E-commerce is one of those things that sounds too good to be true. To start with, you can do business from virtually any geographic location that has daily UPS or FedEx service, which means you can live just about anywhere you want. The mantra of location, location, location for a retail store just doesn’t apply. Your business can be based in your garage, or you can simply choose to lease inexpensive industrial space without regard to location.
You can get by with far fewer employees than a retail store or a traditional mail-order operation, and you can set your own hours as long as you meet the daily shipping pickups. The biggest advantage is that your potential customer base expands from just your local area to the entire world.
If you believe e-commerce won’t impact YOUR business and you don’t need to worry about it, think again. The Internet is already having an effect on your business whether your business is online or not. Your online competitors are indirectly setting the pricing for the products in your retail business. You can be assured that many of your customers are shopping you and your services against the Internet before they actually purchase.
Many of your potential customers will find your Internet competitors before they find you because that’s where they’ll look first. It’s much easier to do a Google search to find what you need. Finally, there’s the convenience of making a few mouse clicks and having it delivered to your door. As an example, I just purchased a two-stage, 60-gallon air compressor online for $800 less than I could buy it locally. Oh yeah, I didn’t have to pay sales tax and the shipping was free!
Granted, not all businesses and products lend themselves well to e-commerce. Complicated items or services such as custom engine builds or even items like supercharger systems that have a lot of variables really need some personalized sales attention. However, the web is still one of the best ways to drive traffic to your business. So what’s holding you back?
For most small business owners the answer is simple: the thought of building an e-commerce Web site sounds too costly or too complex. Like most new hurdles, once you take them on, they’re not as overwhelming as they first seem. What we are going to cover here is not a step-by-step tutorial on how to convert your business from brick and mortar to e-commerce, but rather how to conceptualize the project and how to navigate through the digital minefield that lays ahead of you.
So what are my qualifications to give council on e-commerce? I just helped launch an e-commerce-only business called TreadSource.com, an online tire and wheel retailer specializing in high-performance applications. Along the way we made most of the rookie mistakes that were very costly, especially from a loss of time perspective.
Build Your E-commerce Strategy First
So what’s it take to add on an e-commerce solution to your current business. The first thing you need is a well thought out strategy, and it all centers around pricing issues. The question that needs to be answered is, “can I be price competitive with existing businesses on the web and still make a profit?”
A couple of hours with a calculator, your vendor pricing lists and some prices from your potential competitors will give you a general idea if you have a viable business model. In making that determination you need to forget about traditional brick and mortar margins of 25 percent and more, and set your financial model up for 8-12 percent margins. Remember, the web has the potential for much higher sales volumes.
If you have your own line of unique products or services as opposed to reselling products that are in wide distribution (like intake manifolds for instance), then you can set your pricing at whatever the market will bear. However, for the engine builder/speed shop that is reselling engine components it is important to do a pricing study against the “big boys” like Summit and Jegs. Chances are they are buying at a lower price point, due to receiving a volume percentage rebate, plus co-op advertising allowances and special marketing funds. If that mountain sounds too tall to climb, do the math and see if you can be profitable. You will most likely make less money than the big guys per transaction, but it might still be a viable business for you.
Or, as a custom engine shop, maybe you can add value to the product and charge a premium for that. The key is keeping your overhead lower than the big guys. As a startup you can do that. Spend your money on the best Web site you can afford (it is your storefront, calling card and corporate image all rolled into one).
Tip #1: Here’s something to consider you might want to run your online business under a different name than your retail business. The primary reason is that your retail location requires a higher profit margin than the online portion of your business. The last thing you want is for someone to buy an item from your storefront and go home and find it available for less money on your Web site. It’s a good way to lose a valued customer.
Once you have determined that you have a viable business model, the next step is to begin putting your e-commerce site together. There are many companies that can and will do this for you from start to finish, but it isn’t cheap. Not having a bunch of startup capital, we took the route of subcontracting each operation out. What we ended up with are some serious compatibility problems that have been solved but were both time consuming and costly. We still spent less overall than turning the entire project over to someone else, but if I counted my time, it would have been a wash.
