From Web Presence to e-Commerce: An Introduction to Selling Online

The global reach of the Internet has enticed many retailers -- from home-based businesses to large corporations -- to sell their products online. Going from a web presence to selling online is usually not as simple as adding a picture of your product to a web page. If you have decided to take the leap and sell your products online, this guide will provide a common-sense approach to the world of business-to-consumer (B2C) e-commerce.

Planning For Success

As with most things in life, the better prepared you are, the better your chances for success. Prudent business plans involving e-commerce usually approach online retailing in the following stages:

1. Establish a web presence for informational and marketing purposes;

2. Offer a subset of inventory for sale online, often with reduced functionality;

3. Publish most (if not all) of their products online with real-time payment processing, inventory control, and other advanced e-business tools.

Your e-commerce strategy may differ from this example, but the point is that you actually have a plan. "I’m going to sell (fill in the blank) online" is not a business plan.

There are many hard questions you have to ask yourself before you begin to sell online, many of which are common to traditional retailing:

• Is there a market online for my products?
• Are my customers willing to purchase over the Internet?
• What makes my products different from those of my competitors?
• How will I attract customers to my website?
• Will my full product catalog be available from the start, and will there be any adjustments for goods sold online?
• Are my expectations realistic?

Any business venture involves risk, but the better you can answer these questions the better your odds for success. Taking a phased approach lets you test the e-commerce waters while minimizing financial risk.

Development, Design, and Hosting

There are three types of people who can help you create your site:

1. A web developer or programmer who creates the functionality of the site;
2. A web designer who creates the look of the site;
3. Someone skilled in both areas.

Know what you need and whom you are hiring. The people who design your website may not be the best people to develop the e-commerce portion of your site as the programming involved to implement an online store may be something a web designer is not capable of doing.

Always ask to see existing e-commerce websites that the developer has created. Require a quotation for the work, and find out what technology they will use to create the site. While it is not necessary for you to understand all the technical issues involved in creating the website, it is essential that your web hosting company will support what is being creating. This last statement is true for any type of web presence, but becomes extremely important when the site involves e-commerce.

Some other pointers:

• Don't be discouraged if you are not sure which solution is best, such as whether a "database-driven site" is more appropriate than "static HTML pages". That is why you are hiring someone. It is their job to provide you with options and reasons why you should choose one over another.

• Use common sense. If you are only selling 10 products online, you don't need a costly solution that is scalable to thousands of products.

• Get quotations from more than one company and ask for references.

• Avoid companies who use jargon or try to talk over your head. A reputable company will explain things in a way that is easy to understand.

Professional Image

The greatest challenge facing online retailers is getting customers to trust that you are a reputable business. A clean, polished, and professional-looking e-commerce website is the first step to gaining that trust.

How you present your products is also important. Product images should be clear and appealing, with larger images available for closer inspection. In the world of online sales, clients cannot physically touch, try on, smell, or taste your products. Anything you can do to provide additional information to the buyers can be all the difference in making the sale.

Domain Name Registration

Most businesses have a unique domain name, such as "www.businessname.com" or www.businessname.ca, for their website. Without a registered domain name, your website’s address is typically www.hostingcompany.com/~userid or something similar. This is not the most professional image to present to prospective customers, so consider a unique domain name for your company mandatory.

Electronic Storefronts

An electronic storefront refers to a template-based environment providing many pre-built e-commerce components that a merchant can use to setup an online store. These storefronts offer merchants the ability to build an online store using only their browser. Basic storefronts are typically offered at an inexpensive price, but the more advanced e-commerce components, such as online payment processing, tax calculation, and advanced shipping utilities, can be significantly more expensive.

Electronic storefronts can be a cost-effective approach for small businesses new to e-commerce and unsure about whether they want to pay to develop a custom solution. There are definite drawbacks to using electronic storefronts, however. You are responsible for creating and maintaining the site yourself, which can be time consuming and involve a steep learning curve. The ability to customize the look of your storefront may be limited. Basic services may be inexpensive, but optional components may be quite costly. Finally, you are usually limited to using the payment processing or fulfillment services that come with the storefront, which may not offered at a competitive price. As with most aspects of setting up an online store, you should closely examine the costs, benefits, and options associated with the various storefronts before making a final decision.

Security and SSL Certificates

Security of customer data is one of the biggest perceived barriers to consumer confidence in e-commerce. To protect information that is sent over the Internet, SSL encryption has emerged as the standard for many years now. Businesses can purchase an SSL certificate, often called a ServerID, which is bound to their domain name and installed on the web server by their hosting company. A Certificate Authority (CA) issues the certificate that attests the company is who they say they are when coming from a specific URL. While VeriSign is the largest and best known CA, there are a few others. Prices for SSL Certificates are in the $500 range, and need to be renewed every year or two.

Do you need an SSL Certificate? That depends on several things. Some e-commerce solutions use a third-party to collect sales information, in which case the third party would provide SSL encryption. If your site collects personal data, you should seriously consider purchasing a certificate (with the help of your hosting company). Providing customers with a secure method to enter their personal information can go a long way in improving consumer confidence.

