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Frequently Asked Questions
Let's cut to the chase. If you're like most people, you have questions, and it's likely that some of them are answered right here.
What kind of person does it take to run
an online store?
An aggressive one! Running an online store takes the same kind of personal traits necessary to run any business. You have to be committed, a bit of a risk taker, willing to work long and late hours, and driven to succeed. Being a little crazy doesn't hurt either. Online stores are a new frontier.
You also have to be organized and able to deal with setbacks without flipping out. You have be committed to providing better customer service than your competitors. And if you ever want to grow past a one- or two-person operation, you need to have vision and a clearly defined plan.
It also takes someone who is willing to learn and change. Internet commerce is a growing field that will mature over the next few years. Be prepared to grow with it.
How much will it cost to get my store
up and running?
There are so many variables, it's tough to put an exact figure on it. Will you hire a lawyer and an accountant or will you try to deal with incorporation and tax issues on your own? Do you plan to work out of an office or your home? Will you have any employees? Do you plan to start with a large inventory of products or will you order as demand warrants? Can you build your own Web site or will you hire someone to do it for you? All of these factors will determine how much money you spend to get your store launched.
Tronix's entire initial investment was about $12,000. Of course, we didn't have much of a cushion for inventory, but in our case we only stocked what had already been ordered.
What equipment and software do I need?
Okay, there's a bit more than that. You'll need to download the top two Web browsers: Netscape Communicator (or Navigator) and Microsoft Internet Explorer. You'll have to choose e-mail and newsgroup reading software, a File Transfer Protocol program to upload files to your site, a visual design and HTML code editor, image editing software, a point of sale program, shipping and tracking software (available from the various shipping companies), America Online, CompuServe, a scanner, and possibly a digital camera.
To find out what your options are, check out Chapter 6: Launching Your Online Store.
You'll also need a good deal of equipment for shipping purposes. Packing materials, boxes, a shipping table on which to pack boxes, a scale to keep shipping charges accurate, etc. For more about shipping-related needs, see Chapter 17: Everything About Shipping.
Can I run my store out of my house or apartment or
should I find an office?
That largely depends on the volume of business you're doing and, of course, the size of your home. If you're just getting started, don't have an overwhelming inventory, and don't have the money yet to spend on an office, working out of your home may be your bestor onlyoption.
Also, if you have an empty basement or garage in which you have absolute privacy and which is capable of being wired for phones and a cable modem, using this space to limit your overhead might be a good idea. However, as your business grows, you'll probably need an office for a number of reasons.
One is the separation of work and the rest of your life. No matter how hard you try, you'll never be able to escape work if it's just a few steps away. Although starting any small business requires a strong commitment of both time and effort, you need to be able to get away from it or you'll eventually grow tired of your so-called life and bag the whole thing. And no matter how many times you tell your kids to stay away while you're working, eventually one of them will skin his or her knee and coming running for your help. Or they'll just decide they're bored and want to play.
Additionally, as your business grows you just won't have the space to run your store out of your home. You also have to be aware of local zoning laws.
So, to answer your two-part question, yes and yes.
How many employees do I need? Can I do it myself?
That's the beauty of running an online store. You can do it yourself. Tronix started that way and is still a one-person operation (with a friend occasionally helping out). Sure you'll need some help getting starteda lawyer, an accountant, and someone to design your site if you decide you can afford it or realize you don't have the ability to do it yourself.
Other than that, you can go it alone and add employees as growth warrants. You'll work long and hard, but that's a given for any small business owner. And no matter how big your business gets, you'll never need to hire someone to staff the cash register and lock up on Saturday night.
How much money can I make running an online store?
That depends on what you sell, how organized you are, how well you publicize your store, etc. Much like a traditional store, your future is in your hands. Some people start a small community restaurant and they're happy to remain at that level. And some become McDonald's.
The opportunity to make money on the Web is expected to grow dramatically as the public becomes more aware of its advantages and less concerned about placing credit card orders. Commerce on the Web is expected to grow from $2.6 billion in 1996 to more than $220 billion in 2001, according to a report by International Data Corporation (www.idc.com). The report, the highlights of which are available on IDC's Web site, also said the number of devices accessing the Web will grow from 32 million in 1996 to more than 300 million by the end of 2001.
