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Establishing Your Own Website: Is It Right for Your Business?

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Michael Miller goes over the pros and cons of establishing an e-commerce website for your business.
This chapter is from the book

When it comes to moving beyond eBay, the holy grail for many sellers is running their own e-commerce website. For small sellers, this is what Selling Online 2.0 is all about—controlling your own online sales from start to finish, with no reliance at all on eBay, craigslist, Amazon, or any other online marketplace.

The grass, however, is not always greener. Creating and maintaining your own online store takes a lot of time and money. While you may be able to generate more profit per sale (by not paying any marketplace fees), you also have expenses that you don’t have on eBay—and you also need to promote your site to attract potential customers.

The big question then, is whether establishing your own website is right for your business. Read on and then make up your mind.

Building an Online Store—What’s Involved?

Selling on eBay or Amazon is one thing. Selling on your own website is quite another. Just what is involved with building your own e-commerce site—and how much does it cost?

The Components of an E-Commerce Website

When you sell on eBay or Amazon, you’re taking advantage of everything these sites offer—the existing infrastructure, the built-in customer traffic, the fully functioning checkout and payment services, you name it. When you launch your own e-commerce website, you have to build all this from scratch. It isn’t easy, but the end result is your online store, one that looks and functions just the way you want it.

What constitutes an online store? To successfully sell merchandise to customers online, every web storefront needs the following components:

  • Site hosting. First things first: Your website needs a home. That means contracting with a website hosting service, to provide storage space and bandwidth. Note that some website hosting services provide services specific to online retailers, offering various selling-related features, such as checkout and payment services—for a price, of course.

  • Domain name registration. Your website also needs a name. You’ll want to register a unique domain name for your site, one that reflects the name and nature of your business. You’ll then want to provide that domain name to your site hosting service, so that your site and your name are connected.

  • Home page/gateway page. Every website needs a home page, but the home page for a retailer’s site is especially important. Your home page must not only promote your business but also profile key products. The page can’t be static, either; you need to refresh the featured products on a fairly constant basis so that returning customers always see new deals when they visit. It’s easiest if you use some sort of template for the home page design, into which you can easily place the products you’re currently promoting. This argues for some sort of home page automation, as opposed to you manually recoding the page each time you change featured products.

  • Navigation and search. While you may sell some of the products you feature on your site’s home page, it’s more likely that customers are going to either browse or search for the precise products that they’re looking for. That means you need to organize your site in a logical fashion (by product categories, most likely) and then establish an easy-to-use navigation system that can be accessed from all pages. You’ll probably do this via a sidebar or drop-down menu. You’ll also need to integrate a search function across your entire site, with a search box at the top of each page that visitors can use to search for specific items.

  • Product pages. Every product you have for sale should have its own page on your site. That page should be kind of like an eBay product listing, except more professional looking. You need to include one or more product photos, a detailed description, all relevant dimensions and sizes and colors and such, as well as any other information that a customer might need to place an informed order.

  • Customer reviews. Many sites let their customers rate and review the products they sell. This provides another key information point for shoppers, and it provides unique feedback to the seller. While customer reviews aren’t a necessity, many customers are coming to expect this feature.

  • Inventory/listing management. You don’t want to manually update your site’s product pages whenever you sell an item. Instead, you want some sort of automatic inventory and listing management system, so that when a product sale occurs, both your inventory database and your product pages update automatically.

  • Shopping cart and checkout system. When a customer purchases a product, that product needs to go into the customer’s shopping cart—the online equivalent of a physical shopping cart. The cart holds multiple purchases and then feeds into your site’s checkout system, which then interfaces with your online payment service.

  • Payment service. If you sell something, you need to get paid. That means, for all practical purposes, accepting credit card payments. While you can try to establish a merchant credit card processing account, more likely you’ll sign up with one of the major online payment services—PayPal, Google Checkout, or Checkout by Amazon. The payment service you choose should integrate with your own checkout system so that customers have a seamless purchasing experience.

  • Customer management. Your customers will want to contact you with questions or issues. You’ll want to contact your customers with purchase confirmation and shipping information. It’s best if you can automate all these customer communications.