Privacy Policy

As of 2004, all businesses in Canada are now subject to the Personal Information Protection and Electronic Documents Act (PIPEDA). It is highly recommended that your business draft a Privacy Policy and post it on your website. This policy should outline how your customers’ personal information will be gathered, used, and retained. Detailing your internal processes in this way promotes trust between your company and the buyer. We encourage you to examine other Canadian companies’ online privacy policies to assist in drafting your own. For more information on PIPEDA, contact the Office of the Privacy Commissioner of Canada at www.privcom.gc.ca.

Payment Processing

There are three general ways to process payments:

1. Manual or offline processing
2. Processing through an online third-party payment processor
3. Providing real-time credit card processing through to your financial institution.

Manual payment processing is the simplest method -- and usually the least expensive to implement. Many e-commerce providers refer to this method as "order capture," because the order and payment information is "captured" online and then processed offline. This method is satisfactory when you expect to receive only a small number of orders from your website, but would be difficult to manage as order volumes increase.

Real-time processing through to your financial institution can be a technically complex solution that requires a significant amount of time and money to implement. Your website becomes responsible for collecting all payment information which you securely submit behind the scenes to the bank. This type of payment processing is sometimes referred to as Virtual Point of Sale (vPOS), an is quite similar to having a POS device in a physical store. Unlike in the United States, Canadian banks have been slow to directly provide and promote these services directly. Banks also tend to make it difficult for new businesses to obtain credit card merchant accounts, sometimes requiring that the company post a significant cash bond as a guarantee against fraud.

A popular middle ground between these two approaches is to process payments through an online third-party processor. These companies often follow a "master merchant" model whereby all stores use the processor’s credit card merchant account. The payment processor collects customer payment information, processes the transactions, and deposits the payments (less a transaction fee) into your account. Integrating such a service into your website should not be too complex, and most web designers should be able to do it quickly and inexpensively. PayPal is a well-known example of this type of third-party processor.

While this last approach takes much of the payment processing out of your hands, there are some definite drawbacks. When a master merchant account is used, buyers will see the name of the processor instead of your business name on their credit card statements, which may cause confusion and lead to increased incidents of chargebacks. Transaction fees are often higher than when dealing directly with a bank using your own merchant account. Finally, some processors require that the buyer establish an account with their service in order to purchase, possibly scaring off or frustrating potential customers.

Taxation and Duties

Taking orders over the Internet does not relieve you of your responsibility to charge the appropriate taxes. Consult both provincial and federal taxation authorities to determine what taxes, if any, should be applied to goods or services sold online.

In general, goods sold from a Canadian company to a foreign customer are not taxable. Duties become the responsibility of the buyer and are usually outside of your control. As you are essentially exporting, consult Canada Customs to be aware of any export regulations that may affect your products. www.exportsource.ca is a federal government website portal where you can find more information on exporting, as well as contacting Team Canada Inc. toll-free at 1-888-811-1119.

Shipping and Order Fulfillment

You have received the order and, more importantly, secured the money from the customer. Now you must ship the product. Small businesses with limited inventory often handle all shipping themselves. For operations with large inventory, partnering with a fulfillment house is often the preferred solution. Canada Post, FedEx, and UPS, among others, offer advanced methods for electronic shipping and tracking.

Merchants often obsess about being able to automatically charge exactly what the shipping will cost for every order to every place around the world. Developing such a system is possible, but is it appropriate? Should you accept orders from all corners of the globe? Is it easier to charge a flat rate to all locations that covers the typical cost but is enough to cover the odd remote and more expensive location? Is free shipping an incentive that will appeal to buyers? Should you hide the cost of shipping within the prices? These questions show that charging for shipping can be a business decision rather than just a cost that must be covered.

Return Policy

Customer service in business is paramount, and business on the Internet is no exception. While good business practices like quickly responding to customer inquiries should be understood, the way your company handles disputes and returns also impacts overall customer satisfaction. Disputes and returns are inevitable in business, so you should decide how you will deal with them ahead of time. Your return policy should be available on your website so buyers are aware of their options.

Summary

Try not to let the technology cloud what are essentially business issues. Put the customer first, provide a secure and trustworthy environment, market your products, and hopefully your e-commerce venture will become a success.

Resources

• Canada Revenue Agency
  http://www.cra-arc.gc.ca

• Office of the Privacy Commissioner of Canada
  http://www.privcom.gc.ca

• Retail Council of Canada
  www.retailcouncil.org

• Team Canada Inc.
  http://www.exportsource.ca

• Taxation Division, Department of Finance, Government of Manitoba
  http://www.gov.mb.ca/finance/taxation

• CIO - The ABCs of B2C
  www.cio.com/ec/edit/b2cabc.html

DISCLAIMER
Information contained in this document is of a general nature only and is not intended to constitute advice for any specific fact situation. Users concerned about the reliability of the information should consult directly with the source, or seek legal counsel.

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