Establishing an E-commerce Web Site was published in the July 1998 when I was an Internet Consultant. At the time it was written to aid businesses in making the best use of a new technology tool. Today, 13 years later, this article continues to address the issues that separate effective e-commerce from bad. As with other articles I’ve republished on this web site, the passage of time shows that while technology may continue to advance, basic business principles do not change. While the companies, product names and costs of e-commerce may have changed since this time, this article addresses some of the more practical considerations involved in establishing an e-commerce presence on the Internet.

This White Paper continues to present a realistic approach of how companies can establish an effective e-commerce web site. While franchising presents a unique set of circumstances not considered in the original article, that of a franchisor/franchisee relationship where revenues and profits are not always easily reconciled between the two groups, many franchises have developed their own spin on how to make an e-commerce approach work for their business. For example, Papa Johns offers a centralized web site where customers can order pizza. The order is then routed to the local franchise where it is delivered or picked up by the customer. What Papa Johns has done in this instance is develop an ordering system that is convenient to the consumer with infringing on or competing with their local franchisees.

I have chosen to republish this article through the FranchiseFacts web site as an aid to franchisors in understanding how the Internet can be better utilized within their businesses.

Perry Shoom
FranchiseFacts

Establishing an

E-commerce Web Site

By: Perry Shoom

Initial Publication: July 1998 Republished without revision: August 2011

E-commerce technology is now at a point that makes it economical for nearly any business. And more businesses are realizing how e-commerce impacts on their internal efficiencies and operations.

E-commerce in the traditional sense is far more than the sale of products or services to consumers. It incorporates all business systems that impact on ordering, customer service, distribution and payment systems. Reduced administration and order costs, less demand on telephone-based customer service departments and the ability to accept orders 24 hours a day are strategic advantages for organizations that make effective use of e-commerce technology. For businesses with a solid business plan and a good understanding of their market, the technology behind e-commerce is no longer a reason to miss out on these opportunities.

Before moving down this path, advance planning is required. Thoroughly evaluate your current business model. The fundamentals of business don’t disappear because it is the internet. Take time to understand how the internet will impact on your business as it exists today. Determine what product(s) are to be sold through e-commerce. An entire product line or a limited number of products -- retail products or spare parts, maintenance and servicing?

Look long and hard about pricing. Determine how you will price over the internet, especially if you offer customer specific discounts, volume discounts, specials, bundle pricing or other pricing plans.

What Makes an E-commerce Web Site Successful?
Operational Issues	Lower operational costs Reduced demand on customer service or support staff Reduced print, postage and phone costs Delivering a strategic advantage such as easier ordering or better service Reduction in order management costs
Product or Service	Benefits are easy to communicate by printed words Doesn’t necessarily involve touching or seeing Likely to be purchased sight unseen
Customers are	Comfortable with use of technology Have access to the internet Are willing to use the technology
Web Site is good at	Providing information valued by customers Delivers tangible benefits to customers Increasing retail store traffic

Next, plan out the logical presentation of information or screens needed to take a customer from an intent to purchase to an actual purchase. Will your site require photographs, a way to narrow down product choices, or product comparison tables?

The answers to these questions will help to determine which technology is best for your fledgling e-commerce business.

And don’t forget about the packaging. The way in which offerings are presented, willingness to accept on-line orders and/or payment, and overall style says much about the organization and its relationship with customers.

An e-commerce web site involves up to four distinct components:

1. HTML portion of the web site – HTML, hypertext markup language, is the language of the World Wide Web. It is used to create the majority of pages on a web site. Company information such as marketing materials, history and contact information are normally created using HTML.

2. Catalog portion of the web site – This is the section containing product descriptions, pricing, photographs and other information involved in selling specific products. Catalogs are also created using HTML. Fortunately, there are now many products at different price points which can simplify this process.

3. Payment portion of the web site – Accepting credit card payment through a web site involves complex technology for providing security, receiving authorization from credit card companies and integration with the rest of your web site. This can now be handled by contracting with a Commerce Solution Provider (CSP) to manage the complete process in a way that fits within your e-commerce web site. Conversely, many organizations prefer not to accept on-line payment.

4. Incorporation of custom programming may be necessary to supplement what is available through off the shelf solutions. A simple use of custom programming is the ability to capture e-mail addresses and demographic information, and load this information to a database for subsequent use. At a higher level, custom programming can integrate the ordering process with a company’s inventory and delivery schedules so that a customer can be informed of product availability at the time of purchase.

