From ranking business priorities to budgeting and acquiring customers, our experts tell you exactly what you need to know before you start an ecommerce business.
Small business owners know that the Internet can be a valuable business channel, but for many of them, ecommerce is still clouded in mystery. Choosing the tools and software to manage an online business is the easy part of the equation. It's the factors that small business owners typically don't consider before launching that can make or break an ecommerce venture.
What many small business owners don't realize is that ecommerce is hard. Calling ecommerce "part art and part science," Victor Hanna, CEO and of The Betty Mills Company, says he doesn't want to turn anyone off, but the reality is you need to be prepared for a long winter. "Ecommerce is a lot harder than you think it is," he says. It's the subtle things that small business owners have to know and do well in order to be successful.
7 Things to Know Before Starting an Ecommerce Business
Before you start an ecommerce business, you need to figure out how and where the Web fits in your overall business strategy. You need to find a niche and determine what aspects of ecommerce are critical to your business. Then, experts recommend that you leverage the right technologies and continue to evaluate your ecommerce business strategy on a yearly basis.
Small Business Computing spoke with leading experts and successful business owners to come up with this list of seven things every small business owner needs to know before starting an ecommerce venture.
1. Know how the Web fits into your business strategy
"Your ecommerce strategy should reflect your overall business strategy, and you should use in a way that reflects your business model," says Daniel Toubian, managing consultant, retail practice at Maxymiser. For example, high-ticket, business-to-business companies may use a website as an online brochure or as a lead generation vehicle. A services-related business, says Toubian, may leverage a website's digital capabilities to showcase case studies and customer testimonials. In addition, a consumer product company may use ecommerce to drive sales across multiple channels—ecommerce, mobile commerce and in-store.
2. Know your niche and go deep
"If you're out there just selling stuff, it's going to be difficult unless you have an edge or a new product that no one else sells," says Victor Hanna. "When we started our ecommerce company [in 2002], the few janitorial supply shops online appeared to be small companies with very little technology and no succession planning in their business." Hanna attributes his company's success to picking a specialized niche and going very, deep in that category.
3. Rank priorities, implement features, and evaluate yearly
You need to know what role the Web will play in your business. "Know what you want to accomplish with your digital strategy," says Toubian. A roadmap to success starts with ranking critical business initiatives and budgeting for those accordingly, he says. For example, if you need to know what industry the visitor belongs to, then have a way to glean that information on your site because it's critical to your success. You may need to set aside a larger portion of your budget for these priorities and put less money on other website features.
Small businesses tend to start small, and that's perfectly OK, as long as you strategically map out a plan for growth. Don't just throw additional functionality out there. "In your first year, expect to use the Web for just one purpose. Then plan yearly revamps for an additional functionality using the customer information you glean as you go along," says Toubian.
More of What You Need to Know About Starting an Ecommerce Business
4. Invest in a professional web presence
It's important for small businesses to have a professional Web presence. Website design can cost anywhere from $50 for basic templates that you edit on your own to more than $25,000, depending on your business needs. Toubian recommends preparing for that investment upfront.
"If you have to cut corners, do it someplace else," he says. "Regardless of the size of your business, a poorly designed site that's hard to navigate will give visitors a less-than-stellar impression of your product and services." However, an easy-to-use, seamless, personalized site that loads content quickly gives visitors a positive first impression. It will drive long-term engagement, loyalty and cross-channel sales.
5. Customer acquisition is costly
When The Betty Mills Company first started, it cost 11 cents to bid on the term "janitorial supplies." Today it costs up to $2.50. Hanna says keywords his company would like to bid on can cost up to $7 per click. "If you don't have an installed base of customers, you have to suffer the cost of customer acquisition, and you'll need a lot of money to do it."
Customer acquisition can be costly but Jeff Zwelling, CEO and co-founder of Convertro, a provider of media and marketing attribution, says there's a smarter way to spend your customer-acquisition dollars.
"You want to know which customer-acquisition method you're using—a specific online ad, Google AdWords or any marketing channel—actually results in conversions on your website," says Zwelling. "Small businesses may have reservations about turning off any marketing channel, but tracking customer acquisitions lets you drop wasteful channels and invest more capital in the ones that do work well for your business."
6. Don't forget customer retention
"If you're going to get in the ecommerce business, you need to focus on customer retention from day one. Invest in a good email platform to provide consistency in your message," says Hanna. "From the first order you want to communicate with that customer and bring him back for a second order."
Hanna also says that you need a differentiator. For example, The Betty Mills Company offers more than 3,500 snack food items. The company launched a "Snack Rewards" loyalty program that lets customers earn points that they can redeem for snacks. "Suddenly we have office managers being hailed as heroes for bringing in these great snacks because of our loyalty program," he says. "This gives us an edge that our office supply competitors don't have."
There's no lack of software to analyze website data to improve customer service, and Toubian says "it’s never too early for small businesses to adopt a test-and-learn culture."
He recommends testing every single element and funnel within your website to better understand who your customers are, what they really need and want, and most importantly, to create an experience that will make them come back repeatedly and spend their dollars with you across all channels.
7. Leverage the right technologies for your business
You have to be technical, says Hanna. "You can't get into this business without being technical. There's a lot to know about data feeds, you need to know how to move information around dynamically, and if you're not adept at this, you need to hire someone to do it, or you'll be left behind."
The shift to cloud computing makes it affordable for small businesses to start an ecommerce business. "We're now a cloud-based business, so we no longer have a legacy data center with leases on aging server equipment and IT people on call," says Hanna.
You can start a new ecommerce business without investing huge dollars in systems. "We probably use eight different tools, and when you think about the costs for what you get, ecommerce systems and tools are affordable for any small business," he says.
Toubian agrees. He says there's more opportunity than ever for people who want to start their business because the Web tears down traditional barriers to entry. "Today's technology makes it easier than ever to start your business," he says, "but it also means the competition is more fierce. You're going to have to work a lot harder and be a lot smarter to survive."
Based in Nova Scotia, Canada, Vangie Beal has been covering small business, electronic commerce and Internet technology for more than a decade. You can tweet with her online @AuroraGG.
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