14 Running an E-commerce Site
THIS CHAPTER INTRODUCES SOME OF THE ISSUES involved in specifying, designing, building, and maintaining an e-commerce site effectively. We examine the plan, possible risks, and some ways to make a website pay its own way.
Key topics you learn in this chapter include
Deciding what you want to achieve with your e-commerce site
Considering the types of commercial websites
Understanding risks and threats
Deciding What You Want to Achieve
Before spending too much time worrying about the implementation details of your website, you should have firm goals in mind and a reasonably detailed plan leading to those goals.
In this book, we make the assumption that you are building a commercial website. Presumably, then, making money is one of your goals.
There are many ways to take a commercial approach to the Internet. Perhaps you want to advertise your offline services or sell a real-world product online. Maybe you have a product that can be sold and provided online. Perhaps your site is not directly intended to generate revenue but instead supports offline activities or acts as a cheaper alternative to present activities.
Considering the Types of Commercial Websites
Commercial websites generally perform one or more of the following activities:
Publish company information through online brochures
Take orders for goods or services
Provide services or digital goods
Add value to goods or services
Cut costs
Sections of many websites fit more than one of these categories. What follows is a description of each category and the usual way of making each generate revenue or other benefits for your organization.
The goal of this part of the book is to help you formulate your goals. Why do you want a website? How is each feature built in to your website going to contribute to your business?
Publishing Information Using Online Brochures
Nearly every commercial website in the early 1990s was simply an online brochure or sales tool. This type of site is still the most common form of commercial website. Either as an initial foray onto the Web or as a low-cost advertising exercise, this type of site makes sense for many businesses.
A brochureware site can be anything from a business card rendered as a web page to an extensive collection of marketing information. In any case, the purpose of the site, and its financial reason for existing, is to entice customers to make contact with your business. This type of site does not generate any income directly but can add to the revenue your business receives via traditional means.
Developing a site like this presents few technical challenges. The issues faced are similar to those in other marketing exercises. A few of the more common pitfalls with this type of site include
Failing to provide important information
Poor presentation
Failing to answer feedback generated by the site
Allowing the site to age
Failing to track the success of the site
Failing to Provide Important Information
What are visitors likely to be seeking when they visit your site? Depending on how much they already know, they might want detailed product specifications, or they might just want very basic information such as contact details.
Many websites provide no useful information, or they miss crucial information. At the very least, your site needs to tell visitors what you do, what geographical areas your business services, and how to make contact.
Poor Presentation
“On the Internet, nobody knows you are a dog,” or so goes the old saying.1 In the same way that small businesses, or dogs, can look larger and more impressive when they are using the Internet, large businesses can look small, unprofessional, and unimpressive with a poor website.
1Of course, an “old saying” about the Internet cannot really be very old. This is the caption from a cartoon by Peter Steiner originally published in the July 5, 1993, issue of The New Yorker.
Regardless of the size of your company, make sure that your website is of a high standard. Text should be written and proofread by somebody who has a very good grasp of the language being used. Graphics should be clean, clear, and fast to download. On a business site, you should carefully consider your use of graphics and color and make sure that they fit the image you want to present. Use animation carefully, if at all. Never play a sound without the user requesting it.
Although you cannot make your site look the same on all machines, operating systems, and browsers, you can make sure that it uses standard HTML or XHTML so that the vast majority of users can view it without errors. Make sure that you test it with a wide variety of screen resolutions and the major browser/operating system combinations.
Failing to Answer Feedback Generated by the Website
Good customer service is just as vital in attracting and retaining customers on the Web as it is in the outside world. Large and small companies are guilty of putting an email address on a web page and then neglecting to check or answer that mail promptly.
People have different expectations of response times to email than to postal mail. If you do not check and respond to email daily, people will believe that their inquiry is not important to you.
Email addresses on web pages should usually be generic, addressed to job title or department rather than a specific person. What will happen to email sent to [email protected] when Fred leaves? Email addressed to [email protected] is more likely to be passed to his successor. It could also be delivered to a group of people, which might help ensure that it is answered promptly.