In addition to all these necessary components, you’ll also need to promote your website; unlike with eBay and Amazon, you won’t automatically have 40-plus-million potential customers stopping by your first month in business. That means an investment—in both time and money—in various promotional activities, from pay-per-click advertising to email marketing to whatever works for you.

Bottom line: You need to do a lot of work to get an online store up and running—and even more work to keep it running on a daily basis. You’re used to eBay or Amazon providing most of these pieces and parts and doing most of the heavy lifting for you. When you launch your own web store, however, you’re on your own; you have to do everything eBay and Amazon do, and then some.

Different Ways to Build a Store

How do you go about building your own online store? There are a few different approaches.

First, you can literally build your site from scratch. You start with a blank page and go from there, designing your home page and product pages, plugging in navigation and search modules, integrating a shopping cart and checkout, and signing up for an online payment service. If you’re an HTML master with a lot of time on your hands, you can do this yourself; otherwise, you’ll probably hire a website design firm to do most of the work for you.

Hiring a contractor to design your website can save you time but cost you more money. Let’s face it, hiring out website design is an expensive proposition. Although you get a site that is as custom-designed as possible, you (and your designer) end up reinventing a lot of wheels along the way.

For many sellers, a better approach is to go with a prepackaged storefront. When you contract with one of these services, you essentially plug your logo and product inventory into a predesigned store template. Everything you need is provided—automatically generated product pages, inventory and customer management, shopping cart and checkout system, and online payment service. With this kind of service, you can get your site up and running quite quickly, with a minimum amount of effort. The downside of this approach is that you pay for it—and keep on paying for it. Most of these services not only charge you an upfront cost (typically quite low) but also an ongoing commission on everything you sell. In other words, you pay for the convenience of this type of prepackaged storefront.

Between these extremes is a sort of middle ground. Many third-party services provide the needed features for a quality online storefront, so you don’t have to do the coding from scratch—and you don’t have to cede a portion of your ongoing profits to a service. You simply pick and choose the modules and services you need and plug them into your site. You can find inventory management modules, shopping cart and checkout modules, and the like. (And, of course, it’s relatively easy to connect any checkout module with an online payment service.) Depending on the provider(s) you use, you may pay a larger upfront cost with no ongoing fees, or you may “rent” the services via a monthly or yearly subscription.

How Much Does It Cost?

How much you have to invest in an online store depends on the size and nature of the store, as well as the approach you take to constructing the site. That said, I can provide some general cost guidelines.

If you build your site yourself, you don’t have any upfront costs except for your domain registration, which can be as little as $10 or so for the first year. You do, of course, have monthly site-hosting fees; while some free site-hosting services exist, you’ll probably spend anywhere from $10 to $50 a month for professional hosting.

More likely, you’ll contract out the site design, which costs real money. Depending on the size of the job and the firm you choose, expect to spend several thousand dollars at a minimum, perhaps $10,000 or more. Most design firms charge by the hour, so you’ll want to work through an estimate beforehand. Here is where it pays to shop your needs to several design firms and go with the one that not only offers the best price but also is best attuned to your needs.

The prepackaged storefront route offers perhaps the lowest initial investment—often with zero upfront costs. For example, an Amazon WebStore can be had for no money upfront. Instead, you pay $59.99 per month, plus a 7% commission on all sales you make. That’s a low-cost way to get into the market, although you have to share your future profits with the storefront host.

If you decide to forgo the prepackaged storefront and instead purchase or subscribe to seller services from third-party providers, your costs are dependent on the services you need, the size of your business, and the provider itself. Some online shopping modules go for as little as $50 per month, while larger retailers may end up spending $1,000 per month or more.

Then, of course, there are services that charge a fee per transaction. Most notable are the online payment services you need to process credit card transactions. Whether you go with PayPal or one of its competitors, expect to pay anywhere from 2% to 3% of each transaction paid for via credit card, perhaps with a $0.30 or so flat fee per transaction as well.

So, how much does it cost to create your online storefront? As little as nothing or as much as five figures upfront, plus (perhaps) monthly fees and transaction fees and commissions. So if you think that establishing your own storefront frees you from all those niggling fees that eBay charges, think again; nothing is free.

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