Start Ecommerce Store

Starting Your First Ecommerce Store – The Plan

Ecommerce Guides

Before you build your online store, priority number one is creating a killer e-business plan.

Congratulations — you’re thinking of starting an online business. You certainly know how to spot a growth area when you see one. The rest of the economy might be shaky, but e-commerce enjoys rosy predictions for years to come. More and more people are spending more and more money online every year.

Of course, if it were that easy, everyone would start on online business. Well, actually, it seems like everyone is starting an e-business. Hordes of new online stores spring up every week. Retired grade school teachers start them, and people who use to sell shoes for a living start them. Experienced, well-financed business types launch them, and people who have no idea what they’re doing launch them.

And why not? The barriers to entry are low, a lot of online businesses can be run from home, and there’s gold in them hills.

But, in truth, it’s not simple to succeed as an online merchant (which is different from just setting up a site). As one e-commerce expert noted, there are more dollars being spent online all the time, but the amount of competition for those dollars is growing even faster. At this point, it’s tough out there.

But don’t lose heart. There are a lot of people making money online who don’t have degrees from the Wharton School of Business (Trump’s alma mater). Plenty of cyber-merchants are flying by the seat of their pants, and doing pretty well in the process.

You can be one of them, if you’ve got some dollars to invest, are ready to work hard, and — this part gets tricky — are willing to put some serious thought into it. Let’s start with the serious thought required before you open for business.

The Two Parts

Roughly speaking, starting an online business is divided into two parts: the hard part and the easy part.

The easy part is assembling your basic business structure. You’ll need to choose your software platform, set up a credit card account, develop a marketing plan, and figure out a few more nuts and bolts things. Oh sure, there’s a lot of homework involved here — and plenty of cash outlay — but all told, this part’s not rocket science.

The hard part is developing your e-business plan. That requires awareness and understanding of what it means to do business online, and an inventive strategy. Developing a sound business plan is not only critical; it’s the do-or-die step in starting your online store.

‘But wait,’ you say, ‘I already have my business plan — I’m just looking for a little help in building my site, and I’m rarin’ to go.’

Well, hang on. You may think you have your online merchant plan — and you might. But before you assemble your basic business structure, you have one precious opportunity to really think things through — now.

More e-businesses have failed because of a faulty underlying concept than because of problems with software or hosting issues. Remember the Internet boom of the late ’90s? Those businesses had full tech staffs and fat marketing budgets, but a lot of them went belly up because their business plan was no better than the Titanic’s plans for dealing with icebergs.

“The biggest favor you do yourself in the beginning is to take time to really think about what your doing — make deliberate decisions,” says Jeff Binder, CEO of Saffron Rouge and an expert in starting online businesses.

“Am I going to be niche retailer? Am I going to be a mass market retailer?” In short, “how am I going to make money?”

“Your business model could be such that you don’t make anything on the products you sell — but you make money by selling ads on your site. Or, you can practically give away your product, but make all your money on your grotesquely expensive shipping fees. Or, your shipping is free all the time, but your product costs are higher,” says Binder.

Whatever the case, before you launch YourBusiness.com, make sure you’ve considered the following:

What’s really different?

Is there anything that really distinguishes your site from similar online merchants? If you’re merely going to sell widgets like the 14 other well-established widget sites do, your ‘me-too’ approach will limit your success. Find some way to set yourself apart so people come to you rather than your competition.

Case in point: GatorPack sells packing supplies — nothing unique there. But two things keep customers coming back: the site’s design is as simple and efficient as possible — customers order right from the front page (no digging). And, the site focuses like a laser beam on filling orders the same day they get them. GatorPack sets itself apart by being incredibly easy and fast to buy from.

Here’s the reason originality is so important in your e-business plan: You can set up a dry-cleaning business in your neighborhood, and it doesn’t have to be any different from the dry-cleaning business across town. No imagination, but no problem – because nobody’s going to drive across town to get their clothes dry-cleaned.

But online, all businesses are right next to each other. Click your mouse and you’re there. So simply setting up the exact same online business that someone set up in 2002 is going to be an uphill climb. They’re established in the search engines and you’re not.

So setting up an online business takes a little more originality, some kind of twist, that setting up a real-world store doesn’t.

What’s the competition?

Scope out potential competitors’ sites – now is the time to spot the chinks in their armor. What are they missing? What customer need do they fail to serve, that you can cater to and gain advantage? Pretend you’re a customer. What do you wish was different about their online store?

Case in point: Before she launched PaperMojo, which sells decorative handmade paper, Shelley Gardner-Alley checked out similar sites. She learned two things: most do not have a broad selection, and many do not have attractive sites. So she incorporated both these features into her business plan – she was ready to one-up her competitors before her first day of business.

To find out how much traffic your competitor is getting, you can use the Alexa service. This tool doesn’t give absolute numbers of visitors, but it provides a relative ranking number.

Who are your customers?

The people who spend money at your site are the most beautiful people in the world — you want to know everything about them. (In fact you better share their interests, otherwise you’ll never bond with them enough to be successful.) With all your customers’ desires in mind, make your site the center of their world. Beginning with the front page, make it clear that you exist for their special needs.