You will probably receive a lot of spam sent to addresses that you put on web pages. Bear this fact in mind when deciding how to forward or handle emails sent to these addresses. You should consider using form-based feedback rather than directly giving out email addresses as this reduces the incidence of spam.
Allowing the Site to Age
You need to be careful to keep your website fresh. Content needs to be changed periodically. Likewise, changes in the organization need to be reflected on the site. A “cobweb site” discourages repeat visits and leads people to suspect that much of the information might now be incorrect.
One way to avoid a stale site is to update pages manually. Another is to use a scripting language such as PHP to create dynamic pages. If your scripts have access to up-to-date information, they can constantly generate up-to-date pages.
Failing to Track the Success of the Site
Creating a website is all well and good, but how do you justify the effort and expense? Particularly if the site is for a large company, you will be asked to demonstrate or quantify its value to the organization at some time.
For traditional marketing campaigns, large organizations spend tens of thousands of dollars on market research, both before launching a campaign and after the campaign to measure its effectiveness. Depending on the scale and budget of your web venture, these measures might be equally appropriate to aid in the design and measurement of your site.
Simpler or cheaper options include
Examining server logs—Web servers store a lot of data about every request from your server. Much of this data is useless, and its sheer bulk makes it useless in its raw form. To distill your log files into a meaningful summary, you need a log file analyzer. Two of the better-known free programs are Analog, which is available from http://www.analog.cx/, and Webalizer, available from http://www.mrunix.net/webalizer/. Commercial programs such as Summary, available from http://summary.net, or WebTrends Analytics, available from http://www.webtrends.com/, are more comprehensive. A log file analyzer shows you how traffic to your site changes over time and what pages are being viewed.
Monitoring sales—Your online brochure is supposed to generate sales. You should be able to estimate its effect on sales by comparing sales levels before and after the site launch. Your ability to monitor sales obviously becomes difficult if other kinds of marketing cause fluctuations in the same period.
Soliciting user feedback—If you ask your users, they will tell you what they think of your site. By providing a feedback form, you can gather some useful opinions. To increase the quantity of feedback, you might like to offer a small inducement, such as entry into a prize drawing for all respondents.
Surveying representative users—Holding focus groups can be an effective technique for evaluating your site or even a prototype of your intended site. To conduct a focus group, you simply need to gather some volunteers, encourage them to evaluate the site, and then interview them to gauge and record their opinions.
Focus groups can be expensive affairs, conducted by professional facilitators, who evaluate and screen potential participants to try to ensure that they accurately represent the spread of demographics and personalities in the wider community and then skillfully interview participants. Focus groups can also cost nothing, be run by an amateur, and be populated by a sample of people whose relevance to the target market is unknown.
Paying a specialist market research company is one way to get a well-run focus group and useful results, but it is not the only way. If you are running your own focus groups, choose a skillful moderator. The moderator should have excellent people skills and not have a bias or stake in the result of the research. Limit group sizes to 6 to 10 people. A recorder or secretary should assist the moderator to leave her free to facilitate discussion. The result that you get from your groups is only as relevant as the sample of people you use. If you evaluate your product only with friends and family of your staff, they are unlikely to represent the general community.
Taking Orders for Goods or Services
If your online advertising is compelling, the next logical step is to allow your customers to order while still online. Traditional salespeople know that it is important to get customers to make a decision now. The more time you give people to reconsider a purchasing decision, the more likely they are to shop around or change their mind. If customers want your product, it is in your best interest to make the purchase process as quick and easy as possible. Forcing people to step away from their computer and call a phone number or visit a store places obstacles in their way. If you have online advertising that has convinced viewers to buy, let them buy now, without leaving your website.
Taking orders on a website makes sense for many businesses. Every business wants orders. Allowing people to place orders online can either provide additional sales or reduce your salespeople’s workload. Providing facilities for online orders obviously involves costs. Building a dynamic site, organizing payment facilities, and providing customer service all cost money.
