And a struggling store won't necessarily be saved by the Web. Sometimes building a site can even be a mess, sucking out money you have and creating headaches you don't want.
However, existing traditional stores have a number of compelling reasons to get online and compete for sales. The most obvious reasons to get online are to expand sales and avoid losing sales to competitors who are online. However, why take the "scared stiff" approach? Existing stores should be compelled to go online by the inherent advantages they have over cyber-only competitors.
An existing store already has a lot of the infrastructure set up for such an operation. It will already have stock, distribution relationships, shipping accounts, product knowledge, a name, and a customer base. The trick is transferring your store's ambiance, reputation, and operational style so it shines through on the Web. Let your traditional customers know you're on the Web by posting your URL in your store and on all of your mailings, stationary, business cards, etc.
Maine mail order and retail behemoth L.L. Bean (www.llbean.com) is a great example. The company thrives on its reputation for excellent customer service, product knowledge, and outdoors expertise. When L.L. Bean launched its carefully created Web site, this was apparent. L.L. Bean didn't immediately accept orders on its site, explaining that it would wait until its customers' transactions would be guaranteed to be safe. L.L. Bean also warned that color representation of items shown on the Web was not an exact match to reality. These were classic reinforcements of L.L. Bean's customer service reputation.
L.L. Bean also launched with an extensive database of park and camping site information. Not only was this interesting content to offer as a draw to the site, but it also reinforced L.L. Bean's image as an expert in camping and outdoor activities.
As L.L. Bean shows, traditional retailers can benefit from having a Web presence. However, you don't have to rush and stumble. Instead, create a true cyberspace equivalent to your existing store.
The most successful online stores have been pioneers that launched interesting new ways to shop online but didn't forget that online stores, like traditional stores, have to be focused, provide outstanding customer service, and create an interesting shopping experience.
However, successful is a relative term. Some operations that are considered successful haven't actually turned a profit. These stores are considered successful because they are projected to earn a profit once a critical mass of accustomed online shoppers is available.
Then there are stores like Tronix MultimediaÑsmaller operations that are run profitably on shoestring budgets by aggressive proprietors who have combined a good store choice with a readily available market and built a loyal clientele. Though most of these stores will never reach millions of dollars in sales, they don't have to in order to be profitable and provide excellent returns for their owners.
Some traditional retailers have also done well building a Web presence. Although not every store has successfully managed to add online sales to its repertoire, some stores and catalogs like L.L. Bean.com, Insight.com, and Walmart.com have taken early leads.
Most online auctions deal with computer-related items while some have gone into other areas of merchandise. Online auctions are a newer phenomenon than online stores, but there are an increasing number of players. The big difference between stores and auctions, besides the way you procure goods, is the entertainment value involved in auction sites. Online auctions are also able to generate large profit margins by purchasing excess goods at well below retail price, starting the bidding at less than that, and riding a bidding process that drives the final price well past what the auctioneer paid but still well below the retail price. Everyone goes home happy.
Onsale, Inc. (www.onsale.com) is the early leader in the online auction battle. Onsale requires participants to bid upward in $25 increments to help guarantee lucrative profit margins. First Auction (www.firstauction.com), which is affiliated with the Internet Shopping Network (www.internet.net) and launched in mid-June 1997, could be another serious contender.
It's the same as the difference between building a lemonade stand in front of your house and opening a store that happens to sell lemonade.
The online equivalent of a lemonade stand would be to simply go online and inform people that you have a particular item that you'd like to sell, and anyone who is interested can contact you via e-mail, regular mail, or phone.
Building an online store is much more involved. You'll probably be selling a variety of related products through a virtual inventory. You'll have to make your store known to potential customers and work to get them and keep them. In short, selling something online takes no time, little effort and will likely provide minimal income. Opening an online store requires long hours of work, tireless effort and will hopefully provide you with a living. Selling online is a hobby. Running an online store is your job.
Online selling is extremely competitive; so is selling cars, insurance, or anything else. As an online store owner, you must find out exactly who your competition is. Make sure you can answer the following questions.
How many online companies are selling similar products?
What are their prices and shipping options?
How fast are they getting their products to their customers?
What is the word of mouth on Usenet newsgroups about your competition?
How slick/functional are their Web sites?
Where does your competition advertise (e.g., links, major magazines)?
Will you be able to succeed? What kind of question is that? Of course you will be able to succeed. That doesn't mean you will. A little luck never hurts, but success, as Boston Celtics coach Rick Pitino says, is a choice. ClichŽ alert: You'll get out of it what you put into it.