Case in point: AnglersVice is a fly-fishing site started by an ex-stockbroker who’s following his lifelong passion with fly-fishing. He not only sells the gear, he offers scads of information about fly-fishing, including “The Angler,” an online magazine about the sport. He posts photos of happy fisherman near the top of his front page. He knows his customers and he uses that knowledge to sell to them.

What Sells Online

As e-commerce enters its second decade, certain patterns have emerged about what sells well on the Internet. The product you sell might not be in this mold, but if not, you’ll need a good rationale for going outside the norm.

Hot online sellers:

  • It’s Niche If you’re Wal-Mart, you don’t have to be niche, because you have the deep pockets to carry everything. But if you’re mom and pop, you better pick one product and sell it better/faster/cheaper/more interestingly than anyone else.Selling women’s clothing isn’t a niche, but “women’s vintage clothing” is a niche (although it’s a crowded niche). Even more niche, sell only vintage evening gowns — sell nothing but vintage evening gowns, and have a better selection and more product tips than anyone else.Along this same line, personalized items are good – something you customize for each customer, or anything that is rare and difficult to find. Or, something that isn’t available in your customers’ local areas (like fine French perfumes or hand-painted porcelain dolls) that you have easy access to.
  • It’s Convenient Busy shoppers are willing to pay more if you simplify their lives (and online shoppers are still more affluent than their offline brethren). It’s a hassle to drive to the store to buy it – but if you sell it hassle-free online, you’ve got yourself a customer.For example, the owner of CoffeeCakes sells her coffee cakes and gift baskets at above grocery store prices. Owner Sherry Comes knows that her customers are people who don’t care about saving three bucks – but they want a gift basket sent quickly and reliably. CoffeeCakes, using a highly efficient fulfillment system, does a brisk business.
  • It’s a good deal Okay, this contradicts the “it’s convenient” point above, but there are many types of online shoppers. In short, people want it cheap – and the Internet makes comparing prices as easy as click-click-click. With the help of comparison shopping sites like Shopzilla and Nextag, and other tools like Dealio’s shopping comparison toolbar, people compare prices day and night.This hunger for a cheaper price could benefit a mom and pop operation: in some cases, a small merchant who operates with a skinnier margin can undercut a big player with a fat infrastructure to maintain. (But there’s always someone who’s willing to undercut that small merchant!) How low are you willing to go?
  • It’s small, and easily shipped There’s a reason that books and CDs were the first big sellers on the Net – you can mail them easily. (That’s also the reason it’s hard to open a new book or CD site – it’s a saturated market.) People get very excited by low shipping charges.

Of course there are now plenty of exceptions to this – Overstock sells queen-sized bed frames. You might find a less-crowded market by selling larger items.

Speaking of Overstock… (and the difficulty of online business)
By the way, Overstock’s shipping charge for that full-sized wood bed frame, which it sells for $330, is $2.95. So that’s essentially free shipping for an item that is already competitively priced.

No, this is not an ad for Overstock, but a warning before you start your online business: You’ll be competing with merchants who have huge marketing budgets – Overstock runs TV ads, for goodness sakes – and have rock bottom prices.

In short, there’s no way to compete in this environment without a cogent and inventive business plan. It’s rough out there.

Two More Key Points Before You Begin

Talk to people This one’s a freebie but it’s all-important: get as much advice as you can. Call business owners. Pester people. Look under rocks. Find out why people failed doing the same thing you plan to do. Don’t go into this blind: good information can save you tens of thousands of dollars.(This is the big one:) Do the math! Before making your final decisions about your e-business strategy, sit down with a calculator. Make a list of all your upfront one-time start-up costs, and all your fixed, monthly ongoing costs. Make sure you include a hefty line item for your marketing budget, and another hefty line for unexpected expenses, which will occur every month.

With these numbers in mind, how many widgets do you need to sell at what price every month to turn a profit? Is it realistic that you can sell that many?

And, given that you’re not going to sell that many in your first month, how many months can you operate on a money-losing basis before you need to fold your tent?

Do all these calculations and you’ll have a single number. This is the dollar figure you’ll need to start your online business. Of course, if the thing goes belly up, this is also the dollar figure you’ve flushed down the tubes.

It’s important to do this math ahead of time, because it allows you to look at the number in the cold light of day, before you take the plunge.

Some people don’t figure out the math beforehand, and they get a few thousand dollars in, and they realize, “Hey, I’ll need x-amount of thousands of dollars more to do this!?” It’s only then that they realize they can’t afford it, and by then they’re in the middle of a deep river.

So take a good look at the initial investment amount. Are you willing to risk it?

Boldly Going Forth
Okay, so you’ve got your plan. It’s an e-business that fills a very real need, and it’s at least a little bit different from the other 14 major players in the space.

You know what it will cost, and you’re willing to spend it. Let’s start the building process.

Selecting which software you’ll use to build your online store is a critical decision. Here’s what you need to know, including questions to ask vendors and a survey of platforms.

Selecting which software you’ll use to build your online store is a critical decision. It’s like laying the foundation: all the other tools, from your credit card account to your marketing plan, will be influenced by this one decision. So choose carefully. Very carefully.

‘But wait,’ you say, ‘I already have Web design software — can’t I just use that, and then simply add a secure method for accepting credit cards?’

