Just letting you know I’ve built a new website where I’m sharing all of my information on building websites, internet marketing and online business.

It’s called eCommerce Economy.

Check it out!

Cheers,

Luke

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2. 8 questions in an ecommerce conversation
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1. Price is king. At first we tried raising prices and adding a shipping fee to maximise profits, but sales took a massive dive. Since our products are only sold from a few different shops, I thought it wouldn’t be price sensitive. Boy was I wrong!

So after 2 weeks of very slow sales, we tried the next extreme. We put free shipping back on and reduced prices to be the cheapest on the internet. Everything that was available elsewhere cheaper, we marked down, though we left prices up where we are the only ones selling.

The way we did it on Clock Central was in the form of a permanent sale, so the markdowns show up on the site and also in a “Sales items” category. Since then, around 80% of our sales have all been items that we marked down.

It’s not scientific data, but it’s enough for me… Price is king in e-commerce.

2. Customer service is king. I’m lucky enough to be partnered with a the best customer service guy you could ever get.

For a while, we didn’t have a phone number listed on Board Game Central. Amateur mistake. As soon as we did, it started selling a lot more.

The most common questions we get are product questions. Customers like to ring up for assurance or for some questions about the product.

The next biggest question we get is “Will I have it by xx day”?

People are concerned about whether the product is right for them, and whether they will get it by a certain date (almost always for gifts). Sometimes people just want to be assured and talk to another person.

3. Unique and high margin is best. Without high margins, you need volume. Without unique products, it takes a lot of investment to get volume. (I’ve written more about product/market combinations here). Also with high margins and unique products, there’s not as much of a chance of a price war.

We’ve decided on high margin, unique products, and I believe it has been a good decision. We’ve been profitable from day one and it’s a scalable model.

Whats the goal for the next three months?

The goal for the next three months is horizontal expansion. More products, especially on BGC, and hopefully at least one more store. Stay tuned for updates!

Related posts:

1. Strategies that win: How to be successful in e-commerce
2. Why does every small business need a website?
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Before I go in to what you need to be successful, let’s define some terms.

Resources: I’ve defined resources here as the amount of time or money you have. If you are starting a part time business with a few grand in the bank, you’re starting with low resources. The more time you have and the more money/people you have, the higher your resources.

Margins: How much you make per sale. With high margins, you make a high percentage of the sale price, and vice versa for low margins.

Demand: How much pull there is for your product. E.g. The size of the market.

Competition: Who you’re up against.

You’ll notice that the first two are internal (margins are set by the market, but you have control over them), and the second two are external factors.

Combine the first two, and you’ve got your internal limitations. Combine the second two, and you’ve got the “pull” of your product.

Let me explain “pull” a little more. If you were the only outlet that sold Nike shoes in the world, you would have tremendous pull. There’s massive demand, and you would have no competition. If you were to sell no name digital camera’s in the current market, there’s not much pull at all because of the massive competition. You can find this out using the Adwords keyword tool. Be careful to be very very specific.

If you’re starting an ecommerce business, join me in this exercise.

Classify yourself from 1-10 in each one of the metrics above.

Now consider these charts.

margins-resources

demand-competition

To be successful, I believe you need to match up (or better) in both charts.

That is, if you have low resources, you need high margins and low competition.

If you have high resources, you can deal with competition as long as demand is high.

If there’s high competition, you need to have high resources, or target a specific niche of the market.

The idea of the charts is that it lines up your internal situation with your external situation.

And a quick disclaimer: In the words of someone much wiser than me “You can quote me an exception, but I’m giving you the rule”

Related posts:

1. E-commerce, 3 months in. What I’ve learned so far
2. Charging the right price: Price optimization for freelancers
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People get attracted to starting an online business by the low barriers to entry (Have you ever seen those ads for “Get rich in 15 minutes per day?”) but fail to understand the marketing and resources required to launch a successful website.

My first online shop was a digital camera store called Savvy Shopper. It was a total disaster and it took me two years to realise that margins were too low, and competition was way too high. I couldn’t raise my prices because the instant I did, all of my customers went to one of my many competitors. I was stuck in a cycle I couldn’t beat without massive investment. Then throw in credit card fraud, and it was not worth it to run the business.

Since that time, I’ve worked on a number of online stores, and helped others build online stores. This post goes through four questions that a developer will ask you to find out if you’re serious about your business. Then four questions that you should ask your developer to know if you’re working with someone that is right for you.

Questions a developer will ask you

What market research have you done?

Studies have shown that patients get better results from Health Care if they research their condition than if they rely solely on their doctor for advice.

The same is true in business. You can get a web consultant to help you check out competitors, and to survey customers, but you’re better off doing it yourself.

The reason is this: everybody has a different approach to doing things. When you’re in the process of building a business, a different approach to the way things are done can make a huge difference. It’s important to have a clear dream of how the business will work while doing market research.

The two most important aspects to market research are a) customers and b) competitors.