That would be nice wouldn't it? Unfortunately you can no more do that than you could open a store on a rural road, never advertise, and stay in business for more than a couple of months. In other words, NO!
There are a number of things you should do to increase your visibility--so many in fact that we have an entire section devoted to promoting your store. Chapter 10 will show you how to find customers through Usenet, online forums and referrals. Chapter 11 discusses promoting your store on the Internet: submitting to search engines, where to get your store listed, how to do link exchanges, how to set up leads and bounty programs, and more. Chapter 12 is The Store Owner's Guide To Advertising and will show you how to advertise on a shoestring budget. Chapter 13 focuses on international sales. These chapters will not only show you what to do but what not to do.
Spam is unsolicited e-mail sent out in bulk without any regard to the recipients' interest in the subject. This type of spam, unlike that tasty, canned meat of the same name, is not good. If you decide to use spam as a way to promote your store, be prepared to incur the wrath of a large number of people. You will probably lose more customers than you gain. If you happen to annoy a hacker, you might end up with a trashed Web site. There are plenty of ways to promote your store without spam.
If you're the management type, you might just outsource the entire project, set the goals, pay the experts to build you a killer store, and watch the cash roll in. If you're in the real world, you'll want to learn some fundamentals and dig in a little so that you can keep your costs low and stay on top of the ever-changing Internet. The best management comes from being able to do the work but choosing, for other compelling reasons, not to. That way no one will pull a fast one on you and you can step in when something goes wrong.
You should be familiar with how to use a computer and pick up some Internet experience. After you know your way around, you'll want to learn some HTML and how to use a basic editor. You don't need to be an expert but some basics will help. To gain this knowledge, you can start with this book. You should also look into some other books and check out some of the major online resources and guides listed throughout this book. There is a lot of learning to do, but there are some very good aides available--especially the ones listed in this book.
For those of you more versed in the Web, we recommend that you get intimately familiar with a top-rate e-mail package. As you'll learn later, your ability to command an e-mail program is paramount. Brush up on the ability to quickly edit Web pages and learn the ins and outs of uploading and downloading from your site. I will be critical to know how to make minor edits and changes throughout the life of your store. You might also want to learn how to operate a scanner and/or digital camera and subsequently fix up the imagery in a good paint program.
For those of you who are computer experts but not well-versed in the retailing trade, stop thinking you're ready to go. Running a store on the Web is a lot more than just hacking out some cool HTML code and uploading JPEGs. You need to provide top-notch customer service, make correct orders, maintain stock, deal with the local UPS driver, and collect and maintain all the taxes and money. This stuff is enough to make even the most knowledgeable Java programmer curl into the fetal position. We're here to help.
That depends on your knowledge, your willingness to learn, and your cash flow. If you don't know HTML, don't care to know HTML, and have enough money, you can have someone do the work for you. If you're an established retailer like L.L. Bean or Eddie Bauer looking to build a Web presence, of course you'll want to hire someone to do the work. But if you're a small startup, learning HTML will allow you to do your own site maintenance while keeping your costs low.
Designing your own site is also a creative, if grueling, process. It can be satisfying to put together your own site from scratch, much like creating a piece of art. Anyone can buy a painting and hang it in the living room. Few people can create that painting themselves.
Yes. An example is Viaweb Store, which is a combination of an authoring tool and a hosting service. You can build your store on their browser and Viaweb serves your finished site. Pricing is reasonable at $100 per month for a store selling up to 20 items and $300 per month for up to 1,000 items. You don't have to know any HTML; you just enter the information you want to provide such as names prices and descriptions. You can update your site as often as you want and all you need for software is an ordinary browser: Netscape Navigator or Microsoft Internet Explorer.
However, these products cost money, and if you want to keep your costs down, you're better off creating your own Web site.
These are kits for Internet storefronts that help solve some issues such as creating a shopping environment, order and user tracking, demographic information, and secure payments. But they still leave a lot of work for you to do and are almost certainly out of your price range as a start-up business owner. However, some Web hosts set up servers which run Open Market or Merchant Server and allow you to set up a store on that server while paying a licensing fee. Eventually commerce-based servers should become easier to use and less expensive and can be useful for a large volume store.
Thankfully they aren't where online Valley girls hang out to you know, like, chat.
Actually, the idea behind online malls is similar to that of traditional shopping malls. A developer will launch a site on the Web that offers entrances and integrated shopping experiences across a multitude of product lines and vendors. Everyone is under the same roof; that roof could be the same URL or a similar looking interface with different vendors.