Today there are three options for a company to consider when establishing an e-commerce web site:
>> Develop a custom web site from scratch,
>> Use of an on-line store service where the complete site can be developed through a standard web browser such as Netscape or Internet Explorer, or
>> Purchase an e-commerce package which can be used to build a site for use on a company’s server, in conjunction with an Internet Service Provider (ISP) or with an on-line store service.

Develop a custom e-commerce web site from scratch In the early days of web sites (3-4 years ago) this was the only option. It was expensive and time consuming. With the introduction of recent software and services, however, this option has come into limited use for businesses at either end of the budget spectrum – e-commerce sites requiring an extremely high degree of customization and those requiring very limited capabilities.

At the low end a limited capability e-commerce web site can be developed, through the use of freeware or shareware “shopping cart” software, for between $2,000 and $5,000 with a development timeframe of under a month. At this level the e-commerce site may not be very professional looking. It may also lack scalability. Given these limitations, use of an On-line Store Service warrants serious consideration. Multi-Sport (www.multi-sport.com) provides one example of a web site developed in this manner.

Three Methods for Establishing an E-commerce Web Site

	Advantages	Disadvantages	Cost
Custom Development Recommened choice for many high end e=commerce web sites	Flexible and highly customizable Inexpensive for low end sites but can too easily grow in scope and cost And at the high end Leverages existing computer technology Maximum control of applications Confidential information remains in-house	High technical expertise required Time consuming Less than professional appearance at low end Maximum control of applications Accepting credit card payment involves additional parties, time and cost	Low End –  $2,000 to $5,000 High End –  $100,000+
On-line Store Service Recommended choice for many smaller e-commerce web sites	Easy to incorporate on-line credit card payment Standard templates make it easy to create the web site Economical – no additional equipment or software required	Standard templates offer limited flexibility Unable to incorporate custom features Limited expandability	$5,000 to $15,000
Purchase e-commerce package Preferred choice for high end e-commerce web sites able to accept limitations	Highly flexible Adaptable and customizable Adequate control of applications Confidential information remains in-house	High technical expertise Expensive May be difficult to integrate with existing computer systems	$100,000+

At the high end custom development offers a fully flexible and expandable solution capable of supporting the most complex situations. Acceptance of credit card payment requires the services of a Commerce Service Provider. Internet Commerce Services Corporation, www.icoms.com, is one of this new breed of organization that simplifies the management and technology supporting acceptance of credit card transactions. Development costs can range from $100,000 to over one million dollars and take anywhere from three months to a year or longer.

On-line Store Service
Increasingly this is becoming the solution of choice for many organizations. These services tend to be marketed to smaller and less technologically sophisticated businesses that often lack in house technology support services. A company would develop its on-line store without purchasing additional software nor would they need to deal with computer systems and software normally associated with an e-commerce web site or support acceptance of on line payment. These services will “host” your e-commerce web site, establish all necessary relationships needed to conduct on-line commerce and provide these services for a single monthly fee. Once established, the e-commerce web site can be maintained and updated through your local internet connection and browser software. Typically the fee is about $50 - $100 per month for up to 500 items. The steps involved in executing an e-commerce transaction, either through an on-line store service or independently, are explained in the following table.

Steps in Executing an E-commerce Transaction

Buyer selects product to be purchased Buyer’s browser is directed to a secure server and connection for conducting the transaction Terms of sale are validated and a formal order page is prepared for display to the buyer Buyer may immediately purchase the item or build a “shopping cart” and continue adding items to their cart When “shopping cart” is filled buyer is prompted to provide billing, shipping and payment information. All taxes – there are 30,000 state and local tax jurisdictions in the United States -- and shipping charges are calculated Address is validated Buyer is offered an opportunity to change their order, add items, start over or cancel the order Real-time authorization on credit card orders is obtained through appropriate banking institution(s) Buyer receives an order confirmation Order is processed and fulfilled by the merchant Bank is informed once order is shipped and funds are released to merchant Handling of buyer credits, offering electronic coupons and related services as the need arises – not available through most services

While the on-line store service approach can help to reduce costs by use of standard layouts, it does not eliminate other aspects of web site development and the skills needed to ensure any such service is both professional in appearance and well organized. A potential customer or client should not get lost among the web pages or hyperlinks. Typically a small site can be established for $5,000 to $15,000. Ongoing administration is minimal.

