Creating and Operating an Online Store
It all seems so simple. Build a store on the Internet with exposure to millions of buyers. Sell tons of velvet antler and make lots of money for myself and the deer/elk farming industry. However, experience with my latest venture - the Dog-Mall.com - clearly shows that much more is involved in having a successful and profitable on-line store.
Looking back at my experiences in setting up the Dog-Mall.com, I have concluded that there are 12 essential components to an on-line store. These all have to be done right if you want to be successful.
1. Domain name. This is the name your customers will type into their web browser to get to your site. A domain name is the most important factor used by search engines in determining ranking. For example, our arthritis-in-dogs.com name was selected to ensure high search engine placement when people were looking for information and/or products for their arthritic dogs. It works - anyone typing those two words is likely to find our site listed near the top of most search engines.
The hyphen or dash in the name is very important as it allows the search engine to recognize a unique word. If we used "arthritisindogs" instead, this domain name is meaningless to search engines and thus our name would not rank very high.
I recommend sticking to ".com" domain names even though many other choices are now available. The "dot com" is the grand daddy of domain names and has a certain credibility to it. It also is anonymous as far as country of origin is concerned, and thus more suitable for international marketing.
Finally, manage your own domain name. Don't rely on your hosting service or Internet Service Provider (ISP) to do so. Managing your own domain name enables you to switch Internet providers quickly and allows you to always keep control of it. There are many domain name companies out there.
2. Hosting service. This is the most critical component of your on-line store. If your hosting service is down a lot, or can't be reached when there are problems, it will cost you big time! Even though there are thousands of hosting companies out there, finding a good one can be a challenge. I have personally switched hosting companies several times because of poor performance and service. Each time you do so disrupts your e-mail service and takes much work and effort to transfer your information to the new site.
Here are some of the things you should look for when evaluating a web hosting company:
a. They should offer a 99.9% uptime guarantee.
b. They should be available when something goes wrong. Call their technical support line (be sure they have one) and see if someone answers within a reasonable time. Support must be available 7 x 24.
c. Your site should have an easy to use control panel where you can do many administrative duties yourself, e.g., setting up e-mail.
d. If you are running an on-line store, you will need access to a secure server (SSL). Most companies provide these as part of your package.
e. Expect to pay US$20 to $35 per month for a basic hosting package.
3. Shopping cart. This is the software program that takes and processes the orders from your on-line store. Many hosting services offer a shopping cart as part of their e-commerce package. Prices range from free to several thousand dollars.
I have evaluated dozens of shopping carts and probably tried five or six. I have yet to find the "perfect" one. Some carts try and make it easy for you to use. Unfortunately, these tend to have very little flexibility in customizing them to fit into the "look and feel" of your website.
The other big challenge with shopping carts is their ability to integrate with your credit card payment processor. The cart has to collect all the necessary information, and then be able to pass it on for payment processing. Not all carts do this, and those that do, some programming may be required.
If you are using a third-party cart, you will have to install it on your website. This means using a program to ftp it from your computer to the server and then make all the necessary adjustments. This should be done by someone who knows what they are doing.
I can't recommend a good shopping cart.
4. Payment options. The more options for people to pay the better. Credit cards are a must! If you don't accept credit cards, you will lose many potential sales.
Another option is PayPal - http://www.PayPal.com We have PayPal and their service is very good and easy to use. However, we have found that not many customers use it - most prefer payment by credit card.
Be sure to accept checks. We have customers that prefer to pay by check. So you need include this as a payment option.
5. Merchant accounts. You will need a merchant account in order to accept credit cards. The preferred place to get merchant accounts is through your financial institution. However, be aware that traditional banks look at on-line sales as high risk and will have additional requirements for their merchant accounts. Some of these requirements may be unreasonable or unaffordable.
Shop around. There are many third-party companies that provide these services. However, check them out carefully. Compare their rates, their customer support services, their withholding reserves and payment schedules. Also ask whether they allow you to process telephone credit card sales on their system. See how long they have been in business. After all, they will be collecting your money and you want some assurance that you can collect from them.
Find a company that offers a range of credit cards. You will want Visa and MasterCard at the very least, but you should also accept AMEX, Diners and Discover credit cards.
If you are a Canadian company, you may want both American and Canadian dollar merchant accounts. These are available from some companies as well.
We have been using a company called 2Checkout.com from Ohio - http://www.2Checkout.com - and have been reasonably satisfied with their services so far. Their service is available to non-US companies. You can sign up on-line and be approved within minutes. Currently all processing is done in $US dollars, but they are expected to be able to handle multiple currencies shortly. 2CO charges 5.5% of sales but has no fixed or minimum fees. Therefore, if you have no sales, there are no fees to pay!
6. Payment processing. If you accept credit card orders, you can process payments manually or have them done in real time. In the manual mode, your shopping cart sends you the order and credit card information (encrypted) via e-mail. You then use a terminal, computer or phone to get approval for the credit card payment. If approved, you ship the order. If you are doing a high volume of orders, manual processing will involve considerable work.
Real-time credit card processing has the shopping cart transfer the order and information to the payment processor which approves or declines the payment in real time. You are notified of approval and can proceed to ship your order.
The advantages of real-time payment processing are that:
a. It is much less work for you.
b. Better safety and security for customers as you never have access to their credit card information. Banks prefer real-time processing for this reason.
c. Customer knows right away if their payment has been approved.
