Source: EMarketer
What can the Web do for your business? Plenty. Just having a Web site is the first step, of course. An online presence gives you exposure. It can widen your customer base from a pool of prospects within 50 miles of your location to an ocean of Web surfers worldwide. But what about the next step? Now that your Web site has given your business visibility, how can it add to your bottom line?
The two-word answer is electronic commerce. This wide-ranging category of software, services, and standards is all geared toward turning your Web site into a virtual, 24-hours-a-day, 7-days-a-week storefront for selling your products or services online. Electronic commerce tools range from freeware applications you can download from the Internet to full-blown services offered by megacorporations like IBM.
The future of online shopping is bright, to say the least. Forrester Research projects that online shopping revenues will grow from an estimated $2.4 billion this year to more than $12 billion by the year 2000. Despite consumer caution over security issues, some companies are already raking in big profits from Internet-based sales. For instance, Dell Computer is selling as much as $2 million worth of computer hardware every day from its Web site (www.dell.com). Media Metrix's August report rated Amazon.com (amazon.com), the online-only bookstore, as the number-one Internet shopping site. And that's just the consumer side; Forrester Research's projections on business-to-business commerce describe a significantly bigger market that will grow from $8 billion this year to $327 billion dollars by the year 2002.
But you can't build a commerce site over a weekend. Finding the appropriate software and hardware to run it or hiring someone to help you takes time. You'll also need to make sure your site is secure from hackers and fraud so you and your customers can feel safe exchanging money over the Net. I'll introduce you to the basics of starting a commercial Web site and discuss the pros and cons of the available solutions.
The ideal commercial Web site attracts shoppers with its elegant design and security measures, making it easy to find products and safe to purchase them. The site should also make it easy for customers to interact with your business via guest books, support forums, and email. Commercial Web sites can be cost-effective, too. Except for initial setup and ongoing maintenance costs, selling online involves minimal overhead compared to running a store, managing banks of phone-order staff, or producing and printing thousands of catalogs.
The good news is you don't have to be an expert programmer to build an online store, though some solutions are considerably easier to implement than others. What works best for you will depend on the amount of money you want to spend, the level of sophistication you seek, and the amount of time and energy you can devote to developing a truly commercial Web site.
Mind you, not every business will need or want to sell online. According to the research company eMarketer (www.e-land.com), the top-selling sites on the Web are catalog and mail-order houses, sellers of computer products, financial services, smaller companies with unique products or services, and information or travel services.
Where does your business fit in all this? It depends on what you sell and how you sell it. Basically, you should be equipped to sell and ship in volume or you should have a specialized product that can find a wider audience online. If you have a gas station with a convenience store, it wouldn't make sense for you to sell Slurpees and candy bars from a Web site; all you want is car and foot traffic. If you're an expert at crocheting, you might consider selling hand-knit sweaters and scarves online. But you probably don't need the speed of real-time transactions: Unless you're a speed knitter, you couldn't create more than a few sweaters a month. However, if you dream of creating an online sports card shop, then you'll want the mass-market exposure the Web can give you. Adding secure, real-time transactions is unquestionably an important part of your strategy.
The keys to a successful online business are planning and implementation. Your online business should automate the retail loop of find, purchase, ship, collect. It should also exploit the 24-hours-a-day, 7-days-a-week nature of the Internet; help improve the process of acquiring and retaining customers; and offer customer service.
Basic technologies can help turn your Web site into an online store.
You can add other commerce capabilities to your online store. They can be as simple as the collection of credit card information on your site. (Then you run the individual transactions by hand at the end of each day.) At the other end of the scale, super-sophisticated systems can offer a personal shopper--often a cartoon character--who leads shoppers through your site. Some systems can even hook directly into back-office inventory control systems to verify whether the product is in stock before confirming the order.
Many of these features can be added to your Web site with freeware or shareware applications, depending on the server hardware and OS your Web site is using. Two excellent sources for shareware and freeware are Selena Sol's Script Archive (www.extropia.com) and ScriptSearch (www.scriptsearch.com). Or there are full-featured freeware products like MiniVend (www.minivend.com), which offer online catalogs, shopping carts, shipping and delivery tracking, and more.
