If you own a business, the seductive call of online profits has become nearly irresistible. You just know you'll be able to increase sales and boost profits if you can only sell your products to the zillions of hungry consumers out there on the Internet. If you're a Web-site designer, hardly a day goes by when you're not asked to help a client get online.
But is setting up shop online always a good idea? And what are the hurdles to getting into the electronic marketplace? To answer these questions, you'll need to know more about electronic commerce, or e-commerce, and about the different ways you can put a store on the Net. There are many roads to online commercealthough like most roads, this one has a few potholes along the way.
If you've ever ordered anything over the Internet, you're familiar with the process. First, you find a site that has the product you want to buy. Next, you browse the store until you find what you want, and then you click on the Order button. That click stores the item you've chosen in an electronic shopping cart.
When you're done shopping, you proceed to the checkout area, which accepts your personal information and your credit card number. You shouldn't have to worry about the security of your credit card information, as any reputable e-commerce site will have a secure servera Web server that works with your Web browser to encrypt the order.
As the seller in an e-commerce transaction, you have a different set of concerns. To set up shop on the Internet, you need a commerce-enabled Web site, which includes the electronic shopping cart; a connection to the credit card network; and finally, a merchant account, which allows funds received from credit card transactions to be deposited to your business's checking account.
The biggest hurdle, especially if you are just starting out in business, is getting a merchant account, which usually requires credit checks and application fees. The connection to the credit card network is either software for your Mac or a card-reading machine that connects to the authorization network via a modem. If most of your sales will be over the Net or via mail order, you don't need the machinejust your Mac, a modem, and the software.
The most common authorization software is Tellan Software's (800/483-5526, http://www.tellan.com ) MacAuthorize, which costs about $800. Exact pricing varies because the bank or other company that helps you obtain your merchant account usually sells or leases the program as part of a multiyear contract for credit card authorization services. That same company (which could be your bank) will also take a percentage (between 1.6 and 3.0 percent) of each sale, may charge a small fee (under 50 cents) per transaction, and may charge minimum monthly service fees.
Just as with opening a store in the physical world, you should evaluate the risks in e-commerce before jumping in. First, figure out how much business you need to make your Web store worth running. That will depend on the amount of your average order and your expenses each month for Web hosting and other necessities. Don't forget to add in the value of your time, as you'll need to work at updating your online store, just as you would spend time stocking the shelves in a physical storefront. Because online stores usually start out with small sales numbers (see the sidebar, "Making It Online"), in general, if you need more than a few sales per month to break even, you should rethink your business plan.
Credit card fraud, while rare, does happen, and the ugly reality is that if you ship an order based on a stolen card, you'll end up losing the goods you shipped, and the credit card company will charge you back for the order's amounta double insult. You can protect yourself from fraud by contacting the customer before shipping orders that look suspicious and asking for more information, such as the name of the bank that issued the credit card, and by always requiring a signature for shipped products.
If you do take the plunge, there are three basic ways to get your store online. You can build your own Mac-based e-commerce server and keep the whole shebang entirely in-house. There are shopping-cart services you can tie into a Web site you create yourself. And there are companies that will help you create your online store from scratch and will host and run the store to boot.
Roll Your Own E-commerce Server
If you want to create your own server, the Mac is up to the task. In terms of performance, you have nothing to worry about; because Web serving isn't a CPU-intensive task, any Power Macintosh can easily handle thousands of hits and hundreds of orders per day. You'll need a PowerPC Mac (an iMac will do just fine, or if you have an older computer sitting around, you can press it into service) with an Ethernet connection, a decent amount of RAM (say, 40MB), and at least 1GB of free disk space. You'll need Web server software such as StarNine's WebStar ($499; 800/525-2580, http://www.starnine.com ) or Tenon Intersystems' WebTen ($495; 800/662-2410, http://www.tenon.com ). You'll also want Sophisticated Circuits' (800/769-3773, http://www.sophisticated.com ) Rebound (for ADB Macs; $99) or Kick-off (for USB Macs; $199) devices, which automatically restart the server if the Mac crashes.