The Basic Package
Here’s what’s needed: a search engine optimized (SEO) Web site, a full-function shopping cart (the software that allows people to view and buy your products) and a database that supports your shopping cart. Let’s take these one at a time.
Your Web site is your online business. You can have the smallest business on the planet, yet look like the biggest business in your category just by having a good Web site. It needs to be eye-catching and attractive to look at, easy to navigate and have great SEO. In fact, you need to design the site with SEO in mind. The only affordable way you are going to get traffic to your site is by showing up on the top of search engines such as Google and Yahoo. Any other traffic will cost you hard-earned cash such as paid-for clicks or traditional advertising and marketing.
If you are serious about e-commerce you need to learn about SEO and SEM (search engine marketing) or hire someone to keep the SEO current on your site. Pay close attention to the search functionality on your site. If a visitor cannot instantly find what he wants in a matter of seconds, he will be off to someone else’s site with a click of a mouse.
Shopping carts are available in just about every level of sophistication. If your business will only offer a handful of different products, then the most basic shopping cart will get the job done for you. However, if you have a lot of part numbers you’ll want to have a cart that has good internal search functions (by category, brand, and price) and can be supported by a database. The last thing you’ll want to do is change 700 prices one by one. Many of these shopping carts are free, the cost involved is getting them programmed to work within your Web site.
Tip #2: This one is really simple, but when we built our site we got it wrong so here’s a word of caution; make sure that the computer language (php, asp, .net, etc) between your site and shopping cart is compatible. Your site may function with conflicting computer language, but the search engines might not reach their full effectiveness. Also, if you buy or lease a year, make and model lookup guide from one of the many sources available, make sure it is written in a language that is compatible with your site and shopping cart too.
The key to maintaining a good e-commerce site is to support it with an accurate Excel database. Our TreadSource.com tire and wheel Web site will have close to 18,000 items for sale. The only way to effectively make monthly pricing changes and have inventory control is to do it with a database.
Even if your company has just 50-100 products, you’d want to maintain it through a database. In most cases the larger companies you deal with will have their databases in a current AAIA standard Legacy or ACES (Aftermarket Catalog Enhanced Standards) and PIES (Product Information Exchange Standard) format that will allow you to cut and paste their data into your database. Many companies will not, and you will have to reformat their information (most likely supplied in pdf catalog format) to conform to your spreadsheet.
The “if you build it, they will come” philosophy does not apply to Web sites. With e-commerce you live or die by the amount of unique (individual) visitors you get. Part of your e-commerce strategy from the beginning is to figure out how you will drive traffic to your site. As we mentioned earlier, the best way is to have your Web site search engine optimized to the max.
The next task is to build links to your site from the communities you serve. For example, if you specialize in GM LS-style engines there are many sites and blogs that you can post links to your site from.
After doing good SEO and building links it’s going to cost you money to drive traffic. One of the lower cost ways to do this is to post several items for sale on eBay and link your eBay store to your Web site. It’s amazing how much traffic this can send to your site.
Another excellent source of traffic for a minimal investment is to send mass emails with links to landing pages on your site. The tough part is finding appropriate lists to email to. Ideally, you will build your own proprietary list over time.
Moving up in expense is “paid clicks,” where you pay for every unique visitor that is sent to your site by this source. Expect to pay 50 cents to a dollar or more per click. While that may sound expensive, most pay-per-click visitors are good prospects because they are already searching for what you are selling.
Finally, a traditional promotional campaign of print, electronic and web advertising can be effective. But the more targeted your approach to these markets the better.
Looking back over our personal experience in building an e-commerce site I can reflect on several things. The first is that the entire process took three times longer than I had planned. The second is that I still need to learn much more about SEO and database manipulation it is the lifeblood of e-commerce. Lastly, successfully marketing an e-commerce site is a full-time job in itself, but the rewards can be spectacular!