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Explanation of the basics of e-commerce - Strategies to Succeed in e-commerce. Also refer to online selling, web stores, catalog sales, mail order, shopping cart, Ron Kurtus, School for Champions. Copyright © Restrictions

The Basics of eCommerce

by Ron Kurtus (2 February 2000)

E-commerce is a subset of business, where products and services are advertised, bought and sold electronically or over the Internet. Many businesses have become extremely profitable through online sales. Dell Computers is a prime example. Small companies and even individuals can also market their products or services on a worldwide basis through e-commerce. Large companies can reduce sales and stocking costs by selling online.

If this gets you interested, questions you may have are:

• How is e-commerce different than traditional sales?
• What are the advantages and disadvantages of e-commerce?
• How can a business get set up to sell online?

This lesson will answer those questions. There is a mini-quiz near the end of the lesson.

Comparison with traditional commerce

Online commerce provides an additional method for buying or selling.

Traditional sales

In traditional sales, the buyer and/or the salesman is the active party. In one case, the buyer initiates the purchase by either going to the store to buy or calling on the phone and making an order. In another situation, the salesman goes to the home or place of business to make the sale, or he calls on the phone to make the sale.

A third method combines action from both parties. The business' sales department mails a catalog or other material, and the customer then makes a purchase from the catalog. These methods all apply to business-to-person as well as business-to-business sales.

Online commerce

Online commerce adds a new method, similar to a mail order catalog. The business' sales department posts a Web site with an online catalog. The buyer then selects items from the online catalog and makes the purchase, either online or by phoning or mail order.

Although the buyer is really using an online catalog, the metaphor of browsing a store with a shopping cart of most often used in e-commerce. This allows the customer to put items in the shopping cart to hold until checkout or when the purchase is finally made.

Advantages and disadvantages of e-commerce

There are advantages and disadvantages for both the seller and buyer in online commerce.

Seller

Advantages for the seller include:

• Access to worldwide markets
• Minimal sales costs
• Can compete with larger companies
• Can track purchases and use data to recommend other items to the customer

Disadvantages to the seller include:

• No personal contact
• Expense of getting popular-servers, etc.
• Must get people to know about and visit the site

Buyer

Advantages for the buyer include:

• Can find hard-to-get items from his or her chair
• Reduced cost
• Automated cost-comparison available

Disadvantages for the buyer include:

• Must pay for shipping and wait for delivery
• Cannot see or feel the product before making a decision
• Cannot easily return item or get support

Elements of e-commerce

Just as in tradition commerce, especially that done by mail order, there are certain elements required to perform online business. You must:

• Promote your Web site presence
• Have an online catalog or store
• Have the capability to receive payments
• Be able to deliver the item
• Provide after-the-sale support

Web site promotion

You need to advertise and promote your business, so that the customers will either come to your store, read your catalog or view your Web site.

Online catalog or store

You need to have a store or catalog where customers can view and select goods or services. Customers need to be able to easily get around your catalog to find things. The customer should be able to easily browse the selection and mark products for later purchase. They also need to be able to information or see pictures of the items.

Finding items

The Web site should be easy for customers to find what they want. The customer must know what is in the store, and the products must be organized in a logical manner.

The customer must be able to easily search for what he or she wants without the help of a sales clerk.

Selecting what to buy

Once the customer finds what he is looking for, he can put the selection in a "shopping cart" and search for other items. This make it easier for the customer to purchase multiple items, as well as to buy things he may not have been looking for.

Just as in a physical store, people often buy things they just happen to see. For example, stores place some "impulse items" at the checkout stand.

Purchase

It should be easy for customers to purchase the items they want. You must have a way to receive online payments, either using credit cards or other means of payment. For example, business-to-business sales may simply involve a purchase order.

The purchase of the item can be complex, but it should be made as simple as possible for the customer.

1. The customer must give certain information about himself. Usually this is name, address and e-mail
2. A mutually acceptable payment method must be chosen. Credit card or billing information must be gathered.
3. The merchant must process the customer's payment information.
4. Finally, the customer must receive confirmation of the sale.

Security is a concern in credit card purchases and the ability to encrypt transfer of data.

Delivery

You must have a good means of fulfilling the order and delivering the material to customers. Different means of delivery depends on the type of item purchased.

The product may be access to special information on the Web site, it may be downloadable software, or it may be items that must be physically delivered to the customer.

Support

The customer needs a way to voice problems. You also need a customer service system, consisting of support to handle complaints or returns in the event of problems.

Setting up an online store

You can purchase one of the various ready-made software applications that set up your online business. The problem there is the lack of ability to customize the application.

You can also have a Web programmer develop such a store in a language such as ColdFusion. You may not get as sophisticated site, and it may cost more in the long run if you start to re-invent the wheel.

The best bet is to look at both possibilities and pick a solution that is in-between.

Summary

Online commerce is similar to the mail order business, except that it has potential for worldwide markets. You must not only promote your Web site, but you must also make it easy to find, select and purchase the items. Delivery and support issues are similar to that in mail order.

To set up your own online store, you can either purchase e-commerce software or have your capabilities custom programmed.

Answers to Readers' Questions

Remember that selling helps the customer satisfy needs

Resources

The following are resources on this subject.

Websites

eCommerce Resources

Introduction to eCommerce tutorial - Good overview from Online-commerce.com

List of eCommerce material - A number of good resources from About.com

Books

Top-rated books on eCommerce

Top Business Books

Miscellaneous

Mini-quiz to check your understanding

1. How is online commerce similar to traditional sales?

2. What is a big advantage of e-commerce to sellers?

3. How do most individuals pay for online purchases?

If you got all three correct, you are on your way to becoming a champion in e-commerce. If you had problems, you had better look over the material again.

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