Grow Your Business by Embracing E-commerce
E-commerce is not just for big businesses. Many small businesses can increase their revenue by advertising, buying and selling products online. Developing an effective online store, managing internet-based payments and moving customers from shopping to buying is well within the reach of small business owners.
E-commerce involves advertising, buying and selling products or services over the Internet. It is the logical extension of most Internet marketing efforts. E-commerce benefits many business owners by providing them with the ability to offer their products or services worldwide and the ability to compete with larger companies.
Since customer activities and transactions are managed electronically, e-commerce also provides business owners with a wealth of information that is unavailable offline. For example, online retailers know the number of customers viewing each product in the online store and the percentage of viewing customers that purchase a product. This information can be used to determine appropriate inventory or to suggest popular items or similar items to what the customer is viewing.
In theory, the process of selling online is very similar to selling offline. It requires researching your business plan, creating a store, promoting your business, receiving customer payments, delivering products, and providing after-the-sale support. However, the techniques to use are different than offline. This article outlines how to set up an online store. It covers:
- creating your online store;
- setting up online shopping carts; and
- accepting payments, including using express pay services.
It also addresses issues related to "shopping cart abandonment," which occurs when a potential starts the purchase process but does not complete it.
Creating an effective e-commerce presence involves the same type of strategic thinking and planning that are required for other business decisions. One of the first questions that you need to answer is: "What is my goal for my online store?" The role an online store plays within the website of a given business can vary greatly:
- Supplement business activities. Online stores can supplement existing businesses by offering a limited selection of items that complement an existing business. For example, the website of a sit-down dining establishment may include a small online store to sell gift certificates and promotional clothing such as T-shirts, to offsite customers.
- Integrate business activities. Online stores can increase the revenue and efficiency of an existing business. For example, the website of a pizza restaurant may allow customers to place takeout and delivery orders online. This might improve a restaurant's efficiency by taking orders and processing payment without using employees. It might also increase revenue by attracting customers who prefer to place orders online.
- Create new revenue channels. Online stores can create new revenue opportunities. For example, an independent bookstore can use an online store to sell its entire inventory online. This creates a worldwide market for the bookstore's products which could far exceed revenue generated by in-store customers.
Make It Easy to Find, Evaluate and Buy Your Products
An online store consists of pages on a website where customers can view and select products or services. In many ways, an online store is an online equivalent of a printed catalog. However, the incentive and ability to buy can appear multiple times on different pages, making it easy for a potential customer to succumb to temptation and purchase your products.
The key to developing an effective online store is making it easy for customers to find what they want. This requires organizing the store in a logical manner and including the appropriate amount of information about each product. Business owners must anticipate product-related questions that customers may ask and arrange product information in a manner that answers these questions in the order that they occur:
Do you sell what I want? Items in an online store must be easy to find. Most stores provide multiple ways to find the same information. For example, site visitors may be able to simultaneously click on a product's name or photograph, click on the name of a product category or manufacturer, or use an online search form to select products of interest.
When customers browse individual product pages, they want to have as much information as possible about the product—they do not want to have to guess whether it is suitable. Product pages with good photographs sell more products than pages without them. Since photographs don't accurately reflect product dimensions or colors, it is equally important to specify all product attributes. This includes product name, manufacturer, size, color, weight, availability and price.
How much will this cost? Online customers need to know the total price of an item. This includes the selling price, handling charges, shipping costs and applicable taxes.
How do I pay for it? You must also specify how you will accept payment. Credit cards and express payments are commonplace methods of payment for online stores.
Once the customers find what they're looking for, they typically put the selection in a "shopping cart" and search for other items. This makes it easier for the customer to purchase multiple items, as well as to buy things he may not have been looking for.
Make It Easy to Save and Purchase Items
Like their offline counterparts, online shopping carts allow customers to collect and organize products they wish to buy. Shopping cart pages must be generated dynamically for each order to reflect accurate quantity, pricing, sales tax and shipping for every order. The customers must be able to store items into the cart while they are browsing your website. They must also be able to review and update the cart prior to (and during) the check-out process.
How does a small business owner implement the complex programming necessary to handle e-commerce shopping carts? The answer is simple: you select a pre-existing program or provider that can "plug and play" into your website. You have two basic options: licensed software or hosted services.
If you opt for licensed software, you select the software that suits your needs, both now and over the next few years. One of the leading shopping card software vendors is ProductCart, but an internet search will reveal others. Licensed software is downloaded and installed on a web server. Using the licensed software approach requires more setup time and more diligent maintenance than a hosted solution. However, licensed software generally does not require monthly payments and typically provides a greater opportunity for customization.
Hosted cart solutions allow you to offer shopping carts without installing software on their own server. Instead, e-commerce is conducted offsite using a web-based infrastructure maintained by another company. Hosted carts generally require payment of a monthly or annual subscription fee. Some hosted services also charge a percentage of sales in addition to the monthly fee. This model typically offers turn-key templates that a business owner can customize. Generally, the templates are sufficient for the small business owner. Explore the options offered by several providers and check out reviews of the services.
Here's where the time you spent developing a long-term internet marketing strategy can pay dividends. When you developed your strategy, you should have considered the probability that you would venture into e-commerce. Accordingly, that should have been one factor you considered when researching web hosting companies. Many internet hosting providers also have an e-commerce solution that they can enable for your website. Generally, your life is simpler if you can integrate products and services from a single vendor.