Much of the appeal of online sales is that many of these costs stay the same regardless of whether you take 1,000 orders or 1,000,000 orders. To make the costs worthwhile though, you need to have products or services that will sell in reasonable numbers. Before you get too attached to the idea of online commerce, try to determine whether your products are suitable for an e-commerce site.
Products and services commonly bought using the Internet include books and magazines, computer software and equipment, music, clothing, travel, and tickets to entertainment events.
Just because your product is not in one of these categories, do not despair. These categories are already crowded with established brands. However, you would be wise to consider some of the factors that make these products big online sellers.
Ideally, an e-commerce product is nonperishable and easily shipped, expensive enough to make shipping costs seem reasonable, yet not so expensive that the purchaser feels compelled to physically examine the item before purchase.
The best e-commerce products are commodities. If a consumer buys an avocado, he will probably want to look at the particular avocado and perhaps feel it. All avocados are not the same. One copy of a book, CD, or computer program is usually identical to other copies of the same title. Purchasers do not need to see the particular item they will purchase.
In addition, e-commerce products should appeal to people who use the Internet. At the time of writing, this audience consists primarily of employed, younger adults, with above-average incomes, living in metropolitan areas. With time, though, the online population is beginning to look more like the whole population.
Some products are never going to be reflected in surveys of e-commerce purchases but are still a success. If you have a product that appeals only to a niche market, the Internet might be the ideal way to reach buyers. Even if only 10 people in your hometown collect 1980s action figures, a site selling them might work if 10 people in every other town collect them as well.
Some products are unlikely to succeed as e-commerce categories. Cheap, perishable items, such as groceries, seem a poor choice, although this has not deterred companies from trying, mostly unsuccessfully. Other categories suit brochureware sites very well but not online ordering. Big, expensive items fall into this category—items such as vehicles and real estate that require a lot of research before purchasing but that are too expensive to order without seeing and generally impractical to deliver.
Convincing prospective purchasers to complete an order presents a number of obstacles. They include
Unanswered questions
Trust
Ease of use
Compatibility
If users are frustrated by any of these obstacles, they are likely to leave without buying.
Unanswered Questions
If a prospective customer cannot find an immediate answer to one of her questions, she is likely to leave. This scenario has a number of implications. Make sure your site is well organized. Can a first-time visitor find what she wants easily? Also, make sure your site is comprehensive, without overloading visitors. On the Web, people are more likely to skim than to read carefully, so be concise. For most advertising media, there are practical limits on how much information you can provide. This is not true for a website. For a website, the two main limits are the cost of creating and updating information and limits imposed by how well you can organize, layer, and connect information so as not to overwhelm visitors.
Thinking of a website as an unpaid, never-sleeping, automatic salesperson is tempting, but customer service is still important. Encourage visitors to ask questions. Try to provide immediate or nearly immediate answers via phone, email, online chat, or some other convenient means.
Trust
If a visitor is not familiar with your brand name, why should he trust you? Anybody can put together a website. People do not need to trust you to read your brochureware site, but placing an order requires a certain amount of faith. How is a visitor to know whether you are a reputable organization or the aforementioned dog?
People are concerned about a number of issues when shopping online:
What are you going to do with their personal information? Are you going to sell it to others, use it to send them huge amounts of advertising, or store it somewhere insecurely so that others can gain access to it? Telling people what you will and will not do with their data is important. Such information is called a privacy policy and should be easily accessible on your site.
Are you a reputable business? If your business is registered with the relevant authority in a particular place; has a physical office, warehouse, and a phone number; and has been in business for a number of years, it is less likely to be a scam than a business that consists solely of a website and perhaps a post office box. Make sure that you display these details.
What happens if a purchaser is not satisfied with a purchase? Under what circumstances will you give a refund? Who pays for shipping? Mail order retailers have traditionally had more liberal refund and return policies than traditional shops. Many offer an unconditional satisfaction guarantee. Consider the cost of returns against the increase in sales that a liberal return policy will create. Whatever your policy is, make sure that it is displayed on your site.