For the shopping-cart software, you have two good choices: the first is the $495 Ch-Ching from Imacination Software (800/244-5332, http://www.imacination.com ), a FileMaker Pro-based shopping cart with built-in credit card authorization abilities. It requires Blue World Communications' $548 Lasso (425/646-0288, http://www.blueworld.com ) in order to work with WebStar. For customization, you'll want a copy of the $199 FileMaker Pro (800/986-2249, http://www.filemaker.com ). Your other choice of shopping carts is Pacific Coast Software's $3,395 WebCatalog-WebMerchant bundle (619/675-1106, http://www.pacific-coast.com ), which also requires that you buy MacAuthorize.
After you have bought the hardware and software, you can get started building your Web site and online store. Both Ch-Ching and WebCatalog offer templates that will get a store on the Net quickly, but you'll probably want to customize the look-and-feel of the templates to match your site. For that customization you need some skills in HTML and (if you're using Ch-Ching) FileMaker Pro. When you've built your store, you should expect to pay anywhere from $50 to $400 a month for high-speed, continuous Internet access.
As you can see in the table, "An E-commerce Price List," the start-up costsin money, time, and expertisefor having your own server are quite high. The most compelling reason for making this commitment is that you want and need every bit of control and customization you can wring out of your site. As such, it probably isn't the solution for most small businesses.
Gives you the most control over and complete customization of your online store.
You have to learn how to create that control and customization, or pay someone else to do it.
Costs the most money and time up front, and you are entirely responsible for 24-hour maintenance of the server.
If you already have an established Web site hosted by an Internet service provider, you can add e-commerce to it by either buying an off-the-shelf shopping-cart package and having your ISP install it on the ISP's server, or tying your site to a shopping-cart service. Many companies offer these services, often rented by the month for prices ranging from free to about $100, with few or no setup fees. Because these carts run as programs on the host's Web servers, you'll usually need to insert into your site's pages some specialized HTML code that calls the cart program. This task isn't generally too daunting, but you should check with the ISP to see just how much modification of your pages it will require.
Some carts, such as CheckItOut (978/440-9988, http://www.adgrafix.com ), generate a whole store for you, even allowing you to upload images for your store's items and to customize the look of the store to some extent. Other carts, such as Americart ( http://www.americart.com ), require extensive modification of their HTML templates to get anything to work. Things you want to look for when you choose a shopping cart include the ability to calculate shipping methods and sales taxes flexibly; automatic mathematical verification of credit card numbers; automatic e-mail order confirmations; and most of all, simplicity in the ordering process. Customers won't put up with complex procedures or with systems that require elaborate registration before allowing an order to go through.
Fairly low cost; many options from which to choose; good add-on to an existing site.
Limited customization; HTML skills often required; some carts charge per-transaction fees.
Serious research required to make sure shopping cart meets your needs; feature set may not grow as your store does.
Perhaps the easiest way to get online is to use one of the online store services, such as Yahoo Store ( http://store.yahoo.com ) or iCat Commerce Online ( http://www.icatcorp.com ). Rather than grafting a shopping cart onto your existing site, these services let you build entire stores based on templates, using nothing more than a Web browser. You don't have to run your own server, and this method doesn't require any HTML knowledge, although if you want a really spiffy-looking store you'll probably want to use at least a little HTML. The price is right, too: Yahoo Store charges $100 per month for a secure store with real-time credit card authorization and up to 50 items, and iCat costs even less, beginning with free, 10-item stores, although it won't do the authorization.
Both services say you can build a store in just a few minutes, and it's true; it's just that the result is not too aesthetically pleasing. You can use the Yahoo and iCat tools to create an attractive store, but it will take a reasonable amount of work and experimentation. You can upload your own logo, as well as images of all the products you sell, to either store. Yahoo Store automatically makes thumbnails of large images, and it even lets you download order information in Microsoft Excel format.