There are some downsides to real-time processing as well:
a. Computers don't have any common sense - they won't correct any obvious errors. Unless all information is perfect, payment is rejected. We have a much higher rejection rate using real-time processing than when we processed manually.
b. You need to ship product immediately. Visa requires that products be shipped within 7 days of charging the credit card. With manual processing, you can delay processing the credit card until you are ready to ship.
c. There are delays in you receiving payments as many processors don't deposit your money on the same day.
Some companies, such as the one we use - 2Checkout.com - offer both merchant accounts and processing services. Two other well known companies that provide this service are Authorize.Net and PlanetPay. As with merchant accounts, carefully evaluate the range of fees, monthly minimums and any hidden charges.
7. Website store. As with a "brick and mortar" store, your on-line store must be laid out in a convenient and easy-to-use manner. Because you don't have a live sales person to answer questions, you must provide all the necessary information a potential customer needs to make a purchase. In addition to the prices for your products, you will need to provide information on guarantees, refunds, return policies, shipping, delivery, privacy and security. Navigation should be easy. The purchasing process must be simple.
8. Suppliers. If you don't make your own products, you will have to develop an arrangement with suppliers. The preferred arrangement is to have a "drop-ship" agreement - you sell, and the supplier ships directly to the customer. This prevents you from having to manage inventories and do all the shipping work.
However, in order to do this, you will need reliable, dependable suppliers. You will also need to implement systems to notify the supplier of the order, and to track when orders are shipped.
9. Shipping and delivery. For many on-line stores, this is one of their largest headaches. Here are some of the problems we have encountered:
a. Supplier never receives or loses the order and it never gets shipped.
b. Orders take a long time to get to the customers (especially around Christmas time).
c. Orders get lost in the mail.
d. Orders are delayed or returned by US border customs.
e. Courier costs for small value items can exceed the cost of item.
f. Using regular postal parcel services is the least expensive, but does not offer any method of tracking delivery.
g. 2Checkout.com audits our delivery to customers; if customers don't receive their orders, payment to us may be delayed.
Research has shown that customers prefer to have shipping and delivery included in the price of the product. It also makes setting up the shopping cart much easier. However, customers should be willing to pay extra for rush courier service.
10. Credibility and security. Anybody can set up an on-line business to take your money. Therefore, it is understandable that many people are still uneasy about doing business on-line. Here are some of the things we have done to reassure customers:
a. We purchased and display a Thawte Secure Site certificate. This Seal certifies that we are who we say we are. In order to obtain the certificate, we had to send proof of incorporation and other documents.
b. We have applied for the Better Business Bureau Seal of Reliability. Our site and our company is checked by the BBB before such a Seal is issued and allowed to be displayed on our website. As a condition of displaying this seal, we have to agree to arbitration if we cannot resolve a problem with a customer.
c. We mention our membership with the local Chamber of Commerce and display our city business license.
d. We provide a mailing address and telephone number for people to contact us.
e. We guarantee all our products and issue a refund immediately if a customer is not satisfied with any of our products for any reason. This reduces the risk to our customers when trying our products.
11. Customer support. At one time, I thought having an on-line store meant that all I had to do was check my bank balance at the end of each month. Was I wrong! Having a successful on-line store means being available to respond to customer inquiries and complaints. Even with our small volumes, we get lots of e-mails and telephone calls about our products, lost shipments, etc. And the telephone calls come at all hours! So be prepared to offer a reasonable level of support - otherwise people will not be prepared to do business with you.
12. Marketing and promotion. Even if you have the best on-line store with the best systems in place as described above, your business still will be a failure if people don't know about it. The Internet has grown so rapidly and is so huge, that it is difficult to be found. So marketing and promotion of your store, both on-line and through off-line channels is critical. Here are some promotion suggestions:
a. Most people find sites and products through search engines. Although there are supposedly thousands of search engines out there, only a small handful really count, e.g., Google, MSN, Altavista, Excite, etc. These major search engines account for over 95% of the searches. Getting listed with these is important. Unfortunately, the rules are constantly changing and some search engines are now charging to be listed. Regardless, be sure to submit your site to the major search engines.
b. There are free classified ads on many sites. Select those that your potential customers may be visiting and post an ad about your site and products.
c. Mentioning your new store on appropriate discussion forums or user groups is another way to get the word out. However, provide information only, not hard sell, on these forums.
d. We use our own newsletter - the Dog Business Digest - to let our readers know about our Dog-Mall. Newsletters are a great promotional tool, but they are require a lot of work and commitment.
e. There are thousands of electronic newsletters (e-zines) being published and distributed over the Internet. Most of these accept advertising. Rates are reasonable and very specific target audiences can be reached.
f. We also do cross-promotion across our various websites. Since we operate 5 different dog-related websites, we have a great opportunity to cross promote.
g. E-mail notices, perhaps with discount coupons, are a great way to let your past and existing customers know about your new store. Be careful not to spam! Always provide a way for people to get off your mailing list.
h. Free samples are a good way to get yourself known on the Internet. There are sites that just let their subscriber know of free offers. However, you need to balance the costs of free samples with the actual purchases.
i. Sending press releases to appropriate publications is another way of letting the world know that you are now open for business. However, unless you have something news worthy, most media will not pick up the story.
j. Off-line advertising and promotion will depend on what you can afford. However, it can include newspaper, magazine, radio and television advertising. Remember that unless you have a very large advertising budget, these media will tend to do local promotion only. The Internet is global.
If you are planning an on-line store, hopefully you can learn from our experiences. Then, along with some good luck, you will be able to create a successful and profitable Internet business.