There is no escaping the internet, which essentially connects millions of computers around the world. Even if you’re doubtful about this technology you are already using the internet every time you use EFTPOS, check your bank balance over the phone, or sign your name on a hand-held computer to accept delivery of a package.
The terms “e-commerce” and “e-business” both refer to the way the internet can be used to do business and can offer your business huge opportunities in the global marketplace.
Therefore, no business plan is complete without some mention of how you propose to exploit the potential of e-commerce in your business.
This chapter will give you some guidance about using e-commerce in your business so that you can incorporate these ideas into your business planning. If you are not already connected to the internet, working through the material below will get you thinking about issues to consider before taking your business ‘online’.
There is really nothing mysterious about e-commerce. Essentially it is just another channel for doing business; as with any of your other distribution channels, you need to have a strategy about how you intend to use it in your business. You should identify the current e-commerce capability of your business in your business plan and indicate how you propose to develop this capability, plus give an explanation of how your internet strategy fits in with your overall marketing and business operations strategies.
More details about e-commerce strategies can be found in NZTE ’s online, learn-as-you-go E-business Guide at http://ebusinessguide.nzte.govt.nz.
Types of e-commerce
There are three broad types of e-commerce.
- Business to Business (B2B)
This covers the relationship between your business and other businesses such as your suppliers/customers. This is often the area in which immediate gains can be made in terms of making business processes more efficient – for example by creating sections on your internet site that allow suppliers to view your real time stock levels and orders on hand.
- Business to Consumer (B2C)
This covers the relationship between your business and your consumers. Having an internet site means your customers can order online 24 hours a day, seven days a week. Since a website potentially exposes your business to the whole world, it also allows you the possibility of extending your business far beyond its physical presence in a particular place. If you intend to broaden your business in this way, you should indicate in your business plan how you intend to develop and manage such a worldwide expansion.
- Government to Business (G2B or B2G)
If you have national or local government ministries or agencies as customers, then you may need to develop e-commerce capabilities to do business with them. Detail in your business plan the steps you may need to take to meet their e-commerce standards. These G2B transactions are likely to be in the area of e-procurement, where government agencies may require you to tender online for government purchase requirements, or to have sufficient e-commerce functionality on your website to allow them to order online from you.
Benefits and risks
There are three key benefits of incorporating an e-commerce strategy into your business plan.
1. E-commerce allows you to speed up your standard business operations (advertising, sales, customer contact, ordering) more efficiently and often at a lower cost.
2. It allows you to do new things such as; expand your business beyond its physical boundaries, access new markets, customise products and make it easier and faster for customers to do business with you.
3. Your customers will increasingly expect you to be e-commerce capable. If you don’t offer at least email, the most basic form of e-commerce communications, you will be viewed as behind the times.
You also need to identify and address the risks associated with doing business online such as legal implications, ‘hidden’ costs like training, keeping your website up-to-date and security issues.
Consider also the opportunity to lower your compliance costs in such areas as tax returns by developing the capability to submit your compliance returns online (B2G). Again, this can pay dividends in speed of processing, allowing you to receive such things as tax refunds more promptly.
What to consider before developing your e-commerce capability
Installing information technology (IT) can be a big investment in money, time and commitment. This section outlines some of the points you should consider before making this investment.
- Identify your business requirements
To help work out where you will benefit from IT, get a clear understanding of how your business operates. The best way to do this is to make a list of all your business functions. Identify how technology can help your business. Work out which areas in this list would benefit from having computers. For example, if your accounting is done manually, you could benefit from a simple, computerised cashbook, such as a spreadsheet. If you already use a spreadsheet, an ‘off the shelf’ accounting package might be useful because, as well as the cashbook function, it might also have GST calculations and invoicing.
- Are you using your existing systems effectively?
Are you getting maximum benefit from your existing technology and systems? Is any training required? In a mature and successful e-business you’ll need IT systems that integrate your ‘front-end’ systems (systems that your customers and supplier have contact with, such as your website) with your ‘back-end’ (business) systems. Before you can introduce such complex systems, it is important that staff can use your existing technology well.
- Hardware, software and security requirements
When you have assessed where your business could benefit from computing technology, decide what equipment you need and the best way to get it. There are two types of computer equipment — hardware and software. You need both in a computer system. Choose all the software first, as the software dictates the hardware you will need.
