Over the past few years, I've spoken with a lot of prospective clients who had some pretty unrealistic expectations regarding doing business on the Web. I'd like to share some of those misconceptions and explain why some businesses just don't translate well to the e-commerce paradigm.
The primary misconception is that the technology involved somehow makes it easier to run a business. That just isn't true. A Web business has most of the same problems to solve as a brick-and-mortar business. There are differences, but it is just about split as to whether those differences make doing business easier or more difficult. You still have all the same core business functions. All that has really changed is your customer interface. You still have marketing, operational, financial, and legal issues to resolve.
Unless you are technically inclined, the technology itself can become a barrier between you and the control of your business. Be prepared to learn how to use shopping cart software to manage your product line and orders. You'll need to learn the basics of digital photography and image editing. You'll probably need to learn about how on-line payment works and how to answer questions about the security of your Web site. You may need to learn how to use software provided by your payment gateway to manage credit card payments. Sometimes these functions are integrated with the shopping cart software, but not always. You'll also need to learn how to use a Web page authoring tool, or be prepared to pay someone else to update your site for you.
Another big misconception is that running a Web business is cheaper. While that may be true of a garage-spun startup, you'll find that your overhead starts to keep pace with a brick-and-mortar as soon as you add a few employees. For an extreme example, look at Amazon.com: they've been in business for several years and *still* have not turned a profit because it takes a lot of money to operate their business.
A small business that's a great candidate for the Web is one that offers a unique product line that can be produced on demand. A unique product line is best because it is very difficult to compete against companies like Wal-Mart on mass-market items: your shipping charges eat up what little margin you have. Being able to produce your product on demand is best because you don't have your cash tied up in inventory. The *ideal* web-based business is one that delivers an electronic payload, like software. Here, your Web site handles everything from taking the order to accepting payment and delivering the product.
Of course, the aforementioned business model assumes that you produce what you sell. What if you resell? Well, you had better come up to speed fast on how to properly manage an inventory. And it's harder than it sounds. In order to ship within the recommended 24 hours, you need to have the ordered items on hand. (You can try letting the supplier drop-ship directly to your customer, but resolving disputes in that scenario can be frustrating.) You need to have enough items in inventory to satisfy orders, but you don't want to tie up too much of your money in inventory that may never sell. Maintaining that balance can result in manual hair loss, and failing to do so is a common cause of business failures during economic downturns.
The final misconception I'd like to mention is that running a Web business takes less of your time. While it is true that you don't spend time standing behind a counter waiting on (and for) customers, you do have to spend time responding to e-mail queries and handling the orders you received through your site. I don't know about you, but I spend more time that I care to think about dealing with e-mail. With an electronic order, you have to collect the items yourself, pack them carefully for shipping, and deal with getting the packages to the shipper. I'll bet it takes you longer to do all that than it does for a clerk to put a counter customer's order into a bag and hand it to her.
I don't mean to sound like I'm trying to discourage people from doing business on the Web. That certainly isn't my intent, particularly since I am in the business of putting businesses on the Web! My goal here is to help you take a long, hard, realistic look at the issues before you dive into something that could never have worked for you in the first place. Armed with an understanding of the issues, you improve your chances of success significantly. Now, go forth and e-transact!
If you have any comments or suggestions about this article or any e-business topic, send a message to opinion@LogicalExpressions.com. We'd love to hear from you.