Opening up an e-store

by David English, Computer ShopperIn the brick-and-mortar world, every retailer knows the three keys to success are location, location, and location. Do you want to be in a high-rent mall, a more affordable strip center, or brave it alone in a freestanding building?
Written by ZDNet Staff, Contributor
by David English, Computer Shopper

In the brick-and-mortar world, every retailer knows the three keys to success are location, location, and location. Do you want to be in a high-rent mall, a more affordable strip center, or brave it alone in a freestanding building? If you were to make these same choices for your e-commerce site, you'd be choosing among a storefront provider, an ISP or Web hosting service, or a stand-alone software solution. As in the "real" retail world, the differences are in cost, ease of setup and maintenance, and visibility.

Visibility cannot be underestimated. With e-commerce expected to expand to US$1.3 trillion by 2003, according to IDC, it's easy to get lost in the crowd. But there's no guarantee your site will be successful, so you may not want to sink your life savings into building your virtual store. These are the issues you'll need to resolve as you decide among the solutions described here.

Storefront providers
The easiest way to get started is to set up a site with an e-commerce storefront provider. These turnkey operations function much like online shopping malls. It's the most expensive method in the long run, but it's also the safest—if your business burns out quickly, you won't have wasted much effort or up-front money. It's also the best approach if you're not a programmer, especially if you plan to implement real-time credit-card transactions. You can always start with a storefront provider and move to an independent site later, but you'll have to migrate your customers from one Web address to another.

How much rent will you pay your online landlord? Amazon.com's zShops program charges a fee for each product listed, as well as a completion fee for each item sold. At press time, the listing fees ranged from 25 cents to US$2 per product. If you want zShops to feature your products so that they stand out from the thousands of other products in the mall, you can pay an additional US$2 for a bold listing, US$14.95 for a special-category listing, or US$99.95 for a featured spot on the zShops home page. The completion fees vary according to the price of the item. You'll pay 5 percent for items that sell for US$25 or less, and 1.25 percent for items that sell for more than US$1,000. For credit-card sales, you'll pay 60 cents per transaction, plus 4.75 percent of the total.

These fees can cut deeply into your profits, but you get a lot in return. You don't have to worry about setting up a Web site—zShops automatically adds your items to its listings as well as its searchable database. You don't have to maintain a Web address—zShops dynamically creates the pages for your products whenever customers need them. You don't have to worry about setting up and maintaining a merchant credit-card account with a bank, which would require a 2 percent to 5 percent transaction fee. And zShops guarantees each transaction for up to $1,000, which may dispel shoppers' fears of trying an unknown merchant.

Yahoo Store offers similar storefront services, though its e-commerce stores look and function more like individual Web sites than the on-the-fly product listings at zShops. You can use Yahoo's domain name (as in "store.yahoo.com/yourname") or your own (as in "www.yourname.com"). Although you have to use Yahoo's browser-based software to create your e-commerce pages, you can embed HTML tags and import your own graphics, so you'll be able to give your site its own identity. If you already have a site, you can choose to put the e-commerce portion on Yahoo and link your other pages to it. In addition, Yahoo automatically creates thumbnail images of your product photos for use on its product section pages.

Pricing for Yahoo Store is a simple flat fee. At press time, the cost was US$100 a month for a store that sells fewer than 50 items, US$300 a month for a store that sells 50 to 1,000 items, and a sliding scale for a store that sells more than 1,000 items. There are no startup fees, transaction fees, or minimum time commitments. If you want to accept credit-card orders, you'll have to pay the usual merchant-account fees for each purchase. Yahoo can process your application for a merchant account, or you can use your preexisting account if you have one.

Yahoo adds your site and products to its directory, and automatically submits your site to the top search engines. You also receive extensive store-tracking tools, which tell you how many views you get and your total income per page. You can also find out which sites your visitors came from, how much they spent, and what they searched for. You can determine income patterns by time of day and how much repeat business you're getting. And you can bring the tracking data directly into an Excel spreadsheet.

Similar storefront-hosting services are available from Bigstep.com, eCongo, Freemerchant, and iCat Web Store. Whether the extra handholding is worth the hefty fees depends on your willingness to take on risk and the nature of the products you sell. Because storefront providers can draw curious shoppers who might not otherwise find your site, this approach could be a convenient way to test the waters without having to spend a lot of time and money to promote your new site.

Web hosts
If the storefront providers are the malls of e-commerce, the ISP and Web hosting companies are the strip centers. You'll pay less in fees, but you'll have to do more of the programming and promotion. These companies cater mostly to preexisting Web sites, or to those who are comfortable designing and maintaining their own sites. If all you want to do is add a few e-commerce features to your current site, this could be the way to go.

ISPs and Web hosting companies generally provide their e-commerce tools in the form of preconfigured packages or à la carte menus. MindSpring Enterprises offers several packages that include store statistics, a shopping basket, secure order forms, credit-card authorization, and customer-feedback forms. These packages include a Web hosting account, so you can pay one bill for everything. At press time, MindSpring charged a monthly fee based on the number of products sold from the site: US$79.90 for 50 products, US$109.90 for 100 products, and US$209.90 for an unlimited number of products.