Should customers entrust their credit card information to you? The single greatest trust issue for Internet shoppers is fear of transmitting their credit card details over the Internet. For this reason, you need to both handle credit cards securely and be seen as security conscious. At the very least, this means using Secure Sockets Layer (SSL) to transmit the details from the users’ browser to your web server and ensuring that your web server is competently and securely administered. We discuss this topic in more detail later.
Ease of Use
Consumers vary greatly in their computer experience, language, general literacy, memory, and vision. Therefore, your site needs to be as easy as possible to use. Usability and user interface design principles fill many books on their own, but here are a few guidelines:
Keep your site as simple as possible. The more options, advertisements, and distractions on each screen, the more likely a user is to get confused.
Keep text clear. Use clear, uncomplicated fonts. Do not make text too small and bear in mind that it will be different sizes on different types of machines.
Make your ordering process as simple as possible. Intuition and available evidence both support the idea that the more mouse clicks users have to make to place an order, the less likely they are to complete the process. Keep the number of steps to a minimum, but note that Amazon.com has a U.S. patent2 on a process using only one click, which it calls 1-Click. This patent is strongly challenged by many website owners.
2U.S. Patent and Trademark Office Patent Number 5,960,411. Method and system for placing a purchase order via a communications network.
Try not to let users get lost. Provide landmarks and navigational cues to tell users where they are. For example, if a user is within a subsection of the site, highlight the navigation for that subsection.
If you are using a shopping cart metaphor in which you provide a virtual container for customers to accumulate purchases prior to finalizing the sale, keep a link to the cart visible on the screen at all times.
Compatibility
Be sure to test your site in a number of browsers and operating systems. If the site does not work for a popular browser or operating system, you will look unprofessional and lose a section of your potential market.
If your site is already operating, your web server logs can tell you what browsers your visitors are using. As a rule of thumb, if you test your site in Firefox on all platforms, the last two versions of Microsoft Internet Explorer, a recent version of Internet Explorer on Windows and Safari on an Apple Mac, a handheld mobile device, and a text-only browser such as Lynx, you will be visible to the vast majority of users. Remember to look at your site using a variety of screen resolutions. Some users have very large resolutions, but some use phones or PDAs. It is hard to make the same site look good on a screen that is 2,048 pixels wide and one that is 240 pixels wide.
Try to avoid features and facilities that are brand new, unless you are willing to write and maintain multiple versions of the site. Standards-compliant HTML or XHTML should work everywhere, but older features are more likely to be correctly supported on every browser and device.
Providing Services and Digital Goods
Many products or services can be sold over the Web and delivered to the customer via a courier. A smaller range can be delivered immediately online. If a service or good can be transmitted over a network, it can be ordered, paid for, and delivered instantly, without human interaction. The most obvious service provided this way is information.
Sometimes the information is entirely free or supported by advertising. Some information is provided via subscription or paid for on an individual basis.
Digital goods include e-books and music in electronic formats such as MP3. Stock library images also can be digitized and downloaded. Computer software does not always need to be on a CD, inside shrink-wrap. It can be downloaded directly. Services that can be sold this way include Internet access or web hosting and some professional services that can be replaced by an expert system.
If you are going to physically ship an item that was ordered from your website, you have both advantages and disadvantages over digital goods and services. Shipping a physical item costs money. Digital downloads are nearly free. This means that if you have something that can be duplicated and sold digitally, the cost to you is similar whether you sell 1 item or 1,000 items. Of course, there are limits; if you have a sufficient level of sales and traffic, you will need to invest in more hardware or bandwidth.
Digital products or services can be easy to sell as impulse purchases. If a person orders a physical item, delivery will take a day or more. In contrast, downloads are usually measured in seconds or minutes. As a result, immediacy can be a burden on merchants. If you are delivering a purchase digitally, you need to do it immediately. You cannot manually oversee the process or spread peaks of activity through the day. Immediate delivery systems are therefore more open to fraud and are more of a burden on computer resources.