For a real-life example of a homemade Web commerce solution, check out "The Computer Currents Store" sidebar. Their Webmaster built a complete commerce solution for a little more than $9,000. Half of the software was free.
Finally, make sure your bank is set up to accept online transactions. This issue is discussed in "Web-ify Your Merchant Bank Account". But you should also contact your bank for more information.
Regardless of how you set up your online store, there are keys to creating a good shopping experience. Offer sufficient information so customers can differentiate between products. Determine what will meet their needs; highlight the most popular products and any new releases, updates, or specials; and offer a secure order-taking mechanism.
The universe of e-commerce solutions can be broken down into three main categories: all-in-one software solutions, moving your site to a host server, or outsourcing the transaction mechanisms and parts of the shopping experience. When comparing these options, chant the mantra: time, cost, and complexity. If a solution is cheap but so complex it'll take you six months to implement, don't bite. Spend more on a simpler, more manageable solution. The best solution balances all three criteria.
Probably the most common e-commerce solution is an all-in-one software package. You buy a souped-up database and Web server suite neatly integrated into an online store or online catalog package. Some of the notables include Intershop (www.intershop.com), iCAT (www.icat.com), Cat@log (www.thevisionfactory.com), CatSmart Shopper (www.isadra.com), and IBM's Net.Commerce START package (www.internet.ibm.com). They all offer an easy path to creating your online store.
The all-in-one solutions offer some remarkable capabilities, including cross-selling and upselling. For example, the customer buys a keychain and the system automatically offers a special price on a matching T-shirt and a quantity discount for a dozen or more keychains). For many companies, the features these commerce suites offer far outweigh any hassles that might arise in configuration, implementation, or maintenance.
These suites are much easier to implement if you're creating a new site than if you're trying to add capabilities to an existing one. That's because typically you must install a new Web server program and a host of supplemental applications for building Web pages and tracking customer purchases. It's not always easy to shoehorn your existing site into the new software's paradigm. There's also a steep learning curve. Open up the box and you may find a CD-ROM tutorial, the software, and a 300-page manual.
Worse, while the software may initially cost about $5,000, the extra costs can creep up on you. You'll most likely need a new server (Windows NT or Unix), and if you want a truly secure environment, you'll need a second computer for an SSL server and transaction database. Even with bare-bones hardware, you'll probably have to shell out an additional $6,000 or more plus the time and training involved in launching your store on the Web.
Consider IBM's recently introduced Net.Commerce START package. Aimed at small businesses, the START package includes the IBM Net.Commerce merchant server software; a Store Creation Wizard that lets you set up all aspects of your store, including shipping, tax calculations, customer registration, and payment methods; and e-Till, which includes SET support (see "Will the SET Standard Stick?"). The software package alone costs nearly $5,000 and is available for Windows NT, IBM AIX (Unix), and Sun Solaris (Unix) systems. Regardless of IBM's claims, however, Net.Commerce START seems on the high-end for a small business solution. For instance, most of the poster-child stores you'll find on IBM's site were developed by consultants. This fact leads me to believe that the businesses probably had a decent-sized budget for their e-commerce solutions.
If you don't yet have a Web site or are willing to move either part or all of your Web site to another host, a number of companies offer space on commerce-focused, secure Web servers. Some also offer a wide range of commerce capabilities, including catalog software, guest books, animated shopping carts, logo-branded wallet software, online promotion, and more. Many of the largest ISPs, including Netcom Communications (www.netcom.com) and Best Internet Communications (www.best.com), offer A to Z commerce hosting.
For example, you might have a personal Web account on Best Internet already, which costs about $30 a month and includes 25MB of disk space. Move up to a commerce account, and you gain access to Best's secure SSL server and CyberCash CashRegister, a basic commerce system that lets you do online credit approvals. The monthly fee increases to $250, and you can get up to 100MB of space for your Web site. However, many of the details are up to you. Most of the hosting solutions offer one or two catalog systems, for instance, but you still need to learn them, program them, and tweak CGI and Perl scripts to get exactly what you want.
You could also contract with a simple (non-ISP) hosting company to host your site on its secured commerce server. This approach has a number of advantages, particularly since the best of these firms have in-house experts to ensure the network stays secure and accessible.
