The Beginner’s Guide to Building an Online Presence Part 3: eCommerce
Each year, online sales grow. More and more, these transactions are accounting for a larger portion of total retail sales worldwide. With affordable web hosting and a wide array of free tools at their fingertips, small business owners today can easily join in on the Internet shopping craze.
Whether you’re looking for some help with your side hustle or hoping to grow your business by attracting online customers, we’ve outlined what it takes to set up shop on the Web.
1. Making Sure Selling Online Is the Right Move
Before getting started with selling online, take some time to assess whether it’s the right choice for your business. Why do you feel it is important to open up this sales channel? Is it because your customers are asking for this service? Are you suffering from competition on the Internet? While the barriers to entry are low, getting started with eCommerce requires a commitment of time and resources that you must be comfortable with. At the end of the day, the profits eCommerce generates should justify any upfront or continuing costs to your company.
First off, whatever products you plan to sell online have to live somewhere until they are sold and shipped. As we discussed in our guide to selecting a workspace, storefront retail spaces are costly so it doesn’t make much sense to use them for storage. You can avoid this issue by leasing a separate, less-expensive commercial space for storing your goods. However, if you have a brick-and-mortar business to manage, this can create an operations dilemma. Adding a second facility means you’ll have to either hire additional staff to run the shipping operation or take the time to commute between both sites in order to manage all the work. It’s also critical that you’re ready to pack and ship orders quickly once you set up shop because customers will expect prompt delivery. This will require scheduling regular pickups from parcel shippers like UPS. Do you have the desire and resources to run this kind of operation?
If you answered “yes” and you’re feeling ready to take the leap, then the next step is to conduct some market research to see whether investing in eCommerce makes monetary sense. Poke around on the Internet and look for any products that are similar or identical to the ones you plan to sell. Are they readily available online? What prices are they being sold for? Are delivery costs included in these prices or listed separately? Which businesses offer international delivery and which don’t? Consider these questions carefully and see if the math adds up for moving forward.
2. Selecting an eCommerce Tool
Selecting the right eCommerce tool is like scouting for a new car. There are lots of options. You can narrow your decision by choosing between which of the two types of online store you’d like:
This is the best option for eCommerce newbies because it requires little or no programming knowledge. Hosted eCommerce providers run store software on their own servers and typically charge a monthly subscription fee between $10-200/month for their services. They function like a shop in a box that can be custom-branded and linked to your website content management system. Two of the most popular platforms are Shopify and Big Commerce. They make creating an online shop simple by letting you do things like upload a product catalog, set up customer shopping carts, and manage inventory. They also offer a wide range of themed templates to choose from.
Think of a hosted eCommerce platform like your Facebook account. The ability to customize your page is limited, but the site is easy to use. You also get the advantage of automatic updates, so if there’s a bug, it gets fixed immediately. You don’t have to login and press a button to manually perform an update.
While hosted sites are more popular, particularly for new online store owners, they lack the same kind of control over add-ons, bandwidth, and other things that self-hosted sites do. With self-hosted eCommerce, you’re responsible for selecting and paying for a server. You also download, install, and maintain the software yourself. This is a better choice if your online store will require: a) a lot of customization, b) a layout across several different sites (ex. in different languages), or c) use of your own domain name (ex. yourwebsite.com/sunglasses). Some of the more popular eCommerce shopping cart software providers are Magento and Zencart. You can find self-hosted eCommerce software that is free (open source) or paid, but either way, this choice typically ends up being the more costly option for an online store. That’s because self-hosted solutions are trickier to set up and require more technical knowledge in the long term. In these circumstances, it’s generally a good idea to hire a specialist who can set up your online shop if you don’t feel like digging into HTML scripts. If you choose GoDaddy as your web host (server), they offer the option to hire an expert for a one-time build fee to set up your web store.
3. Shopping with Security
A lot of sensitive information travels in and out of eCommerce sites. It’s crucial to keep your customer’s credit card numbers, billing addresses, and other personal details secure to avoid getting a bad reputation. While most hosted eCommerce platforms come with security essentials built in, self-hosted solutions place the burden on you to ensure that security is in place. First, check that your web host offers Secure Sockets Layer (SSL) encryption, which protects sensitive information. Your hosting provider will also have to be compliant with Payment Card Industry (PCI) security standards in order to handle credit card data. PCI compliance is required by all credit card brands.
If you choose self-hosted eCommerce, don’t forget to keep an eye out for critical software updates, which are usually rolled out in the event of bugs or newly discovered vulnerabilities. These are essential to implement quickly because they can prevent your site (and your customers) from experiencing a potential threat.