Besides building stores, we also tried buying from stores that use each service. The Yahoo stores worked well; the pages loaded quickly, and it was easy to go through the checkout process. Unfortunately, we had many problems with iCat's stores. As consumers, we put items in the shopping cart, only to be told later that the cart was empty and that we should call tech support. When we tried to build a store, iCat demanded a credit card number, even though we were building a free store.
Very reasonable cost for small stores; usually requires no HTML skills; chock-full of features.
Costs are usually tied to the number of items you're selling; limited customization.
In our experience, some of the software didn't work at all. Try before you buy, or make sure you can get a refund if you're not satisfied.
Before you start worrying about the technical problems involved in creating an Internet store, it's important that you make a strong case businesswise for selling your products online. You'll need to spend a considerable amount of time and effort to make your online venture successful, so make sure you're ready to learn the ropes and have considered the risks.
Until recently, the barrier to getting your business to sell online was fairly high, especially if you wanted to use a Mac-based server. E-commerce on the Mac meant a serious amount of programming and fiddling with custom databases, and often required specially written scripts in AppleScript or Frontier to get the shopping cart and databases to exchange data with MacAuthorize. The advent of newer products like Ch-Ching has greatly reduced the need for customization. Still, running your own server makes financial sense only if you need the tightest control over the operation and the look of your online store.
June 1999 page: 90
Being successful in online retailing requires a different mind-set from operating a traditional storefront. A store in the real world has a predictable sales pattern; sales ramp up after the store's opening as customers get to know it, and then plateau when the store has saturated the demand in the local market. Because an online store has no local market (it's just as easy to go to one place as to another on the Internet), the online retailer can't count on window-shoppers to happen by the store. That's why so many of the so-called online malls have failed. There's no compelling reason for shoppers to go to an online mall and browse around the stores. Yahoo's shopping site expects to succeed because people are already coming to Yahoo for other reasons, such as to find things on the Web, check their free e-mail, get news, or use Yahoo's other portal services.
So what you sell, rather than where you sell it, is the primary indicator of your possible success as an online retailer. Making your Web site the place to buy a particular item is essential, because it's so easy for customers to buy from any other store. The key is to pick a small niche you can dominate. If you make or sell something people really want and can't get anywhere else, you have a good chance of online success.
It's foolish to try to compete with big, established Web merchants on their own turf. Chances are minuscule that you're going to beat Amazon.com at selling books. Paul Graham, producer of the Yahoo Store, puts it this way: "Would your product sell and your store prosper in the real world if it was right next door to a Wal-Mart? If so, there's a good chance that you'll make it online."
There are always costs involved in marketing, and selling on the Internet is no exception. We compared three e-commerce solutions to estimate start-up and ongoing costs.
For the Mac-based server, we calculated the price of an iMac running WebStar, with the combination of Ch-Ching, FileMaker Pro, and Lasso. This setup allows you to handle hundreds of orders a day and sell thousands of different items. The shopping-cart solution (CheckItOut) allows 25 items in your store; the hosted store (the Yahoo Store) allows 50 items. You can add up to 1,000 items to the Yahoo Store for $300 per month; to expand the CheckItOut store, you must buy the software for $500.
We estimated a monthly cost for each option by assuming each made 50 sales in one month at $75 each. Then we applied the fees and charges most likely to apply, based on a survey of many merchant account providers. Because the monthly costs, other than the discount rate and the transaction fees, are fixed, the more sales you make, the lower your cost per sale. The high cost of the Mac server makes it appropriate only if your sales volume will recoup the costs. The shopping cart is an attractive service, but the store is small and you have to do all the work to attract visitors. The Yahoo Store costs a bit more per month, but the quality of the shopping cart, the listing in Yahoo's shopping area, and the increased size of the store make it the best deal.