Once a customer has filled the shopping cart, he or she proceeds to the check-out page, where you are ready to accept payment.
Be Prepared to Accept Payment via the Internet
Shopping carts act as the front end for e-commerce. Payment gateway services, such as Verisign or Authorizenet, drive the back end of the online store. The hand off between these two components takes place via a secure connection to ensure that customer data remains safe.
A payment gateway service channels payment requests throughout relevant financial networks, including the merchant account with your bank. The result of each payment request is exchanged between a website's shopping cart software and the gateway service to determine appropriate actions.
For example, if payment is accepted, an order confirmation is provided and the order is fulfilled. If payment is rejected, the customer is asked to resolve the error, provide an alternative method of payment, or place the order by another method.
Merchants who provide their own credit card processing can benefit by adding PayPal and/or Google Checkout as an additional payment option. Although it seems redundant, consumers using these services are more likely to buy from you if you accept their preferred payment method.
Using Express Pay Services Can Increase Sales
Express payment options from companies such as PayPal and Google provide online shoppers with what they're looking for—a secure, hassle-free shopping experience. Shoppers like eBay's PayPal and Google Checkout because it allows them to purchase online without giving out their credit card numbers to individual merchants. These express pay accounts are relatively easy to setup and provide shoppers with a single area to monitor all of their online purchases.
According to a 2005 Forrester survey, 43 percent of U.S. online consumers rely on PayPal's services. Of these shoppers, 80 percent say they are more likely to buy from a merchant that offers PayPal. And these are shoppers that merchants desire: 60 percent of PayPal users are high-net-worth individuals, aged 35-64, and 75 percent are college-educated. These are the types of customers you'd like filling your online shopping carts.
Express pay services provide advantages to online store merchants as well. One of the most important advantages is that these services are a turn-key solution. Also, you aren't responsible for storing credit card information. As a result, there is no risk that credit card information provided to your company will be stolen or misused. Finally, surveys have found that having an express service reduces the number of customers who abandon their shopping carts before completing the purchases.
The two major players in the express market are PayPal and Google Checkout. Both services have many of the same benefits. Like PayPal, Google Checkout offers a process that makes shopping faster, more convenient and more secure for online shoppers. With both services, shoppers complete transactions by entering their login information, avoiding the hassle of filling out multiple forms and having to dig for their credit cards at point of purchase. Also, like PayPal, Google Checkout improves a shopper's security by concealing the buyer's credit card number and providing reimbursement for unauthorized purchases. Google Checkout also lets shoppers choose whether or not to keep email addresses confidential or turnoff unwanted email from the stores where they shop.
The fees charged to merchants are identical, except Google Checkout offers a lower fee structure for monthly sales over $100,000. Neither service requires guaranteed monthly, set up or gateway fees.
Comparison of Fees - Google Checkout and PayPal (July 2011)
|Monthly Sales Volume ||PayPal Fees ||Google Fees |
|$0 - $3,000 ||2.9 percent + $0.30 ||2.9 percent + $0.30 |
|$3,000 - $10,000 ||2.5 percent + $0.30 ||2.5 percent + $0.30 |
|$10,000 - $100,000 ||2.2 percent + $0.30 ||2.2 percent + $0.30 |
|$100,000 or over ||2.2 percent + $0.30 ||1.9 percent + $0.30 |
Take Steps to Reduce Shopping Cart Abandonment
People used to abandon online shopping carts because they didn't understand how online stores and e-commerce worked. Now, it's because they do. Despite ongoing efforts to streamline online purchasing processes, online retailers continue to experience staggering abandonment rates: studies estimate that 50 to 90 percent of all shopping cart purchases are abandoned midstream.
This is because online-savvy consumers are using shopping carts to browse more than to buy. Knowing that shipping costs, handling charges, sales tax, product availability and delivery methods vary widely among online retailers, customers use shopping carts to compare vendors. To distinguish the best online offer, many consumers visit three to five different online vendors and use their shopping carts to determine the final cost of buying before deciding where to make the purchase.
By knowing that shoppers use their cart for comparison, online retailers can serve customers better:
Flexibility. A shopping cart should allow customers to adjust their order without returning to product pages. Customers should be able to change quantities and options. If a product comes in multiple sizes or colors, make it easy to select or change options in the shopping cart.
Shipping. Survey respondents point to excessive shipping costs as the primary reason they abandon shopping carts. Work to keep your shipped costs as low as possible. Consider offering "free shipping" for orders in excess of a given amount. Provide complete shipping information. If you offer multiple shipping methods, show the cost for each.
Availability. Specify whether products are in stock. If items aren't in stock, indicate availability dates. Allow customers to leave an email address if they want to be notified when an out-of-stock item becomes available.
Contact. Include contact information in your shopping cart. Providing telephone and email contact information puts shoppers at ease, and allows them to contact you easily if they print out information for offline comparison.
Remember. Have your shopping cart remember customers' orders even after they leave your site. This allows them to place the order quickly if they return to your site after evaluating competitors.
Simplify. Make the checkout process easy for new customers. Allow individuals to place orders without creating an account. Limit the amount of marketing data you collect when someone places an order.
Survey. Implement a survey to random visitors who abandon their shopping cart. Ask them to identify the top reasons they decided to leave the site without making a purchase. And allow them to rate your prices and shipping charges in comparison to other sites. Ultimately, the best means of finding out why consumers are leaving abandoned shopping carts at a website is to ask them.