All internet sites, regardless of size, require an internet server to host their sites, have backup, recovery and connection to the internet. Internet service providers (ISPs) are the companies that give you this access to the internet and they offer a range of services.
You will also need to secure your computer against threats from the internet — such as viruses and spyware — to protect your business.
- Domain name
A domain name is the name you type into your web browser to visit a website. Choosing a good domain name is a major part of an e-business strategy because the name will become your business’ online identity. It is how everyone will refer to your online business.
If you plan to build a website, register your domain name as soon as possible, even if your website plans are not yet fully developed. Choose a name that is short, memorable and easy to spell and type.
Try if possible to make your domain name consistent with your other business branding. The appearance of your website should harmonise with your business stationery, logo, and other promotional material so that you project a consistently recognisable image to the marketplace.
Becoming more e-commerce capable
How do you begin if you know little about e-commerce and the world of computers?
If necessary you can begin modestly and build your capabilities gradually. This section suggests some activities to help you exploit more effectively the potential of e-commerce in your business.
- Using email and building a database
At the very least make sure that you’re contactable by email and can communicate via email with your suppliers and customers (including receiving orders). It’s so much cheaper, faster and more convenient than conventional post or fax that this facility alone will help speed up your business processes and lower your costs.
Modern operating systems feature very user-friendly email programs that encourage you to start building a database of customers. You can do this very easily by adding their details to your ‘Address Book’, typically through a single mouse click.
Your goals at first might be simply to:
- communicate with customers via simple emails: answer questions, make appointments
- take orders via email (speeding up the process and eliminating paperwork)
- invoice or quote via email, for example by means of a PDF (Portable Document Format) attachment, an Open Office Text document attachment or spreadsheet attachment
- set up some automatic responses to emails (for example: ‘Thank you for your order, it will be despatched…’) to save office administration costs.
- Becoming a more proficient internet user
By the time you’re using emails extensively, you’ll probably also have learned how to exploit the rich resources of the internet by:
- using search engines to access websites and topics of interest
- conducting market research online, analysing competitors’ websites or gathering information about products and services worldwide
- ordering products online
- searching for new suppliers, distributors, agents, ideas, markets or joint venture opportunities online.
- Permission marketing via an email newsletter
If you already send out a conventional newsletter, offer your subscribers the chance to receive the newsletter in email form, thereby starting the transition process. Ask your new customers if you can put them on your email newsletter database.
The advantage of an email newsletter is that it can be sent out at a fraction of the cost of a conventional newsletter.
To get readers to actually read your email instead of simply deleting it along with other ‘junk’ emails they receive every morning, make sure that the newsletter is not all about selling or promoting. The way to build reader loyalty is to keep on giving your customers something of value in the newsletter such as instructional information or news, not necessarily related to your products or services.
That ‘something of value’ can take many forms. Often the most useful form is to offer knowledge that will help them improve their businesses or their lives. In this way you’re building a ‘partnership’ relationship that goes beyond just trying to gain sales.
You can use the newsletter in this way to build your credibility as the leading authority in your particular field. Where do you get the information that allows you to do this? Search the web for suitable tips, ideas, and tactics that will improve typical customer businesses. Remember to get permission first before using articles you’ve found. Good marketing practice means that you should keep in touch with your clients at least every 90 days. Also remember to seek their permission to do so first and ensure you comply with the Unsolicited Electronic Messages Act 2007.
Email newsletters allow you a cost-effective way of developing a ‘permission marketing’ relationship with your customers. And it’s easy to tailor special newsletters. You can identify a special sub-group of your most important customers (the 20 percent who give you 80 percent of your business) and construct a special newsletter for them, based on the customer loyalty theme. This letter could go out several days ahead of your general newsletter so that this group gets advance access to tips, information, etc. For example, you might offer them special discounts, privileged information, invitations to previews of sales (before the general public is admitted), or any other tactic that makes them feel special. Customers enjoy feeling recognised and important and are more likely to remain loyal to you if you show them that you do value their business.
- Building a basic website
Start by identifying your objectives and setting a budget. Think about what you want to achieve with your website and start to develop your online strategy. You do not have to start with a full ‘bells and whistles’ website, but do consider how you might want to develop your site in the future. Seek professional advice and talk to your IT specialist or web developer about your future plans from the outset.
