Setting Up an Online Store – Part 1 of 3Posted by Chris Garrett / July 8, 2008
A step-by-step guide to e-commerce
Part 1: The business end of online stores
Part 2: Ten steps to building an online store
Part 3: The technical side of online stores
Part 1: The business end of online stores
So, you watched ‘60 Minutes’ on the weekend and saw Mark Zuckerberg, the world’s youngest self-made billionaire at 23 and co-founder of Facebook, and thought, ‘I reckon I could do that. It only took him three years. How hard can it be?’
Well take a deep breath—I’m about to burst your bubble.
Shopping online has changed the world we buy in. It has also provided many opportunities for entrepreneurs to access a global market for a small set-up cost. Many small businesses have shifted their sales online and never looked back, but many would-be billionaires have flirted with online sales and landed themselves in a great deal of debt.
Online business, specifically retail, is no different to other kinds of retail business. The only difference is that your customers buy from an online catalogue rather than visit your store in person. The business aspect is identical. Many people believe the Internet is a gold mine where the gold is a six-inch layer on the surface. Yes, some people have made good coin from the Internet, but they have had to dig for it. Facebook took about $38 million to get off the ground.
So, if you were thinking of retiring to the Bahamas next week on your online store revenues, you had better roll up those sleeves and get cracking. All business ventures are hard work, especially at the start.
There are, however, a few advantages to selling online:
- You can reach a global audience.
- Shop fit-out is closer to $20,000 rather than $200,000 for your usual retail store.
- Some wholesalers ship directly to your customers. You do not even have to deal with warehousing or shipping. You do not even see your stock!
- Your store is open all day, every day, without you having to be there. It’s self-service.
- It is extremely scalable.
Here are a few things to consider:
What are you selling and who wants to buy it?
It is easier to identify a niche in the market and develop a product for it than to invent an incredible gizmo that nobody wants. Produce a solution to an existing problem or get good at selling.
As a child, my siblings and I would come home from school and stand in front of the open fridge looking for something to eat. Unfortunately, we suffered a terrible affliction called Fridge Blindness. This crippling illness renders a perfectly sighted person unable to see a big honking snack right in front of their eyes. Our father did not really want to cool the entire planet with our fridge and threatened to put a glass door on so we could see what was inside without opening it.
He needed this product …
Despite my father’s desperate need for a tool like this, it is doubtful there would be a profitable market for it; however, if you do think this is a good idea, read on.
Target Market — do they exist?
Who are you trying to sell to? Are there enough people that want your gizmo? Can they afford it? If you are still nodding, you need to discover who they are and how to communicate with them. Ask yourself (or them) the following questions:
- How old are they?
- Where do they live?
- Where do they work?
- What do they earn?
- Male or female?
- Are they black, white, yellow, red or green?
- Are they educated?
- What is their socioeconomic status?
- Do they have a job?
- What religion are they?
- Are they married?
- What do they already own? (home, car, pet, etc.)
- What language do they speak?
- Do they have a computer and a credit card?
- Why do they want your product? Is to look cool, solve a problem, feel secure, etc?
- What are their interests?
- What kind of lifestyle do they live?
- Is there a general attitude in your chosen niche that needs consideration?
- What are their values and opinions?
- Are they loyal?
- Are they fanatics? (e.g. pet owners, brides or motorcyclists)
How narrow is the niche? Can it support you? When choosing a niche, weigh up your competition. Do not go head-to-head with big players in a highly competitive market. Look for a niche that has not been exploited otherwise your customer acquisition cost will be too high. Find a new spin on an old idea.
Testing the market
Forget focus groups and boardrooms full of iPhone-waggling marketing gurus. The best way to see if your product is going to fly is to Google it. Let the masses tell you.
Things to look for:
- How many competitors do you have?
- Are they in your market or country?
- Are they selling at the top of the market (quality driven) or the bottom (price driven)?
- How many businesses are advertising in the Sponsored Links column?
- Can you do it better?
Another great way to test a market without having a product is to run a Google Adwords, or pay-per-click campaign. There is a bucket-load of information on AdWords here — http://adwords.google.com
Let’s test the market with an example. Say you think there is a market for stapler accessories:
The first step is to set up a single landing page or promo webpage with an order form. Include sales copy explaining the stapler accessories and how cool your prospects will look with their pimped up stapler.
