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The writing appears to be on the (virtual) wall. While "Black Friday," a/k/a the day after Thanksgiving, is generally considered the year's busiest day in brick-and-mortar stores, an estimated 61 consumers shopped from their computer screens on "Cyber Monday" this past holiday season, according to Shop.org, a division of the National Retail Federation.
Meanwhile, Tower Records locations around the globe were in the final days of liquidation sales; the decline of the once-formidable music and video chain was blamed in part on slowness to adapt to e-tailing.
However, while it may seem as though everybody's buying and selling online today, the numbers suggest that e-tailing has a long way to go before it becomes the typical consumer's preferred shopping method. A June 2006 report from Shop.org and Forrester Research projected that revenues from online retailing would reach $211.4 billion for the year, a 20 percent increase over the 2005 figure of $176.4 billion.
Even so, that's only slightly more than 5 percent of the $3.9 trillion in total U.S. retail sales that Plunkett's Retailing Industry Almanac 2007 projected for 2006. In addition, of that $211.4 billion, more than one-third—$73.4 billion—was generated by online purchases of hotel reservations and airline tickets, according to the Shop.org/Forrester report.
On the other hand, consider how many years it took U.S. retailers to reach that $3.9 trillion level, and then consider that online retailing is a little more than a decade old. And in that short time it has evolved to the point where in Shop.org's 2006 eHoliday Mood Study, 71.2 percent of online shoppers surveyed said they were "very satisfied" with their online buying experience, and nearly all said they were at least somewhat satisfied.
Yet one reason that consumers were largely satisfied with their holiday shopping experience a couple of months ago may have been that they had plenty of options to choose from. The number of merchants vying for their share of online business keeps growing. It's hard to think of a merchandise category—any category, from camping gear to surplus vacuum tubes—that isn't well represented in the online search engines.
Given the increasing competition, simply hanging out an online shingle is no longer enough. The would-be e-tailer needs to consider dozens of questions, from what to sell to the choice of e-commerce platform to the best ways to market the Web site.
The answers to all of these questions can't be provided in the space of this article, but what follows is a primer intended to help the Web entrepreneur know at least what he or she needs to consider.
Don't fail to plan
According to writer James Maguire, the easy part of setting up an online business is developing the basic business structure. The hard part is coming up with a business plan.
The reason, according to Maguire, is that online merchants need to think through what it is that they plan to do with their Web sites. At the outset, they need to determine how they'll set themselves apart from the competition, determine exactly who that competition is and what the competition's weaknesses are, know their potential customers and how to appeal to them, and decide what types of products to sell.
Hint: Selling exactly what everybody else sells isn't going to cut it on the Web. If finding a niche is difficult in the brick-and-mortar retailing world, it's doubly difficult online, where shoppers can line up a dozen or more potential sources for the goods they're interested in.
Once these issues have been considered, according to Maguire, the next step is to do some serious number-crunching.
"Before making your final decisions about your e-business strategy, sit down with a calculator," he wrote. "Make a list of all your upfront one-time start-up costs, and all your fixed, monthly ongoing costs. Make sure you include a hefty line item for your marketing budget, and another hefty line for unexpected expenses, which will occur every month."
By making these calculations, you can determine how much capital you'll need to launch the online venture and keep it going until it begins making a profit.
And profitability, needless to say, won't be achieved overnight.
One of the hurdles to surmount in reaching profitability is how to draw would-be shoppers to your Web site.
E-commerce consultant Dr. Ralph F. Wilson summarized several possible tactics in an article titled "The Web Marketing Checklist," including techniques for ensuring that your Web site's name comes up in online searches, and promoting the site in online forums and blogs.
However, Wilson wrote, some more "old-fashioned" techniques can build traffic as well, such as including the Web site's URL in print media or renting targeted e-mailing lists
While a Web site that euphemistically establishes a "Web presence" (translation: It's an ad telling people to contact the brick-and-mortar store, as the Web site isn't set up for e-commerce) is increasingly passé in 2007, the neophyte online merchant doesn't need to launch the e-business with a Web site comparable to that of Cabela's or U.S. Cavalry.
In fact, one effective way to start small is through environments such as Yahoo! Merchants or eBay Store.
eBay Store merchants can choose one of three monthly subscription levels, depending on how much merchandise they plan to sell online and how much marketing support they're willing to pay for.
Users order merchandise from these sellers as they would pay for a winning bid on an auction item; the difference is that while online auctions are usually one-shot deals, eBay Store listings come up every time a user searches for items that the store has listed for sale.
The game is only going to grow more complex as online retail becomes more sophisticated.
"Retailers spent the first decade of eCommerce scrambling to react to and learn about the Internet," said Carrie Johnson, lead author of the Shop.org/Forrester report and a vice president at Forrester Research.
"Companies are now able to take a step back and are busy planning strategies and prioritizing technology investment for the long term. As a result of these efforts, the next five to 10 years of online retail will be even more competitive and more innovative than in the past."
Fortunately, sources of additional information are readily available — fittingly enough, many can be found online (although Maguire also suggested the time-honored technique of calling up experts and picking their brains). One place to start is Wilson's Web site, www.wilsonweb.com, which provides links to scores of articles on making it in e-commerce as well as an e-marketing newsletter and other resources.
author: BY PAUL BUBNY