The opportunity to make a lot of money is there and is only expected to increase.
What are some advantages and disadvantages of
running an online store?
There are plenty of both. First the bad news:
When you run an online store, you're at the mercy of your Internet Service Provider. If the ISP goes down, you go down. It is also easy for competitors to get started and is, therefore, a very competitive field. Since e-commerce is still relatively new, your pool of customers can be small, and you have to really reach out to those potential customers. Since you don't have a storefront on Main Street, people aren't going to just walk by, poke their heads in, and buy something. If you don't make yourself known to potential customers, they may never find you. And if you treat one of those customers poorly, word can spread very rapidly on Usenet.
You can also fall prey to stores that have the ability to stock larger inventory, provide better customer service, and do more extensive marketing, but that is also true of traditional stores. You either need some technical ability or the money to pay someone who does. There are security and fraud issues, and running an online store can be extremely time-consuming.
Now the good news:
Your startup costs are potentially much lower than those of a traditional store owner. Operating on the Web allows you to have an immediate international sales presence from wherever you decide to set up shop. Speaking of which, you can set up shop anywhere in the world provided you have good Internet access. There is no need to relocate.
You can also create a personalized shopping experience. Depending on your budget, there are a number of high-end software products that help guide shoppers to the items they want. You have the option of providing electronically distributed goods for immediate fulfillment. Small operations with slim inventories can more effectively compete with larger companies. As long as your ISP doesn't go down, you can be open 24 hours a day, 365 days a year without hiring anyone.
If that isn't enough, there's a book of more reasons to follow.
How much content do I need to generate?
You can either generate your own product descriptions or rely on the manufacturers' literature, assuming you don't make the products you sell. The content for pages dealing with company policy, common questions, what's new, shipping, etc. will be provided and updated by your company. News and reviews of products can be culled from other sources.
You'll also have to type in prices and product descriptions, even if they've been provided for you. Although you'll have to generate a large percentage of your site's content, it won't account for the majority of your total workload.
Are there any special laws and regulations
covering online stores?
In short, yes. In medium, get a lawyer. In a long-winded answer, there are a plethora of laws that govern both the online and retail universe that will affect your business.
A lot of Internet law has yet to be developedcases either haven't come up or are still pending. As a store owner, you need to stay on top of the news and have a lawyer who can keep you apprised of the shifting legal winds. Some good online legal sources are FindLaw (www.findlaw.com), the Cyberspace Law Center (www.cybersquirrel.com/clc/), The Cyber Law Encyclopedia (http.//gahtan.com/techlaw/home.htm) by Alan M. Gahtan, CyberSpace Law (www.ll.georgetown.edu/lr/rs/cyber.html) by the Georgetown University Law School, and the Web Law FAQ. (www.patents.com/weblaw.sht).
Many of the legal issues are the same as those dealt with by traditional stores: advertising regulations, export laws, customs, guidelines for shipping perishables, etc. Interstate commerce as it pertains to the Web is another unresolved issue.
The only legal advice we're qualified to give is this: consult an expert. You should never assume you are sure about anything. If you have even an inkling that you might be misinterpreting or overlooking a law, talk to your lawyer. There's nothing like a temporary shutdown and a fine to kill your cash flow.
How do I find a good lawyer?
There are plenty of lawyers out there. Some people would say there are too many. It's important to find a good business lawyer who is sensitive to your needs as a new business owner, if you're just starting out. You should be able to find a good lawyer without dragging your business down with legal expenses.
If you don't know a lawyer, ask around. Someone you know will almost surely be able to point you in the right direction. If not, ask the owners of similar-sized businesses to recommend a lawyer.
What products sell best on the Web? What should I sell?
Most of the best-selling products are small items like books, CDs, video games, software, and so on. Don't limit your options to these. What you decide to sell is up to you. Something to think about is a computer-related product since the majority of people shopping online are computer owners. Tronix has been successful in selling computer games because the people who buy them are likely to be online.
You should also sell something you are enthusiastic and knowledgeable about. If you think roughing it is not having a cable modem for your Internet connection, don't sell hiking gear. And if you think punk is the only music worth listening to, don't sell violins.
Of course you may be just taking your traditional store online, in which case you'll know which of your products sell best. Now we know what you're going to ask next.
Once I've started selling thinks, how do I get
the products to the customers?
