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Is e-commerce for you?

How you know it's time to start doing business online

The Products

Selling products and services online sometimes is as much common sense as savvy. Click through some of the most popular websites and you'll quickly see that books and music sell well online.

Conversely, see how many Web sites you find selling explosives. (If you find several, something is wrong with the nation's regulatory process.)

Successful online selling is a matter of what you sell, how you sell it, who you sell it to, who you find as competitors, and how you reach people. If you're contemplating e-commerce, consider the following questions to find out how suited you are to the online sales environment.

What Do You Sell?

Some items "move" online, some don't. Products sold through catalogues and other direct channels usually transfer well to the Web. The following list outlines some general categories of goods and whether they sell well online.

Proven to sell well online:

Products that appeal to enthusiasts e.g. cooking supplies, sports memorabilia. These are niche markets, and well suited to building global communities of interested users. People with interests congregate naturally, so it's easy to market to them. It's also less likely that you'll face much competition.

Low-touch services e.g. travel services, online stock trading. These services don't have a product to ship (except paper, by post). Low or non-existent shipping costs mean you can be competitive with the high street. The examples of travel and stock trading are also information-rich sectors. People buy them after wading through plenty of information. This is something the online environment presents very well.

Frequently purchased items e.g. manufacturing parts, office supplies. Online shops are very good at offering repeat ordering. From paperclips to vacuum cleaner bags, shops which 'remember' your order are very attractive.

Technology products e.g. software, computers. Since online shoppers by definition are already online, they're the sort of people who would buy software. Marketing and targeting to specific consumer groups works online just as it does offline.

Difficult to find items e.g. out-of-print publications, rare stamps. This is a sub-set of the niche discussion above. The internet allows you to sell to a global audience, so esoteric shops which wouldn't work on the high street can often attract global interest online.

Difficult to sell online:

Services that focus on a local market e.g. hair salons. By all means have a website, but don't expect it to broaden your reach dramatically.

Products requiring a high level of customisation e.g. tailored suits. Actually there are international suit manufacturers who have used the web to great effect to sell from India and Singapore to the UK. The point here though, is, if you can't specify your product online, you shouldn't sell it online. Wedding dresses, for example, need hands-on expertise and cannot be bagged and shipped without customisation. You could of course still have a site with example costings and glamorous pictures, which would still be highly effective.

Are your Customers Online?

One of the most important e-commerce considerations is whether your target audience goes online to buy products and services like yours. Above we looked at software in this way; similarly "boys toys", gadgets and electrical goods seem to work well online. That said, as more and more people go online, this distinction will become less important.

In addition, if you sell locally but your products have global appeal, e-commerce may be an attractive way to expand your business. Finally, if your clients live active, busy lives, the time-saving benefits of shopping online may appeal. This is certainly true of, for example, office supply services. If you sell primarily to a local audience that does not regularly use computers, the effort required to convince buyers to go online may not be worth the payback.

Are your Competitors Online?

Having a number of competitors online is a positive sign that your products and services are a good fit for e-commerce. It also presents the challenge of differentiating your site from the rest, and the associated promotional costs of competition.

Create a unique offering by surveying direct and indirect competitor sites and then crafting a site that sets you apart based on your value to the customer. For instance, if you want to sell children's toys online, you might have trouble competing against the e-commerce efforts of national toy store chains. By targeting your site to an under-served market niche - such as educational toys, or toys based on book characters - you may be able to compete more successfully.

It's also important that you don't get entirely put off by competition; as online retail isn't just about looking for new clients. Many of your existing clients might want to shop online, and if you don't offer this service you might end up losing them. Online is a great way to look after your current client base as well as looking to the future.

If your competitors are not online, ask yourself why. It could be that there is an untapped market that can work to your advantage. Equally, some markets don't work- see above. If, for example, your returned-goods rate is very high, it might prove not to be worth it. If you're still convinced that your customers want to buy through the Web, back up your conviction with market research. Survey customers about their online habits, or ask your trade association for research on how the Internet is impacting your industry.

Can You Commit to eCommerce?

As with any new distribution channel, you'll need to commit some of your company's resources to e-commerce to ensure you're able to provide the appropriate levels of service and support. You will need to handle additional sales coming over the Web, as well as tasks associated with keeping your site operating smoothly. These include:

Building (or outsourcing) your e-commerce website, and keeping it secure

Promoting it. We can't stress enough: for the vast majority of e-commerce sites, marketing is a far greater expense than the initial build cost.

Maintaining it: updating site inventory, pricing, stock lists etc.

Handling customer inquiries, arranging shipping logistics and options

Managing outgoing customer communications

To reap the most benefit from your online sales channel, it's a good idea to create a plan for handling these tasks before you build your site, including who in your organisation will own each item.

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