There are limitations. Remember the early days of the web when all sites looked similar? Back then this standardized look was the result of inexperience. Today the standardized approach advocated by these services simplifies a complex process while reducing both development and ongoing costs. Each service offers its own set of pre-built templates to guide you in developing an e-commerce web site – but result in sites that tend to look similar and offer a standard set of features. Should you wish to move beyond a basic e-commerce web site, perhaps capture e-mail addresses and other demographic information in a way that is manageable and usable, or customize the look of your site beyond what is available through pre-defined templates, the necessary custom programming is not supported. Finally, these web sites may not be able to handle extremely high volumes of products or visitor traffic.

If these limitations are manageable, or your aim is to create an initial e-commerce presence with the intent of developing a better service in the future, an On-line Store Service may be your best option.

Developing a web site in this manner can take anywhere from one to six weeks.

Following are some of the players in this market segment:

Icat	www.icat.com	Used by Gymboree, Nabisco, Volkwagen and others. Free for up to 10 products.
YAHOO Store	www.viaweb.com	Formerly known as Viaweb until purchased by YAHOO! and used by Rolling Stones magazine.
ShopSite	www.shopsite.com	Primarily sold to local Internet Service Providers (ISPs) who then operate on-line shopping services under their own name. Software may be purchased for less than $1,000. Responsibility for finding a local ISP to house the site, and integrating with a CSP is responsibility of the merchant. Used by Franklin Daytimer for developing their e-commerce web site.

Within this group of services, Icat is a personal favorite. Their approach seems to be more intuitive and simpler. Similar products may be available at less cost but their limited capabilities make them inferior choices as a business solution. Before deciding on a service be sure to check out a number of sites created and offered through the various services.

For the novice, a simple on-line store service can be an economical and easy way to develop a first e-commerce site. As your market becomes more clearly defined and the site develops an identifiable source of revenue, or as funds permit, more sophisticated and customizable solutions may warrant consideration.

Purchase an e-commerce package
If your requirements are such that limitations of an On-line Store Service are not acceptable, or you require a higher degree of customization, a fully flexible and expandable e-commerce solution may offer an alternative to custom development. A product line in the tens of thousands, complex rules for combining components, very large customer base, adaptable buying interfaces to address the needs of different user types (say, sales vs. engineering), creation of product comparison tables and the need to tie into back-end processes are all supported by these sophisticated solutions.

C&K Components, for example, has developed an e-commerce solution using Open Market’s Transact product which allows for over 19,000,000 different product combinations. To assist customers C&K has adopted a “wizard” approach similar to what is used by Microsoft within its own business application products.

Both Icat and Open Market , along with IBM and Microsoft, offer high end e-commerce solutions that can address the most complex of requirements. These products do not pigeon-hole your site into one of a handful of pre-built designs, allow for any degree of customization and can handle hundreds of thousands of products – but require significantly more expertise to install, configure, design and maintain.

These solutions offer maximum flexibility and extensive expandability without the need to write proprietary computer code. This allows technical specialists to focus on internal concerns rather than reinvent the e-commerce application wheel. The ability to integrate with existing high performance database engines (Oracle, Sybase, DB2, etc.) allows for integration with existing computer systems and can support very high volumes of traffic.

These solutions can cost anywhere from $100,000 to $1,000,000 depending on the requirements and customization that is desired. Due to the complexity of these services and the need to integrate with existing systems, the development time frame can range from three months to a year or longer.

Which direction is best for your organization? That depends on your requirements, expected usage and demands of your customers. But one thing is certain. Internet e-commerce has never been simpler and more economical.

About the Author
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Perry Shoom is the founder of FranchiseFacts, a company that provides research services for the Franchise Industry. The company also publishes a Report incorporating the results from its National Franchisee Survey. The 2010 Annual Report, and the Franchisee Survey that is currently in progress, can both be found at www.FranchiseFactsUSA.com. The survey is open to all franchise owners and store managers. FranchiseFacts does not disclose identifying information that may be provided by survey respondents.

At the time this paper was written, Perry Shoom was Senior Internet Consultant for Nubium Technology Group in Newton, MA. Perry provides marketing, management, strategic and technology expertise to mostly small and mid size businesses.