SageWorld

E-Commerce

E-Commerce has been the perceived golden goose for many years. The so-called "Dot Com" boom of the 1990s almost exploded this fallacy. E-Commerce can make money but in small quantities only and for certain kinds of business only. The one thriving business that runs very successfully online is the pornography industry. For some strange reason people are willing to pay lots of money to see pictures of other people, naked. This selfsame strange desire has led to an increase in the amount of spam. No sexual desire, no matter how perverted or how illegal is not catered for. Daily an average unfiltered email box will receive adverts for products to increase sexual desire, sexual potency, or adverts that offer sex sessions with various prominent people, or which will offer pornographic pictures of men, women, children or even bestialist images. Frequently such emails offer images of sexual deviancy too bizarre and illegal to be listed here. For the pornography industry, E-Commerce is certainly the golden goose.

For the rest of Internet trade, there are some sites that seem to make a profit from e-commerce. Normally, these are sites that offer light-weight, medium value items. For example, ladies underwear seems to do well. Brassieres do not weigh much, command a high enough price to make the sale worthwhile and don't cost much to post. A simple formula for e-business is:
Postage + Item Purchase Price + Losses + Labour/Storage + Packing + Profit + Tax = Selling Price. These are all factors that count heavily in online business. Let's take an example: Product X.

The manufacturer and the e-shop works out a deal whereby the e-shop buys 500 of Product X in a white colour. The normal high street shops charge $30 for a white Product X. It will cost $0.50 to post Product X to a standard mainland customer. The packaging will cost $0.25 and it will take 12 minutes to address and wrap each parcel. The stationary and other office overheads will cost $0.50. Thus, just to post Product X - before it has even left the office, it has cost $1.25 and 12 minutes of labour. Now add the labour costs of $8 per hour at $1.60 and then add $2 for storage and unpacking/sorting the crate when the manufacturer delivers. Then add in the losses - this is the amount of stock the shop expects to lose in the post or that a customer claims has not been delivered or which gets damaged in the shop. This shall be, for the purposes of this example, $2. Already, before the profit and tax have been added to the product cost, the item has cost $5.25. The e-shop will want to sell at less than the high street cost and so pegs the price at $25. Out of that $25 the shop needs to make 20% profit and to pay tax at say 20%. This is equal to $10. Now the shop knows how much it can offer the manufacturer for each item - $9.75. The manufacturer might be willing to sell 500 of Product X for $9.75 each but is likely to be a very tough nut to deal with.

The main problem for an e-shop is that many items, such as women's clothing, will go out of style pretty quickly so it's not worthwhile carrying more than a very limited stock. This will drive up the cost to the e-shop as manufacturers like to supply in larger quantities and their prices get better the more a shop buys. Thus the shop needs to factor into its purchasing, how many it expects to sell. There's not much point in selling last year's fashions this year, even if they're cheap to buy because the customer's won't be interested. In order to succeed with e-business, the e-businessman needs to read the moods of the market: what will sell next year.

Beginners who're starting out might consider using online auction sites. This is a bad idea and not one that should be followed. A quick look at the online auctions will see them flooded with individuals trying to dump their redundant things, criminals trying to sell their ill-gotten gains and dodgy businesses selling pirated software and clones of chic fashion items (sometimes sold as the genuine article). It's full of businesses that offer guarantees that are worthless and the general run of internet users mostly know this. This is most definitely not the place that an honest business that's starting out in e-commerce should be. Once an e-business gets the reputation for being dodgy, that reputation can be impossible to change. Reputations can be lost as quickly as a disgruntled customer can post a message on a newsgroup or bulletin board. Disgruntled e-customers tend, as a general rule, to be very quick to voice their anger on publicly accessible notice boards and are often not worth pursuing through the courts. The same can often be said for dodgy e-businessmen.

What do customers look for from an online business? They like to see a company address, a method of emailing the company and a guarantee that the company will refund or replace should the goods be defective. The website should also be easy to navigate around and should not be slow to load. The general complaint about website designers is that they produce complicated, arty pages that don't attract customers. The experience of one company locally is typical. They paid several hundred to a student to design their website and attracted no customers. Then they spent several thousand and hired a website designing company to build their website. That site was technically very nice with flashy graphics etc. but nobody was willing to wait for it to finish loading. In the end, they sat down with a manual and Netscape Composer and designed the site themselves. The result was that within weeks, they had exactly what they wanted and the pages loaded quickly. Very soon, customers started calling.

The points to remember about e-commerce that keep being reinforced by the experiences of every company that tries it are:

  1. People don't like using credit cards online.
  2. An e-business is not a substitute for a real business.
  3. There are fewer e-customers than walk-in or mail-order customers.
  4. Reputations are easy to lose - newsgroup postings, once posted, are there forever.
  5. People like fast-loading webpages.
  6. People like to see postal addresses, telephone numbers and a way of contacting the company via email/a web form.
  7. Web forms are better than published email addresses because of the spam problem.
  8. Keep your customers happy.