eCommerce business model notes

Posted on May 28, 2020 by Trevor Smith  | Tags:

eCommerce business model

 

eCommerce business model notes, broken down into easy to understand segments, and to give an overview of what a business should be considering to sell online. I will explore the following:

 

  1. Business goals and purpose

  2. The mechanics of eCommerce (including consumer interface)

  3. Back end infrastructure considerations

 

 

Business Goals and Purpose

It is important to define your business goals prior to starting development on any eCommerce business. Ask yourself these things:

  • What business do you want to be in?

  • How does it complement your existing business?

  • What is the competition doing and what can our competitive advantage be over those competitors?

  • How will you differentiate yourselves?

Is there anything that will really distinguish your site from similar online merchants? If you're merely going to sell widgets like the 14 other well-established widget sites do, your 'me-too' approach will limit your success. Decide first some way to set yourself apart so people come to you rather than your competition. Don’t forget to choose an advantage that is sustainable and not easily “copy-able” by others. Here are some ideas:

Ideas on differentiation:

Expert advice or knowledge

Set yourself up as the expert in a particular product or knowledge base. Customers will buy from the “expert” even if you’re not the lowest price.

You want people to link to your site and subscribe – they will only do this if you are offering great

content and advice in the form of articles, videos etc.

Price

Price your products correctly. If you want to compete on low prices keep in mind this will be difficult for small to medium sized companies that do not have economies of scale.

Customer service

Can you provide superior customer service? Think “Zappos” - this needs to be a top priority and 100% the best.

Location

It can take 4-5 days to ship across the USA, location can play a part in terms of shipping. For example, is the Midwest under-served from a geographic perspective?

Selection

Offer the correct selection of products, this should be easy.

Your differentiation has to have four elements:

  1. It has to be “do-able”

  2. It has to be sustainable

  3. It should be not easily copied

  4. It has to be a value to the customer (for example, you use better shipping labels….who cares?)

Often, in an industry that has a technical element like marine parts, a good strategy is to be the best in knowledge. Having excellent knowledge on your website will help drive traffic. Consider Blogs, Forums, Knowledge base, videos, articles, technicians on hand to answer questions...These all require dedication, time and manpower – but if all you are doing is selling stuff you could be beaten by the competition.

 

The mechanics of e-commerce

Domain names:

You need to choose a domain, or web address, for the site itself.

You can also purchase other domain names and point them to your site. The domain names should include generic search terms and keywords, for example “boatparts.com” - this contains two keywords and if customers type www.boatparts.com directly into the URL bar they will be directed to your site. Domain names help drive traffic to your site. A lot of the good domain are taken or being used by other businesses – check each one carefully, they might be for sale.

E-commerce software:

You need an e-commerce software to help run your site (e.g. manage inventory, product uploads, images, discounts, promotions, customer relationship management and online orders). You need a shopping cart program that can handle the tax, shipping and payment transactions. A number of eCommerce solutions will offer all of these components in one bundled package.

Open source solution: “open source refers to a program in which the source code is available to the general public for use and/or modification from its original design free of charge, i.e., open. Open source code is typically created as a collaborative effort in which programmers improve upon the code and share the changes within the community. Open source sprouted in the technological community as a response to proprietary software owned by corporations.”

Magento is probably one of the most popular open source carts in the e-commerce platform market and, in my opinion, is probably the best free cart out there (there is also an enterprise edition with a yearly cost of approximately $15,000 that will provide additional support).

Hosted solution: “Using someone elses software on their machine and integrate it into your web site.” Shopify is a very interesting hosted platform. Compared to something open source and self-hosted like Magento, it is extremely simple to set up, manage and update. You could have a site running within minutes if you wanted to.

But Shopify does have a slight lack of features (by intent — to keep things simple), its price is a monthly fee ($179/month for the unlimited edition) plus, on top of that, a commission for every sale (no commissions in the unlimited edition) and a hosted platform means you have less control of your platform (which isn’t necessarily a bad thing for people who just want things to work).

Special site features required:

Look carefully into features that may not be part of the software package, eg; online parts diagrams. There will be cost in having someone program these or purchase of an add on extension.

Merchant Account Interface

This is a relatively easy process, all you really need is a business checking account, and a merchant account. This will allow you to take credit card payments on your eCommerce site.

User Experience

Understand why people are coming to your site and what they hope to accomplish. Design your website to accommodate those needs easily with the minimum of navigation.

Search Engine Optimization (SEO)

SEO is what gets people to your site. Optimizing search results basically means that when someone types a word or phrase into a search engine (Google, for example), your site will show high up in the results of the search.

An adequate quantity of original content on your site will boost your likelihood of high search engine rankings.

  • Keyword analysis

Google advises: "Think about the words users would type to find your pages, and make sure that your site actually includes those words within it."

Do a keyword analysis and use it.

  • Monitor

Keep an eye on your site traffic

Install Google Analytics or similar tools and use it.

  • Link building

The links coming into your site

This article says it all: http://ezinedesigner.com/ecommerce-seo-checklist.html

 

Back End Infrastructure Considerations

Some questions to answer:

  • How will you fulfill orders?

  • How will you collect payment?

  • How will you provide customer service?

  • How will you integrate your e-commerce business into your existing accounting and inventory control system (see ERP below)?

Enterprise Resource Planning (ERP)

An ERP system can include software for manufacturing, order entry, accounts receivable and payable, general ledger, purchasing, warehousing, transportation and human resources.

These generally do not come with an eCommerce system. Many companies already have an existing ERP system – the challenge then becomes how to integrate the ERP with the eCommerce system primarily to keep inventory up to date and to report accounting, note: reporting live inventory can be especially challenging when doing a lot of drop shipping “Shipping directly from your suppliers without stocking product”

 

Conclusion:

These days the ability to create an e-commerce site to sell your products has become extremely easy.

To be successful it is not just about the mechanics of online shopping, you will need a steady volume of new visitors interested in your website and products that ultimately become loyal customers who will return to your site, buy products, and tell their friends.

The important part is asking yourself the business questions up front and planning a business, not just a website. A good starting point is the following list of questions:

  • Who are your target customers?

  • What do they need?

  • How do you appeal to customers?

  • How do you convert customers to sales?

  • What products will you offer and how will you present them?

  • What revenue and profit do you need to make to be successful?

  • How will you provide customer service?

  • How will you get traffic to your site?

  • How will you fulfill orders?

  • What will you do to follow order up?

  • What information will you keep on record?

  • How will you be personal with each and every customer?

  • What outside resources and talent do you need to develop this business / site?

This is just a partial list but a good starting point to develop a successful online business plan.