One of the most successful examples is Viaweb (www.viaweb.com). You build your online store using Viaweb's convenient, Web-based template store builder. Its features include statistical tracking, promotion tools for building online traffic, and a sophisticated shopping cart. Secure transaction capabilities are built in. Pricing is reasonable: A store with 20 or less products costs $100 per month, with no startup fee and no minimum contract duration. Pay $300 per month and you can make up to 1,000 products available in your Web store.
There are downsides to the host approach. If you already have a Web site, you might want to keep it where it is and continue the relationship you've established with your ISP. Or you might have your own Web server and you don't want to move all your pages to another facility. Moving your site can mean updating a ton of HTML files and CGI programs plus learning a new set of traffic and analysis tools. If the host uses a different operating system, you're facing still more conversion headaches.
Second, most commerce hosting sites force you to build your online store using their templates. That means redoing all your Web pages to fit their design and configuration.
ISPs offering access to their secure servers might be offering less than you think, too. Most likely you can't log on to the secure server from your office and fine-tune your scripts; secure servers don't allow modem access. This restriction leads to the secure hosting dilemma: How do you develop your secure applications if you can't gain easy access to the secure server? The answer is you build it on another, nonsecure server, test it, then move it to the secure server and hope it works correctly. In short, you're largely on your own when it comes to implementation, particularly in integrating the commerce capabilities into your existing Web site. Making an ISP-based commerce solution work often involves hiring high-priced consultants to get everything up and running smoothly.
The third option is the newest on the block: outsourcing. The idea is simple enough. Your Web site stays where it is, but the shopping cart, customer tracking, and transactions are handled by a separate secure server run by another company. It's similar to a business contract with a payroll or janitorial service. Typically, customers browse your site and find products they want to buy. The customers click an Add To Cart or Buy Me button which links them to the outsourced secure server. The customers enter their payment information (usually credit card numbers) and complete their transactions. When done, they return to your Web site.
A small number of companies are offering outsourced, real-time transaction capabilities. Internet Commerce Services Corporation's MerchantTrax Electronic Commerce Service (www.icoms.com) offers complete order management, including buyer registration, tax and shipping charge calculation, integration with fulfillment companies, subscription management, digital goods download authorization, reports on customer account status, buying patterns, and more. For a setup fee of less than $2,500 and a transaction fee as low as $.25, you can use its service to add commerce capabilities to your Web site quickly. Then perhaps you can migrate to a more sophisticated solution as your online business grows.
Another alternative for outsourcing is OrderEasy Secure Internet Commerce Services (www.ordereasy.com), which offers a simpler and less expensive alternative to ICOMS, with an entry point of under $300. OrderEasy features a flexible shopping cart, automatic customer tracking system, tax and shipping calculations, and secure real-time transaction capabilities, all with the addition of only four lines of HTML code to your existing Web site.
Outsourcing is the most straightforward solution and has some significant advantages: It's fast, easy, and offers you complete flexibility. You're in complete control of your Web pages on the server of your choice, and the outsourcing company manages the secure servers so you don't have to worry about security. The downside is these services don't provide any tools for creating an online store, especially those offering a sophisticated customer experience.
Wherever and however you set up shop online, don't neglect two critical factors that will affect the long-term success of your online venture: security and privacy. Mass-marketers, spammers, hackers, and defrauders could take your credit card and account information and use it against your business or your customers. Repeat customers and your reputation in the online community are good reasons to take these issues seriously. Customers who find themselves on lots of mailing lists because they bought something on your site or find spurious charges on their credit card bill because of lax security on your site won't come back.
The two key areas to address are the security of the communication between the customer and your server and the security of the server itself.
To ensure safe transactions between the customer and your site, you (or your host or outsourcer) must use a Secure Socket Layer -- enabled Web server. The SSL protocol, developed by Netscape (www.netscape.com), offers a high degree of security. SSL establishes a secure connection between the server and your Web browser. All data sent and received is encrypted to ensure that third-party snoops can't extract any confidential data in transit. Your browser will indicate when a connection is secure with a closed padlock or unbroken key icon or a similar visual cue. Netscape offers a number of different SSL servers for various popular operating systems. What's more, all Web browsers released in the last 18 months--including versions 2.0 and upward of both Navigator and Internet Explorer--support secure, SSL-based connections.