A simple ‘brochure ware’ website is often the first step because such a site can be established for a relatively modest investment. Essentially it’s an online version of your business brochure or catalogue with a few added features.
These websites typically feature a home page (the ‘window’ to your website) and then tabs or buttons leading viewers to other pages, such as About Us, Products and Services, Orders, Contact Us, Customer feedback, etc.
There are several advantages.
- You gain the credibility of having a website to which you can refer customers and other parties.
- You can register a distinctive domain name (the name of your website), and promote this via all your marketing material.
- Your website, unlike your business, operates 24/7 (24 hours a day, seven days a week). It can generate business for you while you sleep.
- The website can be accessed from any anywhere in New Zealand, giving you nationwide coverage and in any country in the world, giving you a global reach.
- Photographs, images and text on the site can be updated very quickly to keep your business details fresh and current. For example, price list changes or new products can quickly be added.
- Useful features such as an FA Q (Frequently Asked Questions) section offer an efficient and time-saving way for you to answer customer queries and provide product/service information.
- A ‘Customer Feedback’ page builds credibility by displaying comments and endorsements from customers.
A basic website of this nature allows you to ‘dip your toes’ in the internet stream, get the reaction of your customers or clients and discover the benefits of being online.
Even a basic website enables you to save time and money over the conventional and time consuming process of having a brochure or catalogue designed and printed.
And by using email, you can quickly alert customers, suppliers and distributors to price, product or service changes. A link to your site in an email would enable them to view these changes on your website at the click of a mouse.
- Developing your website further
Continue developing your online marketing strategy through a process of monitoring, maintaining and continuous improvement.
It is vital that your website contains elements that continue to attract people to it.
- current, accurate and relevant content
- marketing devices to help people find and use the site
- tools that show you how the site is being used and which marketing devices are the most effective.
Visiting a poorly designed website can be very frustrating. Your site should enhance the experience of doing business with you, so check that it is easy to use. If people find your site hard to navigate, they are likely to ‘click off’ it very quickly, and are unlikely to return.
It is important that you test the site thoroughly before you launch it, both for usability and functionality.
Clear and easily accessed terms and conditions keep customers informed as to how your online business operates and so help reduce customer dissatisfaction. A privacy statement on your website helps gain online customers’ trust by reassuring them about what you will do with any personal information – such as name, address, credit card number and passwords – that they may enter on your website.
A disclaimer is a statement on your website that advises website users of the limitations of the site and the information on it. It helps limit your liability for other people’s use of your website.
- Establishing a fully e-commerce capable website
A basic website would not feature full e-commerce capabilities (the ability to accept orders online) because this additional functionality is more expensive to develop. Behind every website you view is a hidden architecture of coding that makes the site operational.
If you require such features as the ability to accept secure credit card payments for orders over the internet, then the site, like a software programme, becomes more complex, occupies much more space on a computer or server, and will therefore cost more in monthly hosting charges—what your ISP (Internet Service Provider) charges you for hosting your site on their server.
But this step up to a fully e-commerce capable site means added convenience for your customers, and indeed such e-procurement facilities might be a prerequisite for doing business with some customers (such as government departments) who demand such functionality.
A full e-commerce site means that customers can order from you outside of normal business hours (especially important to overseas customers operating in different time zones) and considerably speed up your business processes. Invoices, delivery notes and packing slips can be generated automatically by the software, with the information fed through to your accounting and inventory control systems.
The internet offers you significant opportunities to:
- speed up your business processes
- reduce costs and human error through automation
- improve efficiencies
- conquer distance and isolation to greatly expand your marketing reach
- gain new customers
- compete against much larger businesses, both through creative internet strategies and because a small business can project a ‘big business’ image through a well-designed website.
Show that you are aware of these possibilities by incorporating an e-commerce section in your business plan. You can develop your e-commerce strategy in a series of incremental steps.
Remember that there will always be new ways to use technology to improve your business, so surf the internet, stay current with what others are doing and remain alert to using creative ideas in your own business. You might consider setting up an ‘internet team’ in your business to research new possibilities. If you want to sell online, make sure you have purchased online, so you understand the process.