You can, but it’s a limited solution. Because an online store has so many special requirements, like inventory management and product display, merely building a Web site and calling it an “online store” won’t get you very far. You’re best served by buying or licensing software specifically intended to handle the heavy lifting of e-commerce.

As you shop for an e-commerce platform, you’ll encounter a blizzard of choices, each of which has a blizzard of sub-options. Before you choose one, browse through them until the jargon starts to make sense. The market for e-commerce platforms is far more confusing and lingo-heavy than, say, the market for cars. It’s worth educating yourself before you buy.

Even the most established vendors have only been around a few years, so the market is still evolving quarter by quarter. This means that prices and product offers can vary wildly by vendor. You can spend $10,000 a month and get a Rolls Royce, or you can spend a few hundred bucks a month (or less) and get an almost new Toyota. Either one might be right for you, based on your needs.

Test Drive and Get References

To help you sort through the many options, you can “test drive” the software before you buy it. Most vendors will allow you to demo their software (if not, that’s a red flag). They either have a model store set up that you can access, or some other way for you to poke around the controls.

Don’t plunk down your money until you’ve really opened up the hood and gotten a feel for the software. You’ll be spending a lot of time with it.

While you’re investigating, get references. The only way to find out the truth about a platform is to ask people who use it – and not the people the company recommends. Find a user who isn’t on the official list, and ask them how they feel about the platform.

The All-In-One / ASP Trend

One key concept to be aware of: some e-commerce platforms are “all-in-one” solutions that provide everything: hosting, accounting tools, Web analytics, even marketing tools like e-mail management. In contrast, some platforms are just the core e-commerce platform itself, and you buy the other tools from separate vendors. Adding confusion, some platforms are in-between; they include, say, hosting and the basic e-commerce software, but you shop elsewhere for the rest.

The all-in-one solution has become ever more popular with online merchants in recent years. The advantage is that A) someone else has done the homework of gathering all the needed tools into one handy package, and B) all the tools are integrated, so they work well together.

As a related concept, some vendors of e-commerce platforms license their software on an “ASP” basis. ASP stands for “application service provider.” This means the software seller hosts the software on their own servers, and the online store owner accesses it remotely. This way the store owner doesn’t have to worry about servers going down (hopefully). Also, ASP vendors tend to offer a lot of hand holding in terms of maintaining the store owner’s software.

The e-commerce industry is moving toward platforms that are all-in-one solutions offered on an ASP basis. This frees the store owner from technical concerns as much as possible. It allows e-tailers to concentrate on selling and leave the technical snafus to someone else. An online merchant who licenses an all-in-one solution on an ASP basis doesn’t need to hire tech people — a huge savings. The salary of a tech person can buy a lot of pay-per-click advertising.

But don’t let the trend toward all-in-one be your deciding factor. You might buy an inexpensive stand-alone platform, find a cheap place to host it, and you’ll be off and running. If you’re truly a small fry who’s tech savvy, you might not need a tech person very much.

One more thing: you might be successful. If that happens, your software platform must be able to grow with you. In industry lingo, it must “scale,” as in “scale larger.” Don’t be seduced by a platform whose initial price is low, but that won’t scale. When your business grows you’ll be stuck with a platform that’s too basic. And it’s really a hassle to change your software platform once its in place.

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The general rule: buy as much platform as you can reasonably afford upfront. Get a platform that can grow with you.

Questions to Ask Before Buying E-Commerce Software
Before you buy your platform, look back at your business plan (you did make one, didn’t you?) and find out what specific tools you’ll need. Based on your needs, ask the vendor’s salesperson the following:

Some Really Key Questions:
Do you provide tech support, by telephone, 24/7?
What other important tools are included? Web analytics? Hosting? Accounting package?
Does the platform help with cross-selling and up-selling?
Does the platform have built-in site search? Is so, what kind of tools will I have to enable me to influence search results?
From the page the shopper chooses an item on, what is the total amount of pages they must click through to complete the purchase?
(A higher number of page results in a higher percentage of abandoned shopping carts.)

Site Building Questions:
How many products will your software allow me display? Dozens? Thousands?
Is there a wide array of templates that come with the software, so I can avoid a cookie-cutter look?
If I hire a HTML expert to jazz up the site, will custom-written HTML pages interface with your software?
Does your solution generate both static and dynamic Web pages? (Static pages are written in HTML and are more likely to get recognized by search engines; dynamic pages are created as a shopper requests them, and allow you to more easily present a large catalog of items.)
How much do upgrades cost?
What sort of flexibility does the product shipping section allow me to offer? Will it be easy for me to offer a shipping discount based on total customer purchase?

Marketing and CRM (customer relationship management) Questions: Does the platform help with gathering shoppers’ e-mails, and administering an e-mail marketing campaign?
Does your system include a method for tracking coupons or special offers?
Can shoppers keep their own lists of favorite items, or previously bought items, on the site? (Shoppers really like this, and it boosts sales.)

Merchant Administration Tool Questions:
What notification system will tell me I’ve got an order? (Some systems send the merchant an e-mail; others require you to check a Web interface.)
Will the software send the shopper an automatic confirmation e-mail? To what extent can I customize this e-mail?