The second component, the security of the server itself, is often ignored. But think about it. If you buy a product from an online merchant whose server is sitting in the back room of the store, how secure is the box itself? For that matter, does the business know enough about Internet security to keep hackers from dialing in and stealing your credit card information?
How do the various commerce solutions stack up security wise? All-in-one software suites are the weakest, because it's up to the merchants or their consultants to create a secure environment. Hosting and outsourcing solutions are more reliable since the secure server is run by a qualified third party.
In any case, there are key security features you should implement. They are a secure Web server built atop the SSL protocol and a server that only runs secure and trusted (i.e., hacker-proof) software. You also need a secure, physical facility that is safe from intentional theft, fire, and flood and accidental destruction of transaction records from an inadvertent keystroke or pull of a power cord.
Another security development to watch is the SET (Secure Electronic Transaction) standard. Compared to SSL, which handles the encryption of transactions, SET is designed to verify the identity of the parties in a transaction, namely the customer, the vendor, and the bank. Many high-powered companies are supporting SET, but it's not yet widely accepted. See "Will the SET Standard Stick?"
Online privacy issues strike at the heart of your online customer's confidence. There are programs that let you track exactly how people explore your site and what products they buy. Over time you can create sophisticated customer profiles that could enhance your relationship with return customers. But watch out whenever you do something with this data beyond using it for that purpose.
Just because a customer purchased the soundtrack to a popular movie at your online CD shop doesn't mean you should sell that customer's data to another merchant, who might follow up by offering the customer a movie poster at a special discount. More and more online shoppers are protesting the dissemination of their personal data online, and they'll vote with their browsers by finding alternative outlets for the products they seek.
An excellent resource for privacy issues and online shopping is the nonprofit TRUSTe group (www.truste.org), cocreated by CommerceNet and the Electronic Frontier Foundation. TRUSTe offers a classification of privacy levels, from one-to-one (you'll use the data, but no third parties have access) to one-to-many (you might make your customer data available to third parties), that succinctly describes the different ways you might collect and use customer information on your Web site. Just as important, if you sign up with TRUSTe, you can display a trustmark on your site that visitors can click to read your privacy policy. Your policy, developed in consultation with TRUSTe, details what type of information your Web site gathers, how you use it, whom you share it with, whether customers can choose not to have information used by the site or a third party, whether customers may change or update information once it has been disclosed, and whether customers may delete or deactivate themselves from the Web site database.
Whatever solution you opt for, if you're collecting any sort of confidential information, particularly payment information, make sure your Web server and site are secure. If you anticipate a small amount of online transactions, then a secure form that collects data you process manually might work fine. Even in this type of situation, scrutinize the entire information flow. A third-party outsourcer who processes that form and then emails the payment information to you without encryption defeats the purpose of the security system. Look for PGP-encrypted mail notification services or a service where you log in securely to collect the transaction data.
There's a world of possibilities for online stores in the next year or two. And if you've looked at the small print on your bills recently, you know the large banking and credit companies--Visa, American Express, Bank of America, and Wells Fargo--have begun to educate customers that online shopping is safe, secure, and fun.
They're right. Shopping online is the next frontier. If you're ready to build your online store, now is the perfect time.
Dave Taylor is president of interface design firm Intuitive Systems and is the creator of the OrderEasy Electronic Commerce system. You can reach him electronically at taylor@intuitive.com.
Of the thousands of different Web sites addressing electronic commerce, the following are among the best. They offer reports, articles, and news releases that will help you make informed decisions about implementing e-commerce on your Web site.
- Internet.Com's Electronic Commerce Guide (e-comm.internet.com)
- Developed by MecklerMedia, this site offers articles, journals, white papers, and other reference material on e-commerce; links to informative Web sites, companies that offer e-commerce solutions; and a compendium of articles on e-commerce from Mecklermedia's own publications.
- Web Commerce (techweb.cmp.com/cw/webcommerce)
- CMP's Web Commerce site offers the latest news on e-commerce developments and a collection of links to background information on e-commerce technology and concepts. It's also a good reference source for upcoming e-commerce conferences and symposia.