If your site demands a comprehensive database-driven solution, you can add MindSpring's InterShop 3 for US$159.95 a month. It lets you issue purchase orders, track inventory and sales, and manage customer information in real time. The system can even create Web pages on the fly to update product listings and availability, so your customers will know immediately if the products they're interested in are back-ordered. InterShop 3 provides such professional-level features as a storewide search engine, automatic e-mail notification, group discounts, and credit-card authorization.

Prodigy Communications Corp. offers a similar multitier approach, which lets you choose the bundle of features that suits your needs and budget. The US$50-monthly Starter Class package is restricted to 50 products, but it includes an integrated shopping cart, secure order forms, and e-mail notification. If you want to accept credit cards, you have to move up to the Enterprise Class package, which lets you sell 1,000 products for US$250 a month. Real-time payments cost US$50 a month, and credit-card transactions cost 80 cents each.

Prodigy's payment engine provides some impressive fraud checks during the sale. You can block orders from specific IP addresses or credit-card numbers, or any e-mail address from a specific domain, including the free e-mail services. (Most online fraud originates from the free e-mail services because of the difficulty of tracking their users.) The system also automatically checks to see that the credit-card number is consistent with the type of card the customer is using. Prodigy offers a free 14-day trial of its e-commerce features (excluding online payment processing), as well as a series of free e-commerce tutorials.

ValueWeb takes a more modular approach with its Miva Merchant shopping-cart system. True to its name, ValueWeb provides an exceptional value, with e-commerce hosting packages starting at US$49.95 a month. You can add specific store functions at any time without having to change the core system. Miva integrates category management, product cataloging and maintenance, and a shopping basket. Existing sites can link to the system's functions via HTML and XML commands. If you prefer not to write code, you can use Miva's browser-based interface to build your store from the ground up. Along with the MivaMerchant shopping cart, ValueWeb offers its e-commerce customers free versions of TopPage (essentially a subset of NetObjects Fusion) and WebTrends (which analyzes your customers' browsing and purchasing patterns). If you want to process credit-card payments, you can add LinkPoint to Miva's shopping cart and database capabilities. Cardservice International charges ValueWeb customers a one-time fee of US$299 for its LinkPoint Secure Gateway Solution. Monthly charges include a 2.39 percent discount rate on all transactions, a 25-cent transaction fee, a US$10 customer-service fee (plus 5 cents for address verification), and a $20 LinkPoint Secure Gateway Fee. The monthly minimum charge is US$15.

The freestanding stores of the online world require you to do it all yourself, and you may need to arrange for a Web hosting company independent of your program's e-commerce functions. This is often the least expensive approach, because it requires the most self-reliance. If you're a go-your-own-way type of person, this approach could give you the independence you need.

Boomerang Software's $189 WebShop Designer 2000 incorporates Web-site design, a shopping-cart builder, and merchant credit-card account registration into a single off-the-shelf software program. The price even includes a free year of Web hosting for a 5MB or smaller e-commerce site. The Web-design portion of the package is Boomerang's Internet/Intranet Design Shop Gold, which lets you drag and drop design elements onto your Web page. If you prefer, you can choose from a selection of store templates and add your products and text.

WebStore places the e-commerce features onto your site through a series of dialog boxes in which you enter information specific to your store, create your database of products, and configure your store settings. You make product changes, specify shipping and payment methods, and register for a credit-card account via multiple-choice screens, fill-in-the-blank menus, and online links to e-commerce partners. There are additional fees for credit-card processing similar to those with the storefront providers and hosting companies, but you can start out by processing orders manually until you generate a steady cash flow. In addition to the integrated shopping cart and the ability to perform secure transactions, WebStore lets you add a chat component to your site, so your customers can form an ad hoc community.

Automated online transactions are only one part of a long chain of events that usually leads directly to your accounting program. Although most e-commerce solutions deal with the front end of the transaction, they often drop the ball when it comes to integrating the sales and inventory data with your accounting system. Peachtree Complete Accounting (US$229) addresses this problem by starting at the back end of the process. The small-business accounting package includes a site-creation component with electronic-storefront capabilities. It supports secure transactions, provides UPS tracking so customers can determine the status of their shipments, and creates shopping carts that can accommodate more than 1,000 items with photos. Web orders are downloaded into the accounting program, which creates and prints the appropriate invoices. This could be an excellent solution if you already have a retail operation and want to extend your current invoicing and banking procedures to the Internet.

Whichever level of e-commerce support you choose and however much you plan to spend each month to market your products online, you'll want to study the competition. Keep in mind that potential customers will mentally compare you with the likes of Amazon.com, so paying special attention to design and product photo quality, for example, can go a long way.

Check out Web stores that sell products and operate on a scale similar to your store's. Think like a customer, and observe where and when you become frustrated with the process of choosing and buying products online. Although the cost and the capabilities of your e-commerce tools are important, don't underestimate the value of stepping back and asking whether your site has all it takes to stand out from the thousands of other e-commerce sites.

Go to Feature comparison

Editorial standards