Digital goods and services are ideal for e-commerce, but obviously only a limited range of goods and services can be delivered this way.
Adding Value to Goods or Services
Some successful areas of commercial websites do not actually sell any goods or services. Services such as courier companies’ (UPS at http://www.ups.com or Fedex at http://www.fedex.com) tracking services are not generally designed to directly make a profit. They add value to the existing services offered by the organization. Providing a facility for customers to track their parcels or bank balances can give your company a competitive advantage if you do it early or can become an expected service in your industry.
Support forums also fall into this category. There are sound commercial reasons for giving customers a discussion area to share troubleshooting tips about your company’s products. Customers might be able to solve their problems by looking at solutions given to others, international customers can get support without paying for long-distance phone calls, and customers might be able to answer one another’s questions outside your office hours. Providing support in this way can increase your customers’ satisfaction at a low cost.
Cutting Costs
One popular use of the Internet is to cut costs. Savings could result from distributing information online, facilitating communication, replacing services, or centralizing operations.
If you currently provide information to a large number of people, you could possibly do the same thing more economically via a website. Whether you are providing price lists, a catalog, documented procedures, specifications, or something else, making the same information available on the Web could be cheaper than printing and delivering paper copies. This is particularly true for information that changes regularly. The Internet can save you money by facilitating communication. Whether this means that tenders can be widely distributed and rapidly replied to, or whether it means that customers can communicate directly with a wholesaler or manufacturer, eliminating middlemen, the result is the same. Prices can come down, or profits can go up.
Replacing services that cost money to run with an electronic version can cut costs. A brave example was Egghead.com. The company chose to close its chain of computer stores and concentrate on its e-commerce activities. Although building a significant e-commerce site obviously costs money, a chain of 80 retail stores has much higher ongoing costs. Replacing an existing service also comes with risks. At the very least, you lose customers who do not use the Internet.
Egghead.com’s new venture did not work out. The company closed its physical stores during the dot-com boom in 1998 and filed for Chapter 11 bankruptcy protection during the dot-com bust in 2001.
Centralization also can cut costs. If you have numerous physical sites, you need to pay numerous rents and overheads, staff at all of them, and the costs of maintaining inventory at each. An Internet business can be in one location but be accessible all over the world.
Understanding Risks and Threats
Every business faces risks, competitors, theft, fickle public preferences, and natural disasters, among other risks. The list is endless. However, many risks that e-commerce companies face are either less of a danger, or not relevant, to other ventures. These risks include
Crackers
Failure to attract sufficient business
Computer hardware failure
Power, communication, or network failures
Reliance on shipping services
Extensive competition
Software errors
Evolving governmental policies and taxes
System-capacity limits
Crackers
The best-publicized threat to e-commerce comes from malicious computer users known as crackers. All businesses run the risk of becoming targets of criminals, but high-profile e-commerce businesses are bound to attract the attention of crackers with varying intentions and abilities.
Crackers might attack for the challenge, for notoriety, to sabotage your site, to steal money, or to gain free goods or services.
Securing your site involves a combination of
Keeping backups of important information
Having hiring policies that attract honest staff and keep them loyal because the most dangerous attacks can come from within
Taking software-based precautions, such as choosing secure software and keeping it up to date
Training staff to identify targets and weaknesses
Auditing and logging to detect break-ins or attempted break-ins
Most successful attacks on computer systems take advantage of well-known weaknesses such as easily guessed passwords, common misconfigurations, and old versions of software. A few commonsense precautions can turn away nonexpert attacks and ensure that you have a backup if the worst happens.
Failure to Attract Sufficient Business
Although attacks by crackers are widely feared, most e-commerce failures relate to traditional economic factors. The effort of building and marketing a major e-commerce site costs a lot of money. Companies often are willing to lose money in the short term, however, based on assumptions that after the brand is established in the market place, customer numbers and revenue will increase.