- Electronic Markets: The International Journal of Electronic Commerce (www.electronicmarkets.org)
- A number of different magazines address the e-commerce market, but this one has one of the best Web sites. You can browse the magazine's archives in abstract form before downloading an Adobe Acrobat file of the full text.
- CIO's Electronic Commerce (www.cio.com/forums/ec.html)
- CIO Magazine offers articles, references, and further resources on e-commerce. Some of the references might be a bit dated, but the forum and pointers to technical white papers make this site worth a visit.
- CommerceNet (www.commerce.net)
- This nonprofit organization's mission is to promote Internet commerce. At its Web site you'll find the latest news on e-commerce issues and a calendar of events. You'll also discover information on CommerceNet's more than 200 member companies and other e-commerce organizations like TRUSTe.
One of the pivotal milestones for electronic commerce will be the widespread acceptance of the Secure Electronic Transaction (SET) standard. Jointly developed by Visa and Mastercard and supported by a number of different vendors including IBM, SET is being touted as the breakthrough security standard. Designed from the beginning to offer complete transaction security, SET includes digital signature technology to ensure the identities of all parties involved in a transaction. An encryption scheme assures consumers and businesses that the information received is confidential and hasn't been altered en route.
The problem with SET is it hasn't reached that critical mass of acceptance among vendors and Webmasters. To make SET work, you must have a special SET server, and you and your customers must have special SET software. And each browser needs a SET wallet program for either Netscape Communicator or Micro-soft Internet Explorer. But the SET wallet isn't available for all computer operating systems, and the number of online shops that support SET (let alone require it) can be counted on one hand.
SET also requires that digital certificates from recognized authorities be distributed to all parties involved: the merchant, the consumer, and the bank. That's an even bigger obstacle; today less than one percent of users even know what digital certificates are, let alone how to get them for their computers.
Nonetheless, SET may become an important part of e-commerce, perhaps as early as the end of 1998, if for no other reason than some of the biggest financial service companies in the world are involved in promoting the standard.
When Computer Currents partnered with Stacey's Professional Bookstore to start BookPoint (www.bookpoint.com), Webmaster Garth Gillespie faced the same challenge many small businesses do when getting into e-commerce: how to come up with a commerce solution on the cheap. It took creativity, time, and some bubble gum and bailing wire, but our final bill was just a little more than $9,000, thanks to heavy use of freeware Garth found online. Please note that the biggest ticket item, the server itself, is used for other Internet applications besides BookPoint.
Hardware platform, Dual Pentium Pro-200 (256MB RAM): $8,000
Operating system, Linux slackware: Free
Web server, Stronghold (SSL atop Apache): $900
Search engine, Excite for Web Servers: Free
Shopping basket, MiniVend: Free
Database, mSQL: $250
Digital certificates for server from Verisign: $150
TOTAL: $9,300
A full-fledged online store needs real-time transaction capabilities. In your rush to get all the hardware and software together, don't forget to establish a merchant bank account that lets you process and clear online credit card transactions for your business. Even if you already have an account with your bank so you can accept credit cards, you can't just start accepting cards over the Net, too. Online payments involve a whole new level of risk. They also involve intermediaries, namely your transaction clearinghouse and your e-commerce solutions provider.
Iron out the details of setting up your merchant bank account for online transactions with both your bank and your e-commerce solutions provider. In general, the bank must set up public and private encryption keys with your transaction clearinghouse. The two most common clearinghouses are Verifone (www.verifone.com) and CyberCash (www.cybercash.com). But you probably won't work with them directly. That's the job of your e-commerce solutions provider, whether it's a hosting firm or outsourcing company. Your solutions provider ensures that the required data is sent from your bank to the clearinghouse.
© 1997-1998 Dave Taylor. All Rights Reserved:
This article was originally written for Computer Currents and copyright is jointly owned by Intuitive Systems and Computer Currents. In all cases, republication of this work is prohibited without explicit permission of the author. Also, in case you haven't noticed, most of these links are long since gone, but it's an interesting historical record of our collective e-commerce thinking from the beginning of the "dot com" boom.