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Taking the Leap
The global reach of the Internet has enticed many retailers – from home-based
businesses to large corporations – to sell their products online. Going
from a web presence to selling online is usually not as simple as adding a
picture of your product to a web page. If you have decided to take the leap
and sell your products online, this guide will provide a common-sense approach
to the world of business-to-consumer (B2C) e-commerce.
Planning for Success
As with most things in life, e-business success requires thorough preparation
and hard work. Prudent business plans involving e-commerce usually approach
online retailing in following stages:
- Establish a web presence for information and marketing purposes.
- Offer a subset of inventory for sale online, often with reduced functionality.
- Publish most (if not all) of their products online with real-time payment
processing, inventory control, and other advanced e-business tools.
Your e-commerce strategy may differ from this example, but the point is that
you actually have a plan. “I’m going to sell (fill in
the blank) online” is not a business plan.
There are many hard questions you have to ask yourself before you begin to
sell online, many of which are common to traditional retailing:
- Is there a market online for my products?
- Are my customers willing to purchase over the Internet?
- What makes my products different from those of my competitors?
- How will I attract customers to my website?
- Will my full product catalogue be available from the start?
- Will there be any customizations required for goods sold online?
- Are my expectations realistic?
All business ventures involve risk, but the better you can answer these questions,
the better your odds are for success. Taking a phased approach will let you
test the e-commerce waters while minimizing your financial investment.
Development, Design, and Hosting
There are three types of people who can help you create your site:
- A web designer who creates the look of the site.
- A web developer or programmer who develops the functionality of the site.
- Someone skilled in both areas.
Know what you need and who you are hiring. Your web designer is probably not
the best person to program the e-commerce portion of your site, because the
programming involved to implement an online store may be something that your
web designer or developer is incapable of doing.
Always ask to see recent e-commerce websites that the developer has completed.
Get a quotation for the work, and find out what technology they will use to
create the site. While it is not necessary for you to understand all the technical
issues involved in creating the website, it is essential that your web hosting
company be able to support the proposed site. This last statement is true of
any type of web presence, but it becomes extremely important when the site
Here are some other tips:
- Don't get discouraged if you are not sure which solution is best, such
as whether a "database-driven site" is more appropriate than a "static
HTML site.” That is why you are hiring someone. It is their job to
provide you with the pros and cons of various options.
- Use common sense. If you are only selling ten products online, you don't
need a costly solution that is scalable to thousands of products.
- Get quotations from more than one company and ask for references.
- Avoid companies that use jargon or try to talk over your head. You are
looking for a company that explains things in a way that is easy to understand.
The greatest challenge that faces online retailers is convincing their customers
they are trustworthy and reputable. A clean, polished, and professional-looking
e-commerce website is the first step to gaining that trust.
How you present your products is also important. Product images should be
clear and appealing, with larger images available for closer inspection. In
the world of online sales, clients cannot physically touch, try on, smell or
taste your products. So anything you can do to provide additional information
to buyers can make all the difference in generating more sales.
Domain Name Registration
Most businesses have a unique domain name, such as www.businessname.com or www.buisnessname.ca for
their website. Without a registered domain name, your website’s address
is typically www.hostingcompany.com/~yourcompany or something similar. This
is not the most professional image to present to prospective customers, so
a unique domain name for your company is mandatory.
An electronic storefront refers to a template-based environment that provides
many pre-built e-commerce components that a merchant can use to set up an online
store. These storefronts offer merchants the ability to build an online store
using only their browser. Basic storefronts are typically offered at an inexpensive
price, but the more advanced e-commerce components, such as online payment
processing, tax calculation, and advanced shipping options, can be significantly
Electronic storefronts can be a cost-effective approach for small businesses
that are new to e-commerce and want to test the waters. There are definite
drawbacks to using an electronic storefront, however. You are responsible for
creating and maintaining the site yourself, which can be time consuming and
involve a steep learning curve. The ability to customize the look of your storefront
may be limited. Basic services may be inexpensive, but optional components
may be quite costly. Finally, you are usually limited to using the payment
processing or fulfillment services that come with the storefront, which may
not be offered at a competitive price. As with most aspects of setting up an
online store, you should carefully examine the costs, benefits, and options
associated with various storefronts before making a final decision.
Security and SSL Certificates
Customer data security is one of the biggest perceived barriers to consumer
confidence in e-commerce. For many years, SSL encryption has been the standard
to protect information that is sent over the Internet. Businesses can purchase
an SSL certificate, often called a Server ID, which is bound to their domain
name and installed on the web server by their hosting company. A Certificate
Authority (CA) issues a certificate that attests the company is who they say
they are when customers visit their website. While VeriSign is the largest
and best known CA, there are a few others. SSL certificates cost approximately
$500, and need to be renewed every year or two.