The dot-com crash brought many companies crashing down as venture capital needed to support loss-making retailers dried up. The string of high-profile failures included European boo.com, which ran out of money and changed hands after burning $120 million in six months. The problem was not that Boo did not make sales; it was just that the company spent far, far more than it made.
Computer Hardware Failure
If your business relies on a website, obviously, the failure of a critical part of one of your computers will have an impact.
Busy or crucial websites justify having multiple redundant systems so that the failure of one does not affect the operation of the whole system. As with all threats, you need to determine whether the chance of losing your website for a day while waiting for parts or repairs justifies the expense of redundant equipment.
Multiple machines running Apache, PHP, and MySQL are reasonably easy to set up and, using MySQL’s replication, easy to keep in sync, but they do significantly increase your hardware, network infrastructure, and hosting costs.
Power, Communication, Network, or Shipping Failures
If you rely on the Internet, you are relying on a complex mesh of service providers. If your connection to the rest of the world fails, you can do little other than wait for your supplier to reinstate service. The same goes for interruptions to power service and strikes or other stoppages by your delivery company.
Depending on your budget, you might choose to maintain multiple services from different providers. Doing so costs you more but means that, if one of your providers fails, you will still have another. Brief power failures can be overcome by investing in an uninterruptible power supply.
Extensive Competition
If you are opening a retail outlet on a street corner, you will probably be able to make a reasonably accurate survey of the competitive landscape. Your competitors will primarily be businesses that sell similar things in surrounding areas. New competitors will open occasionally. With e-commerce, the terrain is less certain.
Depending on shipping costs, your competitors could be anywhere in the world and subject to different currency fluctuations and labor costs. The Internet is fiercely competitive and evolving rapidly. If you are competing in a popular category, new competitors can appear every day.
You can do little to eliminate the risk of competition, but, by staying abreast of developments, you can try to ensure that your venture remains competitive.
Software Errors
When your business relies on software, you are vulnerable to errors in that software.
You can reduce the likelihood of critical errors by selecting software that is reliable, allowing sufficient time to test after changing parts of your system, having a formal testing process, and not allowing changes to be made on your live system without testing elsewhere first.
You can reduce the severity of outcomes by having up-to-date backups of all your data, keeping known working software configurations when making a change, and monitoring system operation to quickly detect problems.
Evolving Governmental Policies and Taxes
Depending on where you live, legislation relating to Internet-based businesses might be nonexistent, in the pipeline, or immature. This situation is unlikely to last. Some business models might be threatened, regulated, or eliminated by future legislation. Taxes might be added.
You cannot avoid these issues. The only way to deal with them is to keep up to date with what is happening and keep your site in line with the legislation. You might want to consider joining any appropriate lobby groups as issues arise.
System Capacity Limits
One issue to bear in mind when designing your system is growth. You certainly hope your system will get busier and busier. You should therefore design it in such a way that it can scale to cope with demand.
For limited growth, you can increase capacity by simply buying faster hardware, but there is a limit to how fast a computer you can buy. Is your software written so that after you reach this point, you can separate parts of it to share the load on multiple systems? Can your database handle multiple concurrent requests from different machines? Is your database connection code written so that you can later change it to write to a MySQL replication master and read from a variety of slaves?
Few systems cope with massive growth effortlessly, but if you design it with scalability in mind, you should be able to identify and eliminate bottlenecks as your customer base grows.
Choosing a Strategy
Some people believe that the Internet changes too fast to allow effective planning. We would argue that this very changeability makes planning crucial. If you do not set goals and decide on a strategy, you will be left reacting to changes as they occur rather than being able to act in anticipation of change.
Now that you have examined some of the typical goals for a commercial website and some of the main threats, we hope you have some strategies for your own.
Your strategy will need to identify a business model. The model is usually something that has been shown to work elsewhere but is sometimes a new idea that you have faith in. Will you adapt your existing business model to the Web, mimic an existing competitor, or aggressively create a pioneering service?
Next
In the next chapter, we look specifically at security for e-commerce, providing an overview of security terms, threats, and techniques.