Database/Inventory Questions:
What databases will run with your platform? Does the software allow my site to be connected to a real time database that reflects constant changes in inventory and prices?
What features does the software have to allow me to update inventory level based on my bricks and mortar in-store inventory?
What file formats does it work with to import and export inventory reports?

E-Commerce Platforms
The list of e-commerce software providers gets longer all the time, but here’s a good start:

Yahoo – If there’s a default platform for small business e-commerce, it’s Yahoo’s Small Business platform. Mom and pops flock to Yahoo’s e-commerce software because it includes most everything for one low price — it’s the no-brainer solution. Some merchants complain, however, that Yahoo doesn’t allow them to scale as they grow and the learning curve for its management console can be difficult.

Affinity Internet is a popular provider of web hosting solutions for small to medium-sized businesses. Its ValueWeb e-commerce package allows you to create a comprehensive Web site and on-line store capable of marketing and selling up to 100,000 products. ValueWeb incorporates tools like Miva Merchant and Macromedia’s Contribute site building software.

NetSuite – Well respected in the e-commerce industry as an affordable, scalable package. The company gets a lot of buzz.

iCode – Considered easy to use, the company specializes in the small-to-medium e-business all-in-one solution, although there has been rumbling in our forums about poor customer service from them.

MarketLive – A robust solution that has garnered an impressive client list, including Encyclopedia Britannica and Keds shoes.

Venda For a monthly fee of $10,000, Venda handles everything, from deployment to hosting to maintenance.

Actinic – Used by a lot of small-to-medium sized merchants, the Artinic software interfaces with the UPS shipping system and the popular QuickBooks accounting software.

MainStreet Commerce – MainStreet’s base cost is $15,000, with an additional ten percent license fee. MainStreet provides a complete e-commerce infrastructure, and its software is known to be highly configurable.

ProStores – an eBay Company (formerly Kurant StoreSense) – Geared for the smaller merchant, eBay’s ProStores has solutions ranging from $30 to $250 a month.

LaGarde StoreFront – Along the lines of ProStores, LaGarde caters to the small merchant, with an array of low cost pricing options.

Miva Merchant – A popular solution aimed at the small business market, the basic Miva Merchant store building program retails for $1,000.

Websphere – Made by venerable IBM, Websphere is too pricey for a shoestring start-up, but if you have the finances it’s a full-service platform will scale as large as you can imagine.

Microsoft Small Business – A similar all-in-one platform to Yahoo’s, although a bit more expensive. One advantage: it’s good to choose a vendor that’s going to be around for a while, and it’s safe to assume that Microsoft will be (won’t it?).

Again, don’t limit your shopping to this list alone. As you shop, you might also look at 1ShoppingCart, Shopsite, Mal’s E-commerce, osCommerce, AbleCommerce, MonsterCommerce and many more.

Tips on selecting three critical components of your new online business: a merchant credit card account, a Web host, and an accounting package.

As noted in Parts I (here) and II (and here) of this series, setting up an online business requires gathering a number of tools — in essence, building the technical infrastructure required to serve your customers (and maintain your sanity).

Three of the truly critical tools you’ll need are a merchant account, a Web hosting provider, and an accounting package. Along with your core e-commerce platform, these three key elements form your e-business’s basic foundation.

Be aware that these three elements are often sold as part of an integrated package. Several e-commerce platforms offer their own hosting service, a built-in accounting package, and an alliance with a company that offers merchant accounts.

Many online business owners prefer these integrated packages because they know the elements work together — and they don’t have to shop for each one. However, if you’re assembling your items a la carte, below are tips for selecting each of these three essential e-business tools.

Setting up a Merchant Account
To accept online credit card payments from your customers, you must have an Internet merchant account. You set up a merchant account with what’s called an acquiring institution, in other words a bank, or a middleman company that works with a bank. This bank authorizes the transaction — or declines it, if there’s a problem with the shopper’s credit card — and deposits the money into the merchant’s bank account.

Setting up a merchant account is far from hassle-free — in fact, it requires serious shopping around at the many businesses that offer this service, and at no small expense.

First, some jargon. As you shop around, realize that there’s more than one type of merchant account. Brick and mortar businesses use merchant accounts that accept point of sale (POS) transactions, because the customer is standing right there. In contrast, online businesses need a merchant account that accepts transactions in which the customer isn’t present, or CNP (cardholder not present) transactions. This type of merchant account is sometimes called a MOTO (mail order/telephone order) merchant account.

Because there’s a higher rate of fraud over the Internet than at brick and mortar stores, the fees tend to be higher for an Internet merchant account. Because of the higher fraud rates, banks tend to be leery of Internet merchant accounts. Many banks won’t offer an Internet merchant account to a first time online entrepreneur. Instead, plenty of new e-business owners get their merchant accounts through an ISO, or Independent Service Organization.

These ISO’s are middlemen who work with banks. The ISO’s are more tolerant of risk, and are geared for working with the transient population of Internet business owners. However, since the ISO’s are taking more risk, their fees are also higher.

You can tell a bank from an ISO by its URL. Banks have URLs like WellKnownBank.com. But ISO’s have URLs like Rock-Bottom-Rate-A1-MakeAFastBuck.com. (Actually, that’s not fair to ISO’s — there are plenty of reputable ones.)

