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Ecommerce business, so what, why all the talk? You may have already heard the news many times over from television and magazines that Internet business is booming, that in the last quarter of 2009 alone there were over $35 billion in retail sales. You may well wonder how the economy can appear to be faltering and in decline yet all the while the virtual economy of the Internet appears to be booming. According to U.S. Census bureau statistics, profit from online, retail sales has gone up steadily since 2001. It may very well be that in the midst of general economic chaos, there is real business opportunity elsewhere in the online world of the Internet. If you wonder if there is any way you can share the "pie," this may be the time to think, "Capitalism," and consider ecommerce business as a home business model. What is Ecommerce Business? Ecommerce, in a nutshell, comprises the practices and technology of transacting financial exchange online. Simply put, the "how" and "wherefore" of buying and selling stuff over the Internet. "Stuff," in this case, means goods and services, and probably the two most ubiquitous ecommerce examples most of us are familiar with would be eBay and Amazon.com. And probably most people associate e-business with going to a site, such as Amazon, choosing a book or some other physical product, paying with a credit card, and receiving the product in the mail a few days later. Although ecommerce technology is ideal for running a business that exists only on the Internet with no brick and mortar counterpart (such as Amazon), ecommerce has become a logical extension of store-based retail, and you will notice that major retailers such as Target, Best Buy, Victoria's Secret, and REI all have thriving online stores. However, the retail shop is not the only model for ecommerce. Kinds of Ecommerce Websites and Business Even though you buy stuff from eBay and Amazon, they are actually two very different kinds of ecommerce sites and only represent two of many models employed in online commerce. Business to Consumer: Amazon is purely a business to consumer site. That is it sells retail items to consumers, who complete payment on the site itself. Walmart, Walgreen's, Target, Best Buy, LL Bean, Dell, Staples, Office Depot, and New Egg would be other examples of retail business to consumer ecommerce. Broker or Marketplace: EBay does not sell directly to shoppers seeking to bid on products. Rather, it is a sort of broker or market place bringing merchants together in one online environment, who sell to consumers. Financial transactions occur between buyers and merchants, merchants and eBay, but not between auction shopper and eBay. Other examples of brokers who bring merchants and/or service providers together would be elance.com, rentacoder.com, buyusa.gov, and wftomarket.com. The Brochure Site: Another ecommerce model is the brochure site. This sort of website does not engage in direct financial transaction. Rather, it presents information about itself and facilitates communication by providing phone, fax, email, and other contact details either to it or to affiliated sites who distribute its products and services. Business-to-Business Data Exchange: Service oriented ecommerce. Business serving other businesses by providing phone, fax, email, and other media, financial, and data gathering and analysis services. The market place for information exchange is huge in the business-to-business sector is huge. Buying/Creating and Selling Businesses: This is another area where online commerce thrives. In this model, you scout out failing businesses you think have potential, buy them cheap, refurbish them, make them productive, and then sell for profit. A variation of this is to create a site, monetize it, nurture it until it reaches a threshold profit level, and then sell. This is actually a sub-area of venture capitalism, and for those who understand the model, quite profitable. Affiliate Marketing: In this ecommerce model, you use online resources to promote other people's products for a commission of each sale. Advertising: Here, you build sites for the express purpose of monetizing through advertising. Successful entrepreneurs promote the site in order to develop sufficient traffic flow and standing in the search engines, which in turn makes it valuable advertising space. Online Commerce and Home Business Two of the main take-away points so far are first, that ecommerce is far more than just the online equivalent of buying a book or computer part from a land-based retail store. Second, that even in a bad economy, Internet-based commerce continues to thrive and we see a steady increase in business. Ecommerce is a highly adaptable model that can either complement an already existing brick and mortar store, or exist and be run entirely from a laptop anywhere in the world where there is a reliable Internet connection. Further, it accommodates any size and sophistication of business enterprise. This fact is of particular importance to small home business because it means that depending on business model, size and scope, almost anyone with a few square feet of space, an electrical outlet, and a phone connection can run a business. No Matter How Small or How Big, Ecommerce is Business Even if you are only publishing a blog with a few affiliate ads, in order to be successful, you must understand that your blog is as much a business as Perez Hilton and must be treated as such in order to be profitable. One of the characteristics of successful is that we rarely see the business gears and wheels running beneath the surface. However, business success generally doesn't just happen by accident-even if on the rare occasion when it does, you won't remain successful without business know-how. So, what do you need to know? Research and Plan: Research your market to be sure there is a niche demand for your product or service. Your research and analysis will have everything to do with your success. Business Financing: Before you start, you must nail down the costs of start-up and maintenance and know where the money is coming from. At some point you may need to engage an accountant. Establish Legal Structure: You must determine and establish the legal structure that will best suit your business. For example, will you be a sole proprietorship, a partnership, limited liability (LLC) corporation, or some other legal entity? Also at some point you will need to hire a business attorney. Business Name Registration: Depending on how you choose to be known, you may need to register a business name. The requirements for this will vary from state to state and also depend on the kind of legal structure you establish for your business. Federal Taxes: Depending on the kind of business you set up, you may need to register for a Federal Employer Identification (EIN) Number. Generally speaking, sole proprietorships do not need a Federal tax ID, but there are some exceptions, and you should check the IRS site to understand the rules. State Taxes: It is also important to know whether or not you will need a sales tax permit from your state of residence. The requirements will vary by state. Generally, if you are selling physical products in your state of residence, you will need to add sales tax, and for that you will in most cases need to have a permit that allows you collect sales tax. Other Licenses and Permits: You will need to check the IRS site and with your state