You have a number of shipping options you can make available to your customers. Depending on how quickly your customers want their products, and how much they want to pay in shipping charges, you can ship using everything from standard first class mail to FedEx First Overnight.
Shipping isn't as complicated a process as setting up your shipping accounts and figuring out which company or companies best suits your variety of needs. You'll probably patch together a quilt of shipping coverage that meets all the needs and demands of your customers. To learn more about this, ship yourself to Chapter 17.
Can I make my store almost totally virtual?
Your marketing and sales are virtual. It's possible to run a completely virtual store in which you never see a product and never pack a box by using fulfillment companies. Expect to see an increase in these large warehouses, which store your inventory for you. Web merchants pay a storage fee and when orders come in, they simply tell the warehouse what to send and where to send it. Passing along the risk of holding inventory is the difference between being very virtual and totally virtual.
Is there anything I can sell and send directly to
my customers over the Web?
The Web isn't just a place to sell goods, it can also be an excellent distribution medium for items, provided they are electronically transferable (please e-mail us if someone has figured out how to download milk and eggs).
While most stores sell goods that have to be shipped to users, there are number of stores that don't. For example, music stores eventually will transfer your new CD to you electronically. Many software stores are already turning to ESD (Electronic Software Distribution) instead of shipping the product to the user on disk or CD. The software is downloaded directly over the Internet. Electronic distribution is not limited to music or software. Expedia (expedia.msn.com), Microsoft's airline tickets and travel services "store," sells airline tickets that are nothing more than a password to be given at the gate. This same type of password sale will eventually be used for all sorts of things like car rentals, hotel rooms, movie tickets, concert tickets and more. Eventually these items could even be transferred to so-called smart cards, which you just slide through a scanner as you walk through the terminal gate or into your favorite theater.
Three keys to electronically distributed sales are security, bandwidth, and record keeping. Security is needed to protect items like distributed music and software from being easily replicated by end-users. Also, since the product itself is stored on a server, no one wants to have a virtual break-in where a hacker can copy all the wares and distribute them for free. Bandwidth is crucial because end-users need fast access like that provided by a T-1 or cable modem to receive a full-length CD, movie or video game.
Finally, record keeping is critical because it's harder to count how many copies have been properly sold through electronic distribution. That is why companies have created sophisticated and secure systems that will tell companies how many downloads of a top software package have been properly handled by a particular merchant.
The technology is still catching up, but it won't be long before a number of major products will be bought and distributed directly over the Web.
Should I consider combining my traditional store
with an online store?
Yes. Well, maybe. Let it be said that not everyone has to be on the Web. A store that's doing well might not do any better if taken to the Web. And a struggling store won't necessarily be saved by the Web. Sometimes building a site can even be a mess, sucking out money you have and creating headaches you don't want.
However, existing traditional stores have a number of compelling reasons to get online and compete for sales. The most obvious reasons to get online are to expand sales and avoid losing sales to competitors who are online. However, why take the "scared stiff" approach? Existing stores should be compelled to go online by the inherent advantages they have over cyber-only competitors.
An existing store already has a lot of the infrastructure set up for such an operation. It will already have stock, distribution relationships, shipping accounts, product knowledge' a name, and a customer base. The trick is transferring your store's ambiance, reputation, and operational style so it shines through on the Web. Let your traditional customers know you're on the Web by posting your URL in your store and on all of your mailings, stationary, business cards, etc.
Maine mail order and retail behemoth L.L. Bean (www.llbean.com) is a great example. The company thrives on its reputation for excellent customer service, product knowledge, and outdoors expertise. When L.L. Bean launched its carefully created Web site, this was apparent. L.L. Bean didn't immediately accept orders on its site, explaining that it would wait until its customers' transactions would be guaranteed to be safe. L.L. Bean also warned that color representation of items shown on the Web was not an exact match to reality. These were classic reinforcements of L.L. Bean's customer service reputation.
L.L. Bean also launched with an extensive database of park and camping site information. Not only was this interesting content to offer as a draw to the site, but it also reinforced L.L. Bean's image as an expert in camping and outdoor activities.
As LL Bean shows, traditional retailers can benefit from having a Web presence. However, you don't have to rush and stumble. Instead, create a true cyberspace equivalent to your existing store.