Is your business right for e-commerce?

Posted Monday, May 5, 2003

Selling products and services online sometimes is as simple as using common sense. Click through some of the most popular Web sites and you'll quickly discern that books and music must be conducive to an online business.

Conversely, see how many Web sites you find selling explosives. (If you find several, something is wrong with the nation's regulatory process.)
Successful online selling is a matter of what you sell, how you sell it, who you sell it to, and who you find as competitors. If you're contemplating e-commerce, consider the following questions to determine how strongly matched you are to this sales channel.

What do you sell?

As a first step, determine if your product or service fits the profile of items that "move" online. Products sold through catalogs and other direct channels usually transfer well to the Web. Some services, such as travel planning, also are a good match for online sales. The following list outlines general categories of goods and whether they sell well online.

Proven to sell well online:

- Commodities (CDs, books)
- Products that appeal to enthusiasts (cooking supplies, sports memorabilia)
- Low-touch services (travel services, online trading)
- Frequently purchased items (manufacturing parts, office supplies)
- Technology products (software, computers)
- Difficult to find items (out-of-print publications, rare stamps)

Difficult to sell online:

- Products that are difficult to ship (furniture)
- Services that focus on a local market (hair salons)
- Highly regulated items (explosives)
- Products requiring a high level of customization (tailored suits)
- Items that benefit from "hands-on" assistance (wedding dresses)

Are your customers online?

One of the most important e-commerce considerations is whether your target audience goes online to buy products and services like the ones you plan to sell. Serving a technically savvy customer base is a good clue that selling online may work for your company.

In addition, if you sell locally but your products have global appeal, e-commerce may be a way to expand your business. Finally, if your clients live active, busy lives, the time-saving benefits of shopping online may appeal to them. If you sell primarily to a local audience that does not regularly use computers, the effort required to convince buyers to go online may not be worth the payback.

Are your competitors online?

Having a number of competitors online is a positive sign that your products and services are a good fit for e-commerce. It also presents a challenge: differentiating your site.

Create a unique offering by surveying direct and indirect competitor sites and then crafting a site that sets you apart based on your value to the customer. For instance, if you want to sell children's toys online, you might have trouble competing against the e-commerce efforts of national toy store chains. By targeting your site to an under-served market niche — such as educational toys, or toys based on book characters — you may be able to compete more successfully.

If your competitors are not online, ask yourself why. It could be that there is an untapped market that can work to your advantage. Conversely, the "no shows" may be on to something relevant to you too. If you're still convinced that your customers want to buy through the Web, back up your conviction with market research. Survey customers about their online habits, or ask your trade association for research on how the Internet is impacting your industry.

Can you commit to e-commerce?

As with any new distribution channel, you'll need to commit some of your company's resources to e-commerce to ensure you're able to provide the appropriate levels of service and support. You will need to handle additional sales coming over the Web, as well as tasks associated with keeping your site operating smoothly. These include:

- Managing outgoing customer communications
- Handling customer inquiries
- Updating site inventory
- Arranging shipping logistics and options
- Conducting regular site maintenance
- Establishing and maintaining site security

To reap the most benefit from your online sales channel, it's a good idea to create a plan for handling these tasks before you build your site, including who in your organization will own each item.