Behind the scenes many of the stores run on the same server, taking advantage of a unified shopping infrastructure including credit card checking, digital cash acceptance, personalization tools, etc. The mall operator charges vendors a rental fee for space on the system or takes a percentage of every transaction. As a small operator, launching a store as part of an online mall allows you to reside on a server that has been specifically created online selling. The mall operator may also offer other services such as promotions help and design assistance. The downside is that you might not have as much control over your site.
The biggest existing mall areas are on the specialized online services like America Online and CompuServe. However, several groupsÑincluding IBMÑhave experimented with Web-based malls. There is still a question about how well the mall concept will translate to the Web. Since any site is as close as any other site on the Web, how important it is to have a store located on the cyberspace equivalent of the local mega-mall?
Instead, what may arise are closer affiliations and seamless linking and purchasing ability between vendors selling complementary goods. It won't exactly be a mall, but the concept of pulling a variety of stores together for a unified online shopping experience could be powerful.
Purchasing goods over the Internet using a credit card is becoming a more secure process, although it is not yet perfect. As the industry moves closer to a secure transaction standard, credit card purchases will continue to become less worrisome.
Whether or not you accept credit cards is up to you. Most Web stores, including Tronix, accept them. The risk is for the shoppers and, as long as they understand no transaction is guaranteed to be secure, they'll likely decide whether or not they want to send their credit card number off into cyberspace.
In a purely business sense, the more payment options your store offers, the better your sales will be. In the end, it's tough to run a successful cyberstore without accepting credit cards.
The biggest risk is fraudulent credit card usage and the proper handling of customer's personal e-mail information. You also need to make sure your provider is secure enough to block break-ins. To learn more about eliminating tese risks, see Chapter 16: How to Spot and Catch Online Thieves.
If you're going to run an online store, it's best to know what technologies you're dealing with.
SET (Secure Electronic Transaction) is an open industry standard detailing the use of payment cards over open networks like the Internet. SET uses digital certificates to authenticate parties involved in a transaction. Introduced by Visa and MasterCard, with assistance from technology partners IBM, Terisa Systems, GTE, VeriSign, RSA, Netscape, Microsoft and SAIC, the SET specification was completed in May 1997. The SET consortium is working on creating a SET software compliance process; a structure to manage and issue the SET digital certificates to the payment brands; validation of vendor software against the 1.0 spec and the deployment into the global market; roll-out of programs through financial institutions, merchants, and cardholders.
SSL (Secure Sockets Layer) was introduced in Netscape 2.0 as a technology to protect credit card numbers. Users are often advised if they are using an older browser without built-in SSL to phone in their order.
E-cash systems such as Digicash and NetCash allow the customer to deposit cash into an account and then use that cash to purchase items off the Internet. E-cash is untraceable, which improves privacy. You can only lose as much cash as is in your electronic wallet as opposed to someone stealing your credit card number and maxing it out. However, e-cash in uninsured. If your hard drive crashes or your e-bank goes under, there is no way to retrieve the lost cash.
IBM is also launching a payment server called eTill, that will allow Web merchants to accept a variety of forms of payment.
TRUSTe is a coalition that has been formed to limit the amount of junk e-mail you get. If a store has a tRUSTe tag, that store agrees not to release any of its customers' information to other businesses or to mailing list companies.
VeriSign, Inc. (www.verisign.com) provides digital authentication services and products for electronic commerce and other forms of secure communications. Digital IDs are crucial to establishing confidence in the security of electronic transactions. A Digital ID binds a person's or company's identity to a digital key which can be used to conduct secure communications or transactions. The Digital ID is intended to give the parties involved in a transaction confidence in its origin and can then be attached to electronic transactions and communications as the critical authentication component.
VeriSign was selected by Visa in July 1997 to operate an Internet-based authentication service for electronic commerce solutions based on SET. VeriSign will operate the Digital ID service for Visa which, in turn, will make it available for Visa member financial institutions wanting to roll out secure electronic commerce services.
Don't confuse VeriSign with VeriFone, the company that was recently purchased by Hewlett-Packard and which manufactures and provides services for credit card transaction equipment.
Some of the best information will come from simply checking out other established Web sites. There are also a number of good books out there, including Getting Hits: The Definitive Guide to Promoting Your Website by Don Sellers (published by Peachpit Press) and How to Grow Your Business on The Internet by Vince Emery (published by Coriolis Group Books).
There are also some Usenet spots such as alt.business.misc, comp.internet.net-happenings, andalt.internet.commerce where online merchants can share ideas. To search for more Usenet spots, try searching with DejaNews (www.dejanews.com).
Of course, we're partial to Creating Stores On the Web, but you probably figured that.
That's easy. Read this book.