4. Processing Payments
Ok, now it’s time to make some dough! In order to handle credit card sales online, you’ll need either an online payment gateway and a merchant account or an all-in-one payment service provider. As we delve into what these terms mean, think about which eCommerce platform you plan to use. It’s best to pick payment processing services that offer plugins or extensions for your chosen platform.
Selecting the right system for handling payments comes down to choosing which options offer the right features and pricing to fit your business’s needs. It means thinking about things such as which payment methods people in your target markets like to use and what special functionality requirements (like the ability to set up recurring payments) you might require.
Let’s start at the top. There are always 4 parties involved in any online sale. They are:
- The merchant (you!)
- The customer
- The merchant’s business bank (acquiring bank)
- The customer’s bank that issued them their credit/debit card (issuing bank)
Payment Gateway + Merchant Account:
A payment gateway handles the transaction between merchant and customer much like a point of sale (POS) terminal does in a physical retail store. It functions as the secure link between your website and the payment processor who carries out the rest of the process. Because it’s illegal for payment processors to access sensitive information directly from your website, payment gateways act as mediators and encrypt customer credit/debit card details so they can be securely transferred. Here are five popular payment gateways:
Although a payment processing system is different from a payment gateway, many online services offer both features. Payment processors are like project managers. They ensure that a transaction gets completed by transmitting the data from it between you (merchant), your customer’s issuing bank (associated with their credit/debit card), and your acquiring bank (where your business account lives).
Some payment gateways just include payment processors, while others, like Paypal or Stripe offer this in addition to what is called an internet merchant account. Internet merchant accounts are a must-have for online sales. The merchant account is basically an online bank account that temporarily holds your money until it is moved into your actual business bank account (acquiring bank). After a sale, money will flow into this account and then, in most cases, be automatically transferred into your bank account in 2-7 days. If the payment gateway you choose doesn’t provide an internet merchant account, you can obtain one from most banks or a third-party merchant account provider.
Payment gateways and merchant account providers charge various fees that can include monthly fees, fixed fees per transaction, and variable fees based on a percentage of transaction amounts. If you’re looking to cut costs, consider selecting Shopify as your eCommerce software because of its built-in payment processor program called Shopify Payments that waves per-transaction fees. This is just one of many options available, so we recommend you check out a fee comparison website such as PaymentBrain to get an overview of what’s out there before signing with a provider.
All-In-One Payment Service Providers:
All-in-one payment service providers are those that combine a merchant account, payment gateway, and payment processor into a single platform, allowing for quick and easy setup. These combined solutions are better for eCommerce first-timers who don’t want to go through the hassle of getting a merchant account. They also offer higher levels of customer service and tend to involve fewer or no setup and monthly fees. However, per-transaction fees are usually higher, so it’s best to think about this when pricing your products for online sales. We suggest that small businesses start with a combined payment provider. Larger merchants can typically save money by having their own merchant account.
What’s the deal with Paypal?
While Paypal is the largest and least expensive all-in-one payment service provider, it requires customers to visit a separate page in order to complete their transactions. If you’re looking for continuity of brand, you may not want to disrupt the shopping experience by choosing Paypal as your payment service provider. However, you may want to offer Paypal as a ‘secondary’ payment option for your customers. Lots of consumers prefer using PayPal to providing their credit card details. Even if you don’t use PayPal as your main payment gateway, think about offering it as an alternative way for customers to pay. Having a secondary payment gateway like Paypal also ensures that you have a backup in case any problems with your primary payment gateway occur.
5. Tips & Tricks for Online Sales
Now that you know the ins and outs of setting up an online store, here are some tricks for getting started with selling on the Web:
- Choose an eCommerce vendor that automatically uses search engine optimization (SEO) to help your store’s content show up in search results. Remember, just because you have a store up doesn’t mean that people will know about it and sales will start right away.
- When launching your store, think about investing in some online advertising using Search Engine Marketing (SEM) with Google Adwords. These ads appear on Google search results or on 3rd party websites and only charge you for each time someone clicks on them.
- Put big social sharing buttons on product pages and encourage social sharing after purchases.
- Give every product its own page and unique description.
- Split test your Product page. Try minor modifications on two different versions of a page (ex. green button vs. blue button) and see which page sells more products.
- Several weeks after a transaction, email your customer and ask them to leave a review of the product. You can help encourage reviews by offering incentives (ex. $25 off your next purchase).
- Make sure you have a well-defined returns policy in place and that this policy is communicated somewhere on your website.
- Create a system for customer service. Try out a custom toll-free phone number for 30 days with FreedomVoice, and have customer service calls be auto-directed to a separate voicemail.
Was this guide helpful? Let us know on Twitter @FreedomVoice. Next time, we’ll be discussing how to build your online presence using social media.