Whether you get your merchant account from a bank or an ISO, you’ll face an array of fees. As you consider the offers from various ISOs and banks, it’s a good idea to write down each provider’s fees, so you can easily compare between them – the fees are numerous, and present a blizzard of variables.

Setup fee This can range anywhere from $50 to $300, in some cases more.

Monthly fee Most providers charge a minimum monthly fee, regardless of whether a merchant makes any sales.

Discount rate All providers charge a percentage of each transaction, known as the discount rate. This varies widely, though usually fits somewhere in the range of 1.8 percent to 4 percent per transaction.

Per-transaction fee Most providers charge a fixed fee per transaction (in addition to the percentage charge). This might range from .10 to .40 per transaction, regardless of how much the item costs.

Termination fee It’s not uncommon that a provider charges an account cancellation fee, usually if you close your account within a given time period. Read the fine print on this one – watch out for those providers that require a 2-year commitment.

Extra fees When you give a shopper a refund, your provider will charge you a fee, and this can be a hefty, in some cases $10 to $20.

How to Chose Among Them
As you compare the prices of various providers of Internet merchant accounts, consider the needs of your business – a deal that’s good for one type of business won’t be so good for another type of business.

Low or high volume? If you sell lower cost items in high volume, you need to find a provider with low fixed fees per transaction; you’d be willing to accept a higher percentage per transaction charge to get this lower fixed fee.

Batch or manual transactions? If you chose manual (the cheaper option) you’ll be processing transactions one by one. You’ll manually be routing the credit card information from your online order form to the card processing company.

If you expect a lot of transactions, you’re better off choosing batch processing. Although you’ll pay more, in many cases you’ll be able to provide faster service, and spend far less time doing it.

How turnkey is it? Some merchant account providers take care of many of the technical and data flow issues that confront online business owners. For example, as part of setting up an Internet merchant account you’ll need apayment gateway, which is a data-routing bridge from your e-business to the credit card processor. Some of the big firms that provide this service include Verisign and Authorize.Net. A number of Internet merchant account providers offer turnkey solutions, so chores like setting up a payment gateway are handled for you.

Can you trust them? In response to the many new Internet merchants that have sprung up, many new ISO’s have sprung up to service them. Not all ISO’s are created equal. Some of them hide big fees in the fine print. It’s a good idea to find out what other e-businesses the ISO services, and how happy those merchants are.

Be careful of rock bottom rates, and those “everyone’s approved” vendors. A good ISO will have a customer service department that takes calls — and then actually handles issues.

A Possible First Step
One highly popular and well-respected provider of Internet merchant accounts is Paymentech. If you’re brand new to the idea of merchant accounts, it’s worth your while to browse their site and find out the terms, conditions, and services they offer before venturing off to try and find a cheaper price. Yahoo Merchant Solutions is one of many popular e-commerce solutions that partners with Paymentech.

Or, PayPal?
PayPal this year launched an aggressive program to build up its Internet merchant account business. In the old days, a seller who used PayPal to accept credit card payments needed to route a shopper to the PayPal site to accept payment. Now, with PayPal’s Website Payment Pro option, buyers can make credit card payments directly on the merchant’s site, and PayPal processes them in background. During this program’s introductory period, the fee structure is highly competitive.

CHOOSING A WEB HOST
Unless you’ve got a hefty computer server in your house (along with a fat pipe to the Internet) you’re not going to host your online store yourself. Some other business needs to do this for you. And there are a zillion choices.

As you compare Web hosting companies, be wary of the rock-bottom price hosting companies. There are some good, cheap ones. But if they’re that cheap, will they really provide customer service?

Reliability This is the big one. Your entire business is sitting on the host company’s servers – they must guarantee virtually 100 percent uptime. And they must stand behind that in writing. A reputable host will offer some kind of refund if it falls beneath its uptime guarantee.

Bandwidth As shoppers browse at your site (and make purchases!) they transfer bytes of data from your site. This is referred to as “bandwidth.” The more bandwidth a host company offers you, the better. Hopefully, you’ll need a lot of it.

But be careful: Web hosts give you a set bandwidth allotment, and then charge you based on how much you go over. Sometimes these extra charges are buried in the fine print, but make sure you know what they are – a sudden spike in traffic could result in a huge bill.

Tech Support This is another big one. You want phone access, 24 hours a day, seven days a week. Run, don’t walk, from hosting companies that offer “free e-mail support.” The phone support should be included. Also, before you buy, you should actually call them at 9:30 Sunday night and see if A) they pick up the phone, and B) they can really answer technical questions. In the middle of a busy season you’ll need a live human to handle a problem, and 24/7, high quality phone support will make a huge difference.

Software Tools: PHP, Perl, CGI Bin Directory, etc. Some hosting companies include a full range of these software tools (which are necessary for a site’s full functionality). But some hosts offer a few of these tools, while charging extra for others. Because Web hosting has gotten so competitive, you should expect a full range of these tools included as part of a reasonably priced package. It’s also important to know: what are the host’s database options? Do they include support for your database software as part of the monthly hosting fee, or is this extra?