Who are your customers? Remember it’s better to have a large chunk of a small market than a small chunk of a huge market. Aggressively segment and profile your customers.

What is your customers pain?

How competitive is the marketplace? How many competitors serve your target market already? What are your competitors strengths and weaknesses? Can you realistically compete with them?

The most important part of market research is to come out with a value proposition. A short statement that says what you do for customers, and why you do it better than others.

Why will people buy from you?

Especially if you’re entering a mature market, what makes you different that people will buy from you?

Are you selling t-shirts? There are hundreds of sites that sell t-shirts, why will people buy from you? Just because you don’t know of them, doesn’t mean they don’t exist. Do extensive searches. Use lots of different keywords for your searches. In a mature industry, there are always competitors you don’t know about yet.

If you are using your brand or your personality as the reason people will buy from you, consider how much effort and how long it takes to build a brand.

What resources do you have at your disposal? (The wider the market, the more resources required)

Who will handle customer enquiries? Who will be shipping the products out? How will you get stock?

Compare these two different scenarios.

Scenario 1: You run a 10 person manufacturing business with established sales and established procedures. You want to expand sales by selling online. You’ve got customer service people and a warehouse with a warehouse manager. You’ve got plenty of money to spend on profitable advertising.

Scenario 2: You work full time and want to sell some products on the side. You’ve got a bit of savings, but want to expand the business from profits it generates.

What leverage can you take advantage of?

You can see how having access to different resources changes the approach. In Scenario 1, the business can hit the ground running. It can build links from existing industry contacts, has staff that can add and update products, has shipping policies and procedures figured out already, and has an existing reputation and brand that can be used.

In Scenario 2, there is a lot of work to be done. The business can only be grown from profits, which won’t be much at the start. It is a lot of work for one person to build up a brand, build links, build content, add products, do customer service and send out products.

As you move up the continuum of more resources and leverage, you will be more successful. As Alan Weiss says, “You can cite me exceptions, but I’m giving you the rule”.

Questions to ask your developer

What features will the store have?

The ecommerce software market is flooded. There is a huge problem. There are a lot of ecommerce products getting peddled for $200, and people are buying them. In itself that isn’t a problem, but the problem occurs when customisation is inevitably required.

It blows my mind that one of the question’s people ask me when they want an online shop is, “How many products and categories can I have on my site?”. It goes to show the sad state of ecommerce solutions in the market. The marginal cost of having 5000 products compared to having 50 products, is negligible.

The real cost of having 5000 products as opposed to 50, is that your business is bigger and you need more features.

The most important features as you go up the scale are:

• What shipping options are there? Shipping is way more complicated than it sounds. If the products you sell vary greatly in size or shape or weight, make sure you have advanced shipping calculations or that you’re willing to eat some variance.
• Do products have options? You want the ability to set multiple sizes or multiple colours
• Can the store calculate taxes? Again, calculating tax is annoying. What’s also important is if you charge tax to some regions and not to other regions.
• What payment methods can the store accept? Do you need to be able to integrate with credit card companies?
• What is order processing like? You want to be able to set statuses for orders, and track shipments if you’re getting over one order per week.

How big is the online market?

A web developer or marketer will be able to give you an idea of the size of the market you’re entering. In a small market, you don’t want many competitors. In a big market, you want an angle or niche that you can dominate that separates you from the competition.

You can also find out the market size yourself using online tools. One good one is the Google Adwords Keyword tool.

How is the store optimized to improve sales?

Simple and clean converts better than loads of content. Easy to use will always trump “looks design-tastic”. (Design-tastic is my snide way of saying that a site has been over-designed and looks really awesome and clever but it’s actually totally useless)

The checkout process should be extremely clear and simple. Ideally you want a checkout that has been tested for conversion rates.

Something else you should keep in mind is that people are familiar with online shopping now. They know what a “cart” and a “basket” is. Stick with conventions. People expect the ecommerce experience to be a process of

• Browse categories to find the category I want
• Have a summary view of all the products
• Click on a product to get a detail view
• Add to cart
• View My Cart
• Enter their details
• Pay

You don’t want to deviate from that structure too much otherwise you run the risk of confusing customers.

Similarly, don’t use flash based ecommerce. Yeah it looks flashy, but they generally border on design-tastic and don’t act as expected. Not to mention they’re a nightmare to update, not as good with SEO, not as flexible and not as accessible.

How extensible is the website?

There are a lot of content management systems that do ecommerce, and there are a lot of ecommerce systems that will also let you have other database driven content.

When you’re planning an ecommerce site, look as far into the future as you can, and decide what other features you might need down the road. The last thing you want to happen is to be stuck on an ecommerce platform that doesn’t allow for expansion, or be stuck on a simple ecommerce platform because you needed other features in your site.

Related posts:

1. Shoppers search online: Take advantage of emerging buying trends
2. New website – eCommerce Economy
3. E-commerce, 3 months in. What I’ve learned so far