Are you thinking about starting a business where you sell your products online? If so, then you’ll be joining the millions of entrepreneurs who have carved out a niche in the world of e-commerce.
At its core, e-commerce refers to the purchase and sale of goods and/or services via electronic channels such as the Internet. E-commerce was first introduced in the 1960s via an electronic data interchange (EDI) on value-added networks (VANs). The medium grew with the increased availability of Internet access and the advent of popular online sellers in the 1990s and early 2000s. Amazon began operating as a book-shipping business in Jeff Bezos’ garage in 1995. EBay, which enables consumers to sell to each other online, introduced online auctions in 1995 and exploded with the 1997 Beanie Babies frenzy.
Like any digital technology or consumer-based purchasing market, e-commerce has evolved over the years. As mobile devices became more popular, mobile commerce has become its own market. With the rise of sites like Facebook and Pinterest, social media has become an important driver of e-commerce. As of 2014, Facebook drove 85 percent of social media-originating sales on e-commerce platform Shopify, according to Paymill.
The changing market represents a vast opportunity for businesses to improve their relevance and expand their market in the online world. By 2013, worldwide e-commerce sales reached $1.2 trillion, and U.S. mobile sales reached $38 billion, according to Statista. More than 40 percent of Internet users — 1 billion in total — have purchased goods online. These figures will continue to climb as mobile and Internet use expand both in the U.S. and in developing markets around the world.
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E-commerce businesses may employ some or all of the following:
- Online shopping web sites for retail sales direct to consumers
- Providing or participating in online marketplaces, which process third-party business-to-consumer or consumer-to-consumer sales
- Business-to-business buying and selling
- Gathering and using demographic data through web contacts and social media
- Business-to-business (B2B) electronic data interchange
- Marketing to prospective and established customers by e-mail or fax (for example, with newsletters)
- Engaging in pretail for launching new products and services
- Online financial exchanges for currency exchanges or trading purposes
Categories of e-commerce
As with traditional commerce, there are four principal categories of e-commerce: B2B, B2C, C2B and C2C.
B2B (Business to Business) — This involves companies doing business with each other. One example is manufacturers selling to distributors and wholesalers selling to retailers.
B2C (Business to Consumer) — B2C consists of businesses selling to the general public through shopping cart software, without needing any human interaction. This is what most people think of when they hear “e-commerce.” An example of this would be Amazon.
C2B (Consumer to Business) — In C2B e-commerce, consumers post a project with a set budget online, and companies bid on the project. The consumer reviews the bids and selects the company. Elance is an example of this.
C2C (Consumer to Consumer) — This takes place within online classified ads, forums or marketplaces where individuals can buy and sell their goods. Examples of this include Craigslist, eBay and Etsy.
Getting started
If you have a simple product to sell and a desire to expand your sales online, there are a few tools you can use to get started.
Websites such as SquareSpace and WordPress offer mobile-friendly ready-to-go e-commerce templates that help you get a store up and running quickly. As a shop owner, you will need a way to collect credit card payments from consumers online. PayPal, Square and Google Wallet are all popular ways of accepting and managing online payments.
If you are selling physical goods, you’ll need to consider how you’re going to ship them. PayPal and other processors have worked with shipping merchants, including USPS and UPS, to offer one-stop postage processing. You will also need to research your state laws to determine if you are required to obtain a permit for selling online, or if you need to collect sales tax for your state or municipality.
As your company grows, you may want to consider more advanced ways to process payments, such as using a merchant account and a service such as Authorize.net. Services that integrate more fully with your bank frequently offer discounted transaction costs when compared to processors such as PayPal.
E-commerce strategy
As in any new venture, the first step in succeeding in e-commerce is to set goals. Do you plan to increase revenue from existing customers? Gain new customers? Increase the average order value? Sell through new channels? Lower prices? Once you have figured out your goals, it’s time to set a plan.
A SWOT analysis can help you assess the strengths, weaknesses, opportunities and threats of your company’s current environment. What does the market look like? Where does your business excel, and where does it falter? Review your entire business, not just segments of it. Evaluate external opportunities, because this is the often the primary place to invest time and money. Be honest with yourself when analyzing weaknesses and threats, or else the analysis will not be helpful.
After the SWOT analysis is done, see how it fits into your overall vision. Where do you see your business in five years? In 10 years? This will help you set business objectives for the current year, where you set objectives for sales, profits, customers, traffic, new systems and new staff. After the objectives are set, you can set a strategy into place yourself, or hire an e-commerce consultant to help you.
Other tools that can help you determine how to best grow your company into a new segment include PEST (Political, Economic, Social and Technological), MOST (Mission, Objective, Strategies and Tactics), and Porter’s Five Forces analyses.
E-commerce law
In addition to having a strong business strategy, it’s important to have a basic understanding of e-commerce law. Online sellers, particularly those selling internationally or across state lines, face different legal and financial considerations, especially in regard to privacy, security, copyright and taxation.
The Federal Trade Commission (FTC) regulates most e-commerce activities, including the use of commercial emails, online advertising and consumer privacy. Businesses collect and retain sensitive personal information about their customers, and your company is subject to federal and state privacy laws, depending on the type of data that you collect.
There are also online advertising laws that protect consumer privacy and ensure truthful marketing practices online. As an e-commerce business, online advertising is a major part of your strategy. Over the past decade, federal and state governments have passed new online advertising laws. As you expand into online marketing, it is important to be familiar with these.