E-mail options At this point, most decent packages offer a plethora of e-mail options. All of them, of course, enable you to have own e-mail address at yourname@yoursite.com, with enough e-mail boxes for you and many employees. The host should also offer virus and spam protection, and options like AutoResponder, which lets you send automated messages to your customers. You should also be able to forward your e-mail to any of your other e-mail in-boxes (those not hosted by the host company.)

A really good host will offer an important e-mail extra: a basic e-mail marketing package, to help you reach your customers.

ACCOUNTING PACKAGES
Ah, the poor accounting package — no one gets excited thinking about accounting software (and if you do, well, I’m sorry but you’re a little odd). But your accounting program is vitally important. As one e-tailer so aptly stated, “this business is all about numbers.” You can’t track that ever-important profit and loss statement with pen and paper (although some small merchants try to, to their great detriment.)

Again, there are integrated e-commerce platforms that come with their own accounting package; the advantage is that the accounting software is integrated with the inventory tracking software — a huge plus.

However, if you’re looking for a stand-alone program, the key is “simplicity,” notes Jeff Binder, CEO of Saffron Rouge and an expert in e-business setup. “You want to buy software that gives you what you need to grow, but is not incredibly cumbersome to operate.”

Specifically, it’s important that your accounting package be upgradeable; as you take on more employees, or more business functions, your number crunching software must grow with you. What does it cost to upgrade?

It’s worth your while to find out what package your accountant or tax person uses. If you can simply send them data in the format they already use, that can lower your tax prep bill.

Be aware that some accounting software companies offer phone support, for an added fee. This option can be worth its weight in gold if you’re in crunch time and you need information from an expert.

Perhaps the default small business accounting package is QuickBooks, made by Intuit. “QuickBooks is relatively easy to use — it’s a very nice basic package,” Binder notes. Intuit claims that QuickBooks 2006 is a big step forward from its previous QuickBooks releases.

Microsoft hopes to take a large chunk of Intuit’s small business accounting market share with its new Microsoft Office Small Business Accounting package. Microsoft’s obvious advantage is its accounting software’s interoperability with the existing Office suite. Industry observers expect the Microsoft accounting app to offer stiff competition to QuickBooks.

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Binder is a big proponent of NetSuite’s accounting software, which is sold on an ASP basis. “I’ve used it for three years, and I’ve never used anything that can compare with it.”

But don’t stop your shopping with QuickBooks or NetSuite. The list of well-known packages includes Peachtree,Simply Accounting (both Peachtree and Simply Accounting are owned by Sage Software, and MYOB.

You’ve built your new online store, and now all you need is a large crowd of customers. We offer you a primer on attracting customers even if your advertising budget is almost non-existent.

Okay, you’ve built your new online store, and now all you need is a large crowd of customers. But you face a major problem: without customers, you can’t afford advertising – but without advertising, you can’t attract customers.

The solution is to use effective shoestring marketing methods to begin building a customer base. Once you have a steady revenue stream, you can bulk up your marketing. But, for now, you’re looking to do it on the cheap.

Marketing on the Internet revolves around search engines, e-mail campaigns, and affiliate programs; all three of which require investment for maximum return — sometimes a hefty investment.

We’ll look at each of these. But before we do, let’s face it: we’re cash-strapped. Are there any marketing methods that are free, or almost free?

The Real Freebies (Well, Almost)
Mention your site in online forums Find an online forum that relates to your business — there are dozens of them, no matter what you sell — and post there. Don’t overtly push your business. Instead, make an intelligent comment and list your URL in the signature line of your post. This invites people to your site without offending them by turning the forum discussion into an ad for yourself. To find a relevant group, visit Google Groups.

Offer a free service Make your site useful by posting a service, or information, that relates to your product, like a mortgage calculator, a bunch of great recipes, or a list of the 100 most popular boys and girls names. Not only will this draw in visitors (that is, shoppers), but, if it’s really useful, other sites will link to you. Also, don’t forget to present your sales offers near your free service.

Write a blog, or related articles No matter what you sell — from sailboats to CDs — a running commentary on that area can spark user interest, drawing visitors to your site. (Hint: a little controversy does wonders.) To host a free blog, go to TypePad or Blogger.

Include your URL on everything Any time you print something, especially business cards or your stationary, include your URL. Don’t forget to include it in the signature line of every e-mail you send.

Join a Web Ring A Web Ring is a series of related sites that link to one another, promoting traffic flow between them. It costs nothing to join, and having other sites link to you will increase your search engine ranking. Find a Web Ring resource at — you guessed it — Webring.com.

Hold a contest A chance at winning something excites people — and can also convince them to part with their e-mail address in exchange for a chance to win. Choose the item you give away carefully to ensure you’re attracting the kind of users who will likely turn into repeat buyers. (Also, check to be sure your contest rules are legal.)

List your site on Froogle Froogle is Google’s free comparison shopping search engine. Other comparison shopping engines charge, but since Froogle is free you’ve got nothing to lose by listing your site there.

Distribute a free press release PRWeb mass distributes press releases to a legion of publications and news-business outlets. The basic service is free, and the PRWeb caters to small and medium-sized businesses. (Although free, the service accepts voluntary contributions.)

