E-Commerce

Q. I sell electronic components used is setting up home and office security systems. I’m considering conducting some of my business on the Internet. What is involved in pursuing this course of action?

A. E-commerce, the selling of a service or product over the Internet, is becoming big business. Managing a countrywide site, answering inquiries from customers at vast distances and developing quick response systems are arts that have yet to be mastered.

The first step in opening an E-commerce Website is to select the right equipment. You will need a high grade computer with fast software, a fast modem, a fax which can be built into your computer or be separate, a high speed connection to the internet, software capable of handling massive files, adequate hard drive, a high speed printer and perhaps, other peripherals. The total cost can be thousands of dollars.

Your next action will be to choose a company to setup your Website. Theoretically you can setup your own Website but, generally speaking, this is not a good idea. Think what would happen to your business if your computer fails, your hard drive crashes with your customer base information, power outages and other such service problems. While it is true you can install a server to back-up all material, it can be very expensive. The professional Website companies back-up all material they manage, thus eliminating these risks. The cost of this service must be determined and figured into your financial plan.

Once you have decided the need for a Website you must select a name similar to the company name you now operate under. Selecting the right name is very important as studies show that if a customer cannot find the desired Website in 10-15 seconds they go somewhere else. Your service provider can provide a name for a fee.

Next you need to design your Website. There are millions of Web pages, and your challenge is to attract customers to yours. Unless you are extremely proficient in designing and implementing a Web page, it is better to have the page developed by a text editor, and this too can be expensive.

Another major concern is security. It is the number one reason customers are reluctant to make a purchase on the Internet. Credit cards are used primarily for Internet trades as they represent the safest way to transfer funds. To handle this type of transaction you must have an 800-phone number for ordering directly from you, thereby minimizing your customers’ concern about security.

Because you are selling a product some means must be provided to list purchases of each customer and arrange them so that they can be filled in correct order. This type of software is complex and costly. Most servers will charge a monthly fee to manage this software for you on a 24 hours per day, seven days a week basis. Separate arrangements must be made with a supplier(s) for delivery of goods to customers or you must arrange for this with major delivery services yourself.

Customers will not flock to your Website on their own. You must attract attention by placing ads on servers, or other Websites, any other appropriate means. In general you will need to launch a marketing campaign. Customers want to buy at the flick of a button. This is the important distinction, exchanging travel time to a store for looking over merchandise from your home and making a purchase with the flick of a button. This is what makes E-commerce viable. Attracting customers is a major task. Putting your Web address on every possible document including business cards, and letterhead; and, for a fee, advertising on other Websites, can enhance the Web traffic.

You should consider that it might be at least 6 months and most probably a year before you will have enough traffic to break even. Further, there will costs of the operation to cover monthly payment for time on the Internet, a one-time fee to register your name, monthly costs to record sales and maintain customer files, and some continuing costs for advertising on the Internet. This all represents approximate costs for the first six months of some $15,000 with continuing costs of some $2,000 per month. This does not include credit card use, return of merchandise expense, computer upgrades, etc.

In summary, at present this is a costly and risky venture. Therefore, before proceeding, you should seek counseling from experts and participate in workshops/seminars, conducted by experts, which will cover these issues in detail.