Creating an on-line storefront is not simply the process of creating a web site or adding shopping services to your existing site. There are a lot of business considerations which may include the involvement of your lawyer and accountant.
Reading the following guidelines will help you avoid the pitfalls and problems that are common with any new venture.
If you have dreams of becoming an Internet merchant there are a lot of things to consider as there is when you start any business. Even if the Internet is just a secondary sales channel to your existing retail or wholesale business, it has rules of its own that need to be considered beforehand. Here is a short list of some of the most important things to consider.
Key Questions to Ask Yourself, Before You Build Your Store
what are your objectives?
Are you planning to become an on-line Wal-Mart, become the world’s greatest source of new-fangled widgets or manage a small enterprise that only requires a little spare time to operate and limited cash to start? Your plans are affected by your capital, experience, ability and sometimes just plain luck. Generally, the bigger you want to be, the more it will require of each of these items. Write a short description of your objectives and try to put a date for completion on each. Leave it for a few days and look it over again. Does your list sound reasonable? If not continue to revise it until it seems within your reach.
how committed are you?
It’s an accepted principal that the larger you want to become, the more time and money it will take to do it. Regardless the size of your final business, time is required for planning, locating or manufacturing the products you sell and all the tasks associated with operating a business. Although the costs of an entry-level on-line business are only a fraction of those associated with creating a storefront on main-street, it still takes time and some money to do properly.
Setting up is only the first step; operating your business is another. If you are not interested in merchandising, you should seriously reconsider the venture unless you have people to manage your store. Otherwise, you may very well wonder why you started your business a year or two down the road.
do you have experience in retail/wholesale?
Merchandising experience is a distinct advantage because operating an Internet business is very similar to a traditional mail-order or retail business. The Internet lets you reach a virtually unlimited marketplace but that presents its own problems. You still need to be sell your products at a suitable profit to keep your business operating and make money to properly compensate your for your time and risk. How much should you markup goods, what items can’t you afford to sell? Knowing the answers to these questions early in the process means you have a better chance of being in business a year from now.
what is your backup plan?
What happens if your store doesn’t succeed? Are you investing your life savings in making your venture fly? It’s prudent to have a backup plan because even with a good idea, factors outside of your control may adversely affect your success. Even moderate success may not be sufficient to reward you for your effort so a “Plan B” is always a good option.
who are your target markets?
Who is going to buy what you have to sell? Can you describe the customer groups that you are trying to reach? Target markets can be defined along age, sex, interests, income, ethnicity, religion and other factors. Some market segments are bound to be more profitable than others. If your product range is too narrowly focused there may not be a sufficient demand to support your business. Diversification may be in order. Create a list of the top 5 types of customers you think will shop at your store. Are these same groups adequately serviced elsewhere either on the Internet or elsewhere?
how sellable are your products over the Internet?
Answering this question requires some competitive research. Look at what potential competitors are doing – both those selling the same type of products on the Internet, or through mail-order services and retail stores. Remember that customers are not likely to purchase from your on-line store if the same product is available in their own neighborhood. Why pay the additional costs of shipping and incur the wait time for the purchase to arrive when the same item is available down the street?
What are the general sales forecasts for your type of product?
Some products have longevity and others a short life span. If you are selling novelty items, expect the market to be short-lived, requiring you to come up with new products for your inventory as sales decline. With product selection, timing can be everything. Some items are hot and people will pay a premium but interest commonly drops as quickly as it grows.
are there conflicts with other sales channels?
If you are a wholesaler that sells your products through distributors or a retailer that that has a specified sales territory, you must consider potential conflicts with existing sales channels. Once on the Internet customers can come from anywhere. How are you going to handle these situations?
what are the key factors that affect product sales?
Other than the obvious factors such as price, customer service and return policies which all on-line stores require, every type of business has specific factors that are crucial to on-line sales. For example, if your customers require a lot of information before making a purchase decision, your site should include that information or have links to sites that do. Are your customers price sensitive? Some products are less price sensitive than others and decisions are made more on features and perceived quality. These issues will impact on your marketing and sales strategy.
who are your potential competitors?
Are your products already available over the Internet? If you are selling products that are already available from well established Internet-based business you face an up-hill competitive battle. Being second, third or later in a market adds to the challenges you face trying to create your own profitable niche. Rather than go head-to-head with a competitor, look for a niche that you can fill and establish yourself as a dominant player in that category.
how will you differentiate your store from potential competitors?
Will you offer people a better price, broader selection, lower shipping costs or fantastic customer service? What unique value proposition are you offering your customers?
how will you handle customer support?
Once you are in business, customers will inquire about your products, shipping terms, returns and exchanges and other issues. Try to provide as much information in your store so customers do not have to email or phone you. Getting back to people can require a lot of time and eat into your profits and be a considerable discouragement if responses are not timely. Many web sites offer a toll-free phone number so customers can speak to a real person to resolve their issues.
is your virtual store consistent with your existing physical store?
If you have both an on-line and bricks-and-mortar store offering the same type of products you will want a consistent business presence and need to align them from an accounting, inventory and pricing or you may increase your management costs significantly. If you sell products from two outlets at the same time you must be careful to manage your inventory so your web site doesn’t advertise products that are out of stock.
what is it going to cost to sell your products online?
Like a bricks-and-mortar store you are going to incur costs to sell your products: site development, web hosting costs, merchant account fees, credit card fees, on-line marketing expenses and professional services such as accounting and legal expenses. It is easy to forget some of these costs when determining the selling price of your products. Keep a record of these costs and include factor them into your margin calculations.
do you have a business plan?
A business plan is a written document that outlines your business concept and plans for your business. The act of writing it will force you to look at each aspect of the business and includes an overview, market analysis, sales and marketing strategy, financial projections and operational issues such as order processing, refunds and shipping. Without it is equivalent to walking down a dark alley without a flashlight. If you are unprepared to do it yourself, enlist the aid of an accountant or business planning advisor. These services cost money but can save you from making costly mistakes later on. It’s better to properly assess the merit of your ideas beforehand than experience failure later. A business plan is considered an essential item if you are planning to borrow money to fund your venture.