Viral marketing Viral marketing is a message you send out that users find so interesting or entertaining that they send it out to other users – it spreads by itself, like a virus. So there’s no advertising expense required to keep it circulating in ever-wider circles. It’s usually some kind of joke, or perhaps an odd video clip. A successful viral marketing campaign is a hard thing to develop, and you’re a genius if you can do it successfully. (There are highly-paid people working right now on creating viral campaigns for big budget companies.) A few imaginative people have managed to do it cheaply, or at no cost at all.

Search Engines: Unpaid Results
Getting your site listed near the top in a search engine is arguably the best possible Internet marketing. However, 100 zillion other Web sites just like yours want top listing, too. These days, getting highly ranked requires both time (several months, at least) and money.

The first step is registering your site with the top search engines, but that alone won’t get you listed. Being registered merely means that as the search engines send a “spider” out to “crawl” the Web (automated software that indexes sites) they’ll know to crawl your site.

Be leery of those services that charge you $50 to “submit your site to 500 top search engines.” There aren’t 500 top search engines. Those cookie cutter submission services submit the same information to each site, although the sites themselves have different submission criteria.

It’s worth registering your site with the top search sites on a one-by-one basis. Among the many you want to register with is the Open Directory, Google, MSN, and both the Yahoo search engine and the Yahoo Directory. (Yahoo offers both a free “standard” submission and a paid “Express” submission; experts concur that that the fee is worth it for faster ranking).

Because high rankings attract so many shoppers, businesses spend large sums on search engine optimization (SEO). SEO is the process of tweaking your site so that search engine spiders will more readily recognize it, and hence boost your site’s ranking.

Many e-businesses hire SEO experts, who are high-priced gurus that help them change their site to boost their ranking on search results.

Quickie SEO
If you can’t afford a SEO guru there are some basic steps you can take to optimize your site for search engines.

Your site’s ranking will be determined chiefly by two things: 1) the keywords in the text of your pages, which must be included in your page titles and meta tags; and 2) the number of other sites that link to yours (including how popular those other sites are, and how their content relates to yours).

So first make sure your page titles, meta tags, and site text are all focused on attracting the shoppers you want. In short, they all have to echo the same keywords.

If you’re working with a professional site designer to build your site — a good idea — it’s important to check whether they’ve done the following:

Title To get the most click-throughs from search engines, make your site’s title specific and interesting. Not “Joe’s Shoes” but “Joe’s Shoes: Athletic, Dress and Casual.” Shoppers want to know before they click through if you offer what they want.

Description meta tag In this one- to two-sentence description of the site (no more than about 250 characters), incorporate all the keywords you know shoppers are searching for. These terms should echo those you used in your title. Not only do the search engine spiders index this, the description also shows up in search results, so it must clearly compel surfers to visit.

Keywords meta tag This list of terms (about 170 characters or so) should include all the most common terms that shoppers use to search for your product. These terms should be the same ones used in your description meta tag.

Headings Your site’s text will have headlines, and these headlines must, again, incorporate your site’s key search terms.

Text If your search terms aren’t built into the text in your site, all your work with tags won’t count for much. For example, if you want to be found for music downloads, you have to weave “music download,” “get song,” and “download music” in your site’s text.

Hyperlinks Your links must, once again, use the search terms you want to be found for. So on a site that sells sailing gear, instead of a hyperlink that that says “more information” it should say “sailboat gear” or “learn about sailing.”

Two key points: 1) sites built with frames encounter difficulty with search engine spiders; and 2) pages built dynamically — which means a software program creates them only when a shopper request that page — are indexed more slowly.

For more information about SEO, visit Search Engine Watch and Search Engine Forums.

Linking for Success
Even if all your tags are in order, to get highly ranked you’ll need many sites to link to your site. Search engines place great weight on this.

Google, for example, tracks the total amount of incoming links to your site, boosting your ranking more if those links come from what Google considers a leading site in your area. Google explains this, somewhat, on its technology page. (In truth, Google keeps its technology secret, lest anyone learn how to trick the system.)

Ideally, you want to convince as many related sites as possible to link to you – particularly big ones. To find influential, non-competitive sites, install the Alexa toolbar, which will provide a site’s relative ranking.

You can contact related sites and suggest reciprocal links, but be warned that is a tough process. It will only work if you can offer something of value, at the very least, a link from a truly relevant site (yours), which boosts their search ranking.

(Whatever you do, don’t use those automated programs that request links – your e-mail will only get deleted.)

One way to build a network of links to your site is through affiliate marketing. With an affiliate marketing program, you sign-up other Web sites to link to yours, and pay them a commission if a click-through results in a sale.

The advantage to affiliate marketing is that you pay only when you make a sale. Consequently, many well-established e-commerce sites use affiliate marketing. They hire firms like LinkShare and Commision Junction to help them administer their programs.

However, affiliate marketing is of limited value to a brand new online store with a shoestring budget. It’s hard to recruit affiliates to drive traffic to an unknown site, and many of the programs charge a set-up fee. But keep affiliate marketing in mind as you grow – with time it can be a valuable traffic driver.