Do you need an SSL Certificate? It depends. Some e-commerce solutions
use a third party to collect sales information, in which case the third party
would provide SSL encryption. If your site collects personal data, you should
seriously consider purchasing a certificate (with the help of your hosting
company). Providing customers with a secure method for entering their personal
information can go a long way in improving customer confidence.
As of 2004, all businesses in Canada became subject to the Personal Information
Protection and Electronic Documents Act (PIPEDA). It is highly recommended
policy should outline how your customers’ personal information will be
trust between you and your customers. We encourage you to examine other Canadian
companies’ online privacy policies to assist in drafting your own. For
more information on PIPEDA, contact the Office of the Privacy Commissioner
of Canada at www.privcom.gc.ca.
For more information on the Personal Information Protection Act (PIPA) in
Alberta, visit the Office of the Information and Privacy Commissioner at www.oipc.ab.ca/pipa.
There are three general ways to process payments:
- Manual or offline processing
- Processing through an online third-party payment processor
- Providing real-time credit card processing through your financial institution
Manual payment processing is the simplest method – and usually the least
expensive to implement. Many e-commerce providers refer to this method as “order
capture,” because the order and payment information is “captured” online
and then processed offline. This method is satisfactory when you expect to
receive only a small number of orders from your website. It would become increasingly
difficult to manage as order volumes increase.
Real-time processing through your financial institution can be a technically
complex solution that requires a significant amount of time and money to implement.
Your website becomes responsible for collecting all payment information that
is securely submitted behind the scenes to the bank. This type of payment processing
is sometimes referred to as Virtual Point of Sale (vPOS), and is quite similar
to having an actual POS device in a physical store. Unlike American banks,
Canadian banks have been slow to provide and promote these services directly.
They usually outsource these services to other companies. Banks also tend to
make it difficult for new businesses to obtain credit card merchant accounts,
sometimes requiring companies to post a significant cash bond as a guarantee
A popular middle ground between these two approaches is to process payments
through a third-party, online processor. These companies often follow a “master
merchant” model whereby all stores use the processor’s merchant
account. The payment processor collects customer payments, processes the transactions,
and deposits the payments, less a transaction fee, into your account usually
on a monthly basis. Integrating this service into your website should not be
too complex, and most web developers should be able to do it quickly and inexpensively.
PayPal is a well-known example of this type of third-party processor.
While this last approach takes much of the payment processing out of your
hands, there are some definite drawbacks. When a master merchant account is
used, buyers will see the payment processor’s name, instead of your business
name, on their credit card statements. This could cause confusion and lead
to more chargebacks. Also, transaction fees are often higher than dealing directly
with a bank using your own merchant account. Finally, some services require
the buyer to establish an account with the payment provider, which could possibly
scare off or frustrate potential customers.
Taxation and Duties
Taking orders over the Internet does not relieve you of your responsibility
to collect appropriate sales taxes. Consult both provincial and federal taxation
authorities to determine what taxes, if any, should be applied to goods and
services sold online.
In general, goods sold from a Canadian company to a foreign customer are not
taxable. Duties become the responsibility of the buyer and are usually outside
of your control. As you are essentially exporting, consult Canada Customs to
be aware of any export regulations that may affect your products.
Here are some other very useful resources:
Shipping and Order Fulfillment
You have received the order and successfully processed the payment. Now you
must ship the product. Small businesses with limited inventory often handle
all shipping themselves. For operations with large inventory, partnering with
a fulfillment house is often the preferred solution. Canada Post, FedEx, and
UPS, among others, offer advanced methods for electronic shipping and tracking.
Merchants often obsess about being able to charge the exact shipping costs
for all international orders automatically. Developing such a system is possible,
but is it appropriate? Should you accept orders from all corners of the globe?
If so, it might be easier to charge a flat rate for international orders that
covers typical shipping costs, plus a little extra to cover the odd remote
or more expensive location. Is free shipping an incentive that will appeal
to buyers? Should you hide the cost of shipping within the prices? These are
some of the questions to consider as you price your product and set your shipping
As with traditional business, providing exceptional customer service on the
web is crucial. While good business practices like quickly responding to customer
inquiries should go without saying, the way your company handles disputes and
returns also impacts overall customer satisfaction. Disputes and returns are
inevitable in business, so you should decide how you will deal with them in
advance. Make sure your customers are aware of your return policy before they
make their purchase.
Try not to let the technology cloud what are essentially business issues.
Fill a defined need, deliver excellent customer service, provide a secure and
trustworthy buying environment, market your products, and your e-commerce venture
is more likely to be a success.