Ecommerce marketers will have to learn new skills and attitudes to be successful.

by Bob Browning

Electronic commerce is growing rapidly and many merchants are asking themselves how they can benefit from this new technology. This paper provides a grounding in the basic concepts.
September 02, 1999

This paper gives some checklists of information that will be required during the business planning phase, and focuses on Internet-specific issues that need to be resolved before technical planning can start rather than generic business issues. We emphasise however, the need to approach this type of project in a systematic way, identifying requirements before making commitments to software or hosting services.

The body of the paper helps this process by providing checklists of issues that need to be considered at the business planning stage.

At a high level this involves:

• Project management
• The market
• Your product offering
• Business processes

The business planning phase of an e-commerce project is the most important phase. Decisions made at this stage can have a disproportionate effect later in the project. Organisations that go into the technical planning and product selection phase without understanding the business issues will eventually resolve them - but to work around problems rather than to do the project right first time.

The development of your on-line store needs to be looked at as a project. Set it up with business objectives, a budget, and a time scale as you would any other project. Like all projects it needs to be planned and monitored.

The project manager will need to coordinate the work of the various parties who will be involved. The project requires technical, artisitic, marketing, and sales skills working together to achieve synergy.

Senior management commitment is vital to ensure that the project does not fail through lack of internal organisation. The project should have a sponsor at the most senior level.

You should be able to answer the following questions positively once the project proper is under way:

• Have you identified a project manager who has the skills to manage this important project?
• Does that person have the ability to make decisions quickly, or access to someone who has?
• Is there a written project plan with deliverables and milestones identified?
• Will you have a single point of contact for outside suppliers?
• Does the project have a sponsor at the highest level in the organisation, normally director level?

Your store has to be relevant to your market. The objective is to create:

• An attractive Web site which will promote the merchant and encourage visitors to purchase.
• A catalogue that will attract visitors.
• An efficient catalogue, which will allow visitors to find the products they want easily and quickly.
• Most of all a site that sells, by demonstrating value and quality.

To achieve the best result you need to understand your market:

• Region: Are you targeting domestic UK or US business? Remember the bulk of the Internet market is US-based.
• Type: Are you selling to the general public or to businesses?
• Technology: Will your customers be technology-aware? Will they have up to date and efficient technology available?
• Awareness: Is your target market likely to understand the process of electronic payment and be comfortable with it?
• Payment methods: What will be the preferred payment method?
  • On-line credit card.
  • Faxed credit card.
  • Cheque.
  • Customers account number and PO number.
• Currency: What currency will your target market be comfortable paying with?
• New Market: Are you servicing an existing market for your company, or do you aim to use the Internet to open up a brand new market for you?
• Style: Is your customer base expecting to see a stylish, graphic rich site, or are they more down to earth looking for an efficient method of purchase?
• VAT: Is your customer base VAT registered? If customers are in the EEC will you need to collect their VAT number to avoid having to charge them tax?
• Creating traffic: How will your market find your Web site?
• Brand recognition - people will look for your site.
• Advertising - both on and off the net.
• Search engines - people looking for your product type.
• New customers: Can you rely on good traffic and sales once launched, from an existing loyal customer base, or will Internet customers be entirely new?

As with any business plan, definition of the offering is essential. The designers of the application need to understand the offering before they start.

• Benefits: What unique benefits do you offer?
• Added value: Do you offer added value such as warranties or after sales service?
• Special offers: Do we need to make special offers from time to time both for marketing and for stock disposal reasons?
• Product Set: What products do you want to offer on the net?
• How many?
• Average value?
• Is it your complete product line or a sub set?
• Technical: Are the products very technical requiring exact specifications or are they generic and instantly understood by the customer?
• Pictures: Are images required to describe the products? How detailed need these images be, and how many will be needed for an average product?
• Delivery: How is the product delivered? What shipping options are offered and how are they charged?
• Ordering options: Are there multiple ordering options for each product, eg sizes, colours?
• Pricing: How is the product priced? Do ordering options imply a different price?
• Descriptive / Graphical Information: Does graphical product information already exist or will it have to be created from scratch? Is it in a machine-readable form?

One the e-commerce operation is set up it will need to function efficiently. If you plan to take credit card payments, a primary issue is your bank and any requirements they may have.

The bank is taking a certain amount of risk. If a merchant gets into financial difficulties, then it is not unknown for the company to continue to receive payments while not shipping goods. In due course those dissatisfied customers will demand a refund (a charge back), which the bank will have to meet. If the merchant is bankrupt then the bank will end up having to meet this liability. Clearly an acquiring bank is going to want to check credit references.

Your bank may tell you that they will not permit payments to be received from the Internet. There are two possible reasons for telling you this:

• The bank has a firm policy and you do not conform to the parameters.
• You do conform to the requirements of the bank but your representative does not understand the issue.

Questions to ask:

• Bank: Which bank do you use; how important is your business to that bank?
• Credit cards: Do you want to complete the credit card authorisation/payment process on-line, or can it be done manually?
• Authorisation: Does authorisation of card payments need to be a separate step from debiting of the cardholders account? Can these two steps be combined because quick shipment of product can be guaranteed?

The Internet may open up new markets, but you have to be able to fulfill these orders.

• Staffing: Do you have a flexible administrative staff who will be happy to deal with on-line processing?
• Shipment: If your market is currently domestic, but you expect to sell overseas, what fulfillment method will work?
• Warehousing: Can you ship from the UK or should you set up overseas depots or agents?
• Support: Can you support overseas users of your product?

You may have a call centre, but does it operate round the clock? The Internet operates 24 hours a day.

• Hours: Should you look to extend the working day or should you outsource to a call centre operation in other time zones?
• The US: If you are selling to the USA you must offer a 1-800 number. There are companies that will offer such a number that is routed to your UK office.

The catalogue has to run on a computer (commerce server) that is permanently attached to the Internet. While many Technology Departments will be enthusiastic about developing this for their company, this will involve a very significant cost.

• The server itself will be a fairly significant piece of equipment.
• Connection to the Internet will require an expensive leased line.
• The Internet Service Provider (ISP) will also make a significant charge to support a permanent high-speed connection.
• The acquiring bank will almost certainly lay down security guidelines, which may involve a firewall.
• Once set up the system must be run and supported on a 24-hour basis. Every line and piece of equipment should be backed up.

The direct cost of such an endeavour (forgetting the internal staff costs) for the first year is likely to be well into five figures, and normally will be in six. Given the margin on most goods, and the necessity to process the orders and ship the goods, such a site is unlikely to be profitable unless it turns over millions of pounds worth of business.

At the business planning stage, consider if there are any over-riding reasons why the operation should be in-house or out-sourced.

• Do you need to link the e-commerce system to your current order processing systems?
• Does your bank have technical guidelines for the way in which payments may be accepted?

Conclusion

This Electronic Commerce Tutorial is courtesy of Textor Webmasters Ltd. Textor are located in a leafy suburb of London, and are one of the most innovative Internet shops in the UK. They specialize in electronic commerce.

This Electronic Commerce Tutorial is presented in three sections. Click one of the links below to continue reading.

1. Electronic Commerce Primer
2. Planning for Electronic Commerce: Business Issues
3. Selecting an Electronic Commerce Solution