Paid Search: A Necessary Evil
In today’s competitive online marketplace, merely optimizing your site for high ranking is rarely enough. Many of your competitors are paying for high-profile search results, using tools like Google AdWords, which is why you’ll probably need to as well.

To ensure your site comes up when a user searches for a given term, you bid for that term on a per-click basis. The more popular the term, the more expensive it is. Many terms are pennies per click (though many are far more expensive), and the search engines allow you to set a spending cap so you don’t spend the family fortune.

Naturally, this gets expensive, and fast. “When people step up to the plate who don’t know what they’re doing, it’s very easy to get hurt,” notes Jeff Binder, CEO of Saffron Rouge and an expert on setting up e-businesses.

The key to surviving and thriving in the world of paid search is doing the math to see what you can afford. You need to calculate your cost of acquisition, which is the amount it costs you to attract each customer. (This is an important figure to know for your entire marketing budget, not just for your paid search expenses.)

In short, you must calculate: what is the maximum dollar amount you can spend to attract a customer and still make a profit from that customer? As long as your cost of acquisition stays underneath this figure, you have a chance of making a profit.

To calculate your cost of acquisition, you must know your conversion rate, which is the percentage of the visitors to your site who actually make a purchase. Conversion rates vary wildly across the e-commerce industry, but many sites report a one to three percent rate.

Let’s calculate a theoretical cost of acquisition. Let’s say you buy a keyword search term for 18 cents per click. At that rate, it will cost you $180 to get 1,000 people to your site. With a conversion rate of 2 percent, from those 1,000 visitors you’ll get 20 sales. So here’s your math: $180 (advertising cost) divided by 20 (number of customers attracted) equals $9. Your cost of acquisition, the amount you pay for each customer, is $9.

Do you have more than $9 profit in each of your sales? If you do, you can afford to spend 18 cents per click and still make a profit. When you start out, you won’t know your conversion rate, so you’ll need to experiment. Be prepared to lose some money in the experimentation phase.

So, which words should you bid on? To research which words shoppers are using to find your product, go theOverture Keyword Tool. Enter the search terms you know are related, and the results will show you how many times each term was used, along with related searches. The only drawback is Overture’s results are calculated using data from the previous month.

It’s important to remember that these popular terms are the ones you want to build into your meta tags and the text of your site, so you’re boosting your free search ranking while you’re paying for higher ranking.

Another key point I want to make is that as you run your paid search campaign, you need to monitor your results using your Web analytics software. Where are visitors coming from? What keywords are driving the most business? Only by knowing the answers to these questions can you maximize the return from your paid search buy.

Examples of Web analytics software includes WebTrends, ClickTracks, and Urchin, and there are many good packages available.

E-Mail Marketing
Wow, you’ve actually attracted a shopper to your Web site — now you have to convince them to come back. A great way to do that is to send them an e-mail with relevant and timely product offers.

But harvesting your shoppers’ e-mail addresses is easier said than done. Typically you have to offer today’s spam-wary shoppers something of real value to cajole them into parting with their e-mail. Some merchants offer a coupon or a discount on purchase. Whatever you offer, it’s a good idea to provide a sign-up option on every page.

This process of gathering e-mail addresses is part of what’s called opt-in marketing or permission marketing. Two key principles of successful opt-in marketing are: 1) letting your shoppers know you’ll never, ever, give or sell their e-mail address to another party; and 2) providing a Unsubscribe link so they can easily get off your list.

If don’t have an e-mail list, you might consider renting one. There are vendors who sell lists of address of people who have indicated they’re interested in a given topic. Be careful, though, because some of these vendors are simply spammers selling addresses they’ve collected with automated harvesting software – e-mailing to these lists will quickly make you a very unpopular merchant. You can search for e-mail list vendors at the Direct Marketing Association, among other places.

You’ll need special software to administer your e-mail marketing campaigns – gathering addresses in Outlook Express just won’t do. If you’re on a tight budget, there’s a free version of the popular Group Mail software, and a low cost version of the popular Constant Contact. Other leading programs include Gammadyne Mail and iBuilder, and there are many good group e-mail applications.

To be sure, e-mail marketing is one of the great special weapons of online store owners. But your e-mails must be written effectively — a complicated art form that takes considerable time to master. The basics, however, include two golden rules:

  • A compelling subject line Getting your users to open your e-mail is the biggest hurdle because we’re all drowning in spam. The subject line must romance your specific target demographic, not merely the general audience, and it must offer real value without hucksterism. It’s a good idea to include an “action word” like free, bargain, sale, and close-out, or promise some truly interesting tidbit of information.
  • Make the body copy brief — and relevant Your readers won’t give you much time, so you must state your message succinctly. The point is to present an offer. It can be a free sample, free shipping, a money-back offer, a special new customer discount, a quantity discount or any of dozens of other offers. But the offer must be clear and present compelling value.

How often should you send out e-mails? There’s no set answer, but the point is to establish a regular connection without pestering your customers. At a minimum, e-mail your customers once a quarter. Many businesses send a couple mailings a month, and plenty send weekly mailings.

Marketing Your Site: The Bottom Line
The process of promoting your site never stops – and it never gets cheap. The only way to truly thrive online is to market constantly, and to regularly monitor the results of your marketing efforts. Start now and don’t stop!