Second, set up a Google Adwords campaign aimed at a couple of specific markets (stapler fanatics and morons), and run the ad for a few weeks to see what response you receive. Record how many impressions (times the ad appears), clicks and enquiries you receive and that will soon tell you whether your idea has any legs.
Choosing a domain name
I won’t go into this too deeply as there is already a fine article on this topic here. In a nutshell, try to include the name of your product in the domain name.
Your online store budget
Set your budget then double it. I have never seen an online business venture cost less than the owner budgeted. The most common mistake is only budgeting enough to build your store. This is like setting up a beautiful shop in Westfield, complete with water fountain and live tigers and having no money for staff or stock.
Now divide your budget into thirds. One third of your budget will build your store. Spend the rest of your budget driving traffic to it. The famous Roman saying, ‘build it and they will come’ does not apply on the Internet. The Internet grows exponentially and your little store is only a drop in a very large ocean. You have to tell everyone you exist. Hint: Look up SEO and SEM.
Like any business, it may take a while to get the formula right. Finding the right niche, fine-tuning your site or perhaps just getting your distribution and delivery right can take some months. Make sure you have pockets deep enough to sustain yourself through this.
Putting an online store together can take from one to four months and it mostly depends on you. Many people try to put the cart before the horse and build an online store before they have done their market research or written a business plan, let alone worked out how they are going to ship live iguanas. Every minute spent preparing is an hour earned.
Running an online business takes more time than you think, especially at the start. Assuming you have done all your research and still think it is a good idea, it will then take about a month to specify what you want with a web developer and get it designed. The construction stage usually takes six to twelve weeks, depending on what you are building, and the testing and launch phases happen after that. While your site is being constructed you will need to be doing some things. Here are just a few:
- Photograph all stock
- Write descriptions of all stock
- Write copy for all other webpages
- Find images for other webpages
- Write disclaimers and privacy policies
- Write refund policy
- Set up a payment gateway
- Obtain an Internet merchant ID at your bank
- Shoot, edit and optimise video if you need it
What’s your offer?
What will you offer people? A better price, broader selection, free shipping or a twice-your-money-back guarantee? What unique value proposition are you offering your customers?
Do not try to be everything to everybody. Just do one thing and do it well. If you have other products or services that confuse your online message, set up a separate web site for them.
When customers go to a traditional store, there is an instant level of trust (hopefully). They can see that you are a real person and not an axe-wielding maniac and they can touch or try on the items they are about to buy. In the online environment it is trickier to build that initial trust because you only have text and images at your disposal.
The most effective way to build trust is with a strong brand. If you look reputable, you probably are. This can be achieved for around $2000 with a good graphic designer. Here are my favourites: Red-I Design, Whip Creative, Dreamvistas, mc3, Design Animals.
Another proven winner is video. Placing a video demonstration of your product on your site has been proven to increase sales by up to 300%. You can also build trust by adding a video of yourself talking about the product or store and a few video testimonials from your customers will seal the deal. There is nothing like a third party endorsement to build trust. Ask CI Productions about video. They are brilliant.
- Deliver on time, every time.
- Keep it simple.
- Give them a reason to come back; i.e., interesting content, specials, newsletters, forums, members’ area and loyalty programs. Make it fun.
Remember, online business is the same as offline business
- Find a niche, not a produce
- Test the market
- Find some cash
- Hang in there
- Send a singular, clear message
Direct Ink Cartridges — http://www.directinkcartridges.com.au
A custom online store selling more than 4500 printer cartridges. (Note the very search friendly URL)
Crafty — http://www.crafty.com.au.
A great example of an off-the-shelf system (xCart) with about 3000 products. The guys at Crafty have created a strong community around the business with news, a forum, events and images of customer projects in a gallery. This is a terrific driver of repeat business.
Nike — http://www.nike.com.au
The pièce de résistance of online stores. Obviously they have very deep pockets, but it is a great example of what is possible. The Nike site is driven almost completely by Adobe Flash.