In addition to protecting consumers from data leaks and misleading online advertising, digital works are also protected on the Internet via the Digital Millennium Copyright Act (DMCA). There are a number of provisions that e-commerce businesses need to be aware of, including copyright infringement liability and a service provider’s responsibilities.
More information
More information about e-commerce can be found at the following resources:
“Online Advertising Law” (Small Business Administration)
Shopify
E-Commerce Times
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– See more at: http://www.businessnewsdaily.com/4872-what-is-e-commerce.html#sthash.HSzqZ9rc.dpuf
Affiliate programs are an important tool for drawing visitors to a web site. Basically, an affiliate program pays other web sites to advertise for you based on their performance. Your affiliates are paid out based on clickthroughs, leads or sales. This article focuses on clickthroughs. One of the best ways to set up an affiliate program is to utilize a well established company such as Cj.com. They will take the headache out of administration, fraud control and payment of your affiliates.
But not all of us can afford to utilize these third party companies when we are starting out, and we need to be able to “test the waters” before outlaying such a large investment. There are a number of relatively easy, free ways to kick off and administer your own affiliate programs.
The first way is a simple code for hyperlinks you supply to affiliates that does not require you to make any changes to your site. This works best if you have access to accurate statistics reporting on your web traffic. The code would look something like this:
The ?999 represents the unique identifier that you would issue your affiliates, a different number for each affiliate. The “_blank” will open your page up in a new window. No special software is required to direct to the page/site in question. The hits from each affiliate would appear in your server logs as the referrer along with their code to identify them, then you just need to record the results in a spreadsheet for tracking/payment purposes. If you don’t get server log stats; there are a number of free web traffic reporting services that have excellent reporting mechanisms.
Another way would be to create a series of home pages that were identical to your current home page, but saved under a different name. The code that you would issue to your affiliates may look like this:
The “a123.htm” would be a copy of your home page with the affiliate ID as the file name. Because the page is a carbon copy of your home page; the visitor would be able to navigate the site as per normal. These should not be confused with doorway pages, a subject that is covered in another article on my site. It’s important to keep search engine spiders away from these pages, as they may incorrectly assume that you are trying to “spam” your way to the top of search engine rankings. You can do this by placing the follow codes between theandtags:
Learn more in my robots tag tutorial.
If you store these pages in a separate folder and depending on your authoring software, you may not even have to physically alter the navigational link coding on your “customized” home page. A package such as FrontPage 2000 will recalculate the hyperlinks for you. If you store the affiliate pages in the root directory of your web (where your index page is) there will be no need to alter the links on the page as navigation would remain the same. The resulting traffic from this method would reflect in your server log stats in a section usually entitled “Page Counts”. Once again, it is simply a matter of recording the results into a spread sheet.
While I have only covered text links in this article (as they are less annoying to prospective visitors), basically the same logic applies to graphical banner ads; with one important difference. You keep the graphical banners on your server, the affiliate link contains the reference to the location. The following is sample code:
The “alt” value within the code allows a visitor to get a better idea of what is on your site as there is limited space for descriptions on graphical banners. When they move their mouse over the banner, a text box will appear with the description in it. Within the code example above, you can see the reference to the banner, which is actually located within my web. Implementing the link this way will make life easier for your affiliate and ensure that your banner is not altered.
While these methods can assist you in establishing an affiliate program for zero dollars, there are several important considerations to bear in mind.
Fraud – there are many “bots” (programs) available on the Internet that will fake clickthroughs which cost the Internet advertising industry millions of dollars each year, so you will need to be especially selective in who you allow to be a part of your affiliate program. Review your affiliate applications carefully and be specific in your agreements with them (strict fraud policies). For an example of standard agreements, consult any site that already offers an in house program for guidelines in wording, and if you can afford it; seek legal advice on policy wording.
Trust – Many affiliates, especially those who are experienced, may not trust these methods of accounting.
Targeted traffic – ensure that the affiliate links you provide are descriptive of what is actually contained in your site. This ensures that the visitors (which you are paying for) are interested in your product/services.
Administration – It’s of the utmost importance that you maintain good records and copies of your server logs in case an affiliate questions their level of payments and for end of financial reporting for taxation issues. Dependent upon your structure, those payments you make to affiliates could be tax deductible.
Pricing – Clickthrough costs can add up very quickly. If you cannot convert clickthroughs into sales, your program is doomed. Again, it boils down to selecting effective affiliates.
Time – Running your own affiliate program on minimum budget is very time consuming. Pick and choose your affiliates carefully which will minimize the time (and money) you spend on administering your program. If your site sells bathroom accessories, there probably isn’t much point in taking on affiliates who run used car sites.
Government – It might be wise to check out what other requirements the government in your country has in regards to paying “contractors”, which effectively is what an affiliate is. In Australia, we now have a Goods and Services Tax (what a brilliant idea that was…not!) in place that requires us to supply extra reporting for any product we buy or any person we pay in connection with our businesses.
Future planning – Use your home grown affiliate program as a test bed rather than as a long term solution. Try out different ad campaigns before taking the leap and spending your cash with companies such as Cj.com. If your home grown program works well, chances are it will work better in the hands of a capable co-ordinator such as Cj.com or Fineclicks as a pay per lead or pay per sale program.
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