E-Commerce FAQ

What exactly is E-Commerce?
E-Commerce, or Electronic Commerce, is a general term for any type of business, or commercial transaction, that involves the transfer of information across the Internet. This covers a range of different types of businesses, from consumer-based retail sites like Amazon.com, through auction and music sites like eBay or MP3.com, to business exchanges trading goods or services between corporations. Electronic Commerce has expanded rapidly over the past five years and this growth is forecast to continue or even accelerate. It is likely that in the future the boundaries between "conventional" and "electronic" commerce will become increasingly blurred as more and more businesses move parts of their operation onto the Internet.

What is B2B E-Commerce?
B2B stands for Business-to-Business and refers to Electronic Commerce between businesses rather than between a business and a consumer. (You'll sometimes see this referred to as B2C E-Commerce). Businesses can often deal with hundreds or thousands of other businesses, either as customers or suppliers. Carrying out these transactions electronically gives obvious advantages over traditional methods. It's faster, cheaper and more convenient. Electronic transactions have been around for a while in the form of EDI (Electronic Data Interchange). However, EDI generally requires each supplier and customer to set up a dedicated data link between them, whereas E-Commerce using the Internet provides an easy and cheap method for companies to set up multiple and ad-hoc links. E-Commerce has also led to the development of electronic marketplaces where suppliers and potential customers are brought together.

What do I Need to Start an E-Commerce Site?
First of all, you obviously need a product or service to sell. Then you need a Web site. This can either be an existing Website to which you can add E-Commerce capabilities, or you can build the site from scratch. Next you need some way of accepting on-line payments. This normally means credit cards, although there are other options for very small or low-volume sites. Lastly, but most importantly, you need to have a strategy for marketing your site and attracting customers. This is far harder than you might think.

Can I do it by myself?
Yes of course you can, especially if your requirements are straightforward or you are on a limited budget. However, if you are planning a large site or have no previous experience, hiring a professional may well save you a lot of time and money. If you do build the site yourself, the trick is to know your limitations, keep things simple and concentrate on the priorities i.e. keeping the site easy to use, secure and reliable.

How do I accept payments by credit card?
Firstly you need some secure method of collecting credit card details from your customer. Most storefront services or shopping cart software offers this facility. You then have the option of processing these details manually, or using an online credit card authorisation system to process the payments. This is obviously preferable, but there is an additional cost. Finally, you normally will require a Merchant Account with a bank or other financial institutions in which your payments can be deposited. Note that not all Merchant Accounts are suitable for Internet payments. It is possible to find payment processors who do not require a Merchant Account, however these companies inevitably have higher charges.

What will it cost?
Pretty much whatever you want to pay. The actual site can cost from nothing up to several hundred dollars per month. You'll probably like the sound of nothing, but the free e-commerce sites tend to be a risky bet in today's economic climate. Many have gone bust, and some of the others have started charging for their services.

As well as the cost of running the site, there is the additional cost of processing payments. If you intend to accept credit cards you will pay transaction fees to your bank and credit card-processing companies as well as fixed monthly fees. The transaction fees mean that you may end up paying from 2-5% of the sale plus up to $1 for each transaction. If you don't qualify for a Merchant Account, the payment processing services can charge anywhere from 10% upwards depending on how much of a risk they consider you to be.

Do I have to accept credit cards?
Generally yes, as about 95% of on-line consumer transactions are by credit card. However low volume sites, or sites that are linked to auction sales, may be able to get by using one of the on-line payment services like PayPal. (In fact PayPal offers premier and business accounts, which allow credit cards to be accepted directly from Web sites at very reasonable cost.) There are other options like on-line checks, or more unconventional methods like reverse SMS using mobile phones, which may be useful for some specialised applications. For most small businesses though, credit cards will be the normal system of payment

How do I get customers to visit my site?
You have to work at it. Don't expect customers to come flocking to your Web-store once you set it up. Marketing is the hardest, but most important, part of selling on-line. You can use search engines, banner ads or advertising mailshots to attract customers. You can add content or community features to your site to try and increase traffic, and therefore increase the chance of making a sale. You can use off-line advertising. If you do decide to open up an E-Commerce operation, nine times out of ten it will be the effectiveness of your marketing that will make the difference between success and failure.

Hasn't E-Commerce been a failure?
Not at all. Many on-line businesses are doing very well. It's true that many of the business that went on line at the height of the dotcom boom have either failed or have found things very difficult. In retrospect, these businesses owed their existence to hype and the easy availability of investment capital and were never really viable. Doing business on the Web isn't the easy option it's made out to be, but with planning, a certain amount of care, and a lot of hard work, it can be made to succeed.