to be sure you have the necessary licenses and permits to run your business. If you are a one-person, sole proprietorship running an online blog that relies on advertising for revenue, this will be relatively simple. If you plan on running an incorporated ecommerce site employing several staff and selling health care products (which may require special licensing), your particular Federal and state requirements may be a little more demanding. Online Business Everything above is true for Internet-based ecommerce as well as the land-based, retail product/service provider. Your market research and analysis may well be the single most important step you take in starting your business. However, online business does have some unique characteristics due to the fact that it takes place in the virtual, digital space allowed by Internet technology. Basic Ecommerce Start-Up Strictly speaking, it is not absolutely necessary to own your own domain name and purchase your own hosting. Many people do well using free web space provided by social community sites, blogger, Squidoo, or Hubpages, to name a few examples. Others do well conducting business using only classified ad sites. However, setting up an ecommerce website generally implies a number of basic steps. It would be wrong to suggest that there is only one way to get started with ecommerce; business is far to fluid and creative to be so rigidly proscribed. However, in the next paragraphs, we outline a basic, step-by-step plan as suggested by the Small Business Administration, How to Start and Grow an Online Business. The step-by-step rough guide includes: Registering your own .com domain. This is done through a registrar, such as Go Daddy or Name Cheap. You can register your domain for one or more years, and you generally get a small discount off the registration fee for longer periods of times. Purchasing and managing your own web hosting account. You buy hosting from a third party company who owns/manages the servers upon which your domain resides. Your account will allow your .com domain to accessible on the Internet and to appear in the search engines. Creating logo and graphics. Although not absolutely necessary, your own logo and graphics will help distinguish your site. Creating content for site. Writing the pages appearing and uploading product descriptions and images. Designing and building site. This includes the kind of coding necessary and well as all design and structural details. Choosing and integrating shopping cart with site. Depending on type of business you set up, your shopping cart, which presents your products as a sort of catalog, may be the site itself. For examples of sites that are essentially shopping carts, see newegg.com, target.com, or groundsforchange.com. Some sites are complete content management systems with an integrated shopping cart. Most sophisticated shopping carts will also gather sales analysis data. When determining which cart is best for you, you will also need to give consideration to the kind of sales data you want to collect. Choosing and integrating a payment processor. Many shopping carts are designed to allow integration with a selection of payment processors. A payment processor is the tool that allows you to collect and process payment. This is where people enter their credit card information, where shipping costs are calculated, and taxes computed and added in. PayPal and Google Checkout are two well-known means of collecting payment. 2Checkout.com and Authorize.net are two other examples payment processors. Some sites are so well integrated that you are barely aware that they are a content management system, shopping cart, and payment processor all rolled into one. Competitor analysis. Although you should have researched your competitors during the market research phase, it is important to continue to monitor your competition. In online business, you want to analyze the keywords of your competition, their back links-how many and who is linking to them, site visitors-how many and where they come from and where they go when they leave the site, You want to track other demographic factors such geographic locations of visitors, age, and socioeconomic strata. You also want to monitor trends associated with your niche. Product sourcing. Business, ecommerce or otherwise can be tricky, and if you are providing a product manufactured or created by a third party, you need to be sure that your product supply is secure as supply interruption is a serious potential issue. You need to have not only Plan A but Plans B and C. Your earlier market research will inform this segment of your business. Along with product sourcing, you will need a strategy for the marketing, packaging and positioning of your products and services. Product Distribution. Are you going to handle all of the shipping and handling? If not, then you must be sure to establish a relationship with a reliable third party to warehousing, shipping, and distribution. Presumably, this would have been worked out during the business planning research phase. Search engine optimization (SEO). Search engine optimization refers to the practices, both legitimate (white hat) and illegitimate (black hat), that cause the search engines to rank your site well. This is generally considered to be important because the better ranked your ecommerce site is, the more potential customers will find you. Most SEO practices fall under two broad categories, on-page optimization and off-page optimization. On-page refers to how you write your content, and off page refers to getting links back to your site from other sites. The overall goal of SEO is to make your site prominent in the search engines so that people searching for your topic/product area will easily find you. Site promotion. Although you promote your site with SEO, this refers more specifically having your site listed in search engine directories, online market places, and having an active presence on key social sites such as Facebook, LinkedIn, My Space, and YouTube. Also included are maintaining an active presence on forums key to your product area, banner advertising, publishing and advertising on related blogs, publishing a newsletter (if consistent with your business model), and advertising in local markets through newspapers, radio, and even television. This is an exciting time for ecommerce. Business online is booming, and given the nature of Internet technology, it does not require a fortune to go into business for yourself. It does, however, require thought and business planning, and the motivation to take action. Fortunately, everything you need for research and start-up is available online, and your office literally can be the nearest Internet connection. Resources Business.gov, Start an Online Business, business.gov Bob K., Making Money Online-When are You a Business?, business.gov Business.gov, 10 Steps to Starting a Business, business.gov Business.gov, Write a Business Plan, business.gov SBA.gov, Starting a Business, sba.gov SBA.gov, Write a Business Plan, sba.gov University of Arkansas at Little Rock, The Business Plan for Home-Based Business, Arkansas Small Business and Technology Development Center Bplans.com, Running an Online Business, Bplans.com Export.gov, Exports Live, Powering Jobs, Sales and Profits through Exports, www.export.gov U.S. Census Bureau, Monthly & Annual Retail Trade, census.gov Proproductsourcing.com Simpleocity.com |
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