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Thursday, 06 November 2014 00:10

Small businesses must commit time, resources for e-commerce to pay off

Written by  Jill Hinton
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According to the U.S Census, 6.4 percent of all retail sales are made online, but for many small businesses, selling products and services over the Internet can be daunting.

While most brick-and-mortar businesses have managed to at least put up a website, when it’s time to take the next step and start accepting credit cards, many small businesses hesitate. Only about a quarter of all small businesses have an e-commerce function at all on their websites, a number that hasn’t changed much in four years.

But small businesses are rethinking their strategies.

According to Forrester, analysts believe the next few years will show e-commerce levels increasing, making up between 10 and 15 percent of all U.S. retail sales.

And for many small businesses, those sales could mean the difference between profits and losses.

Manufacturers and e-commerce

Walker-based Carter Products Company Inc., which manufactures bandsaw parts as well as various laser products, is one of the few local manufacturers that sells its products direct to consumers through its website.

President Lee Perez said his company was unique in the market when it first launched e-commerce features more than a decade ago.

“We were a little ahead of the game, but our product is very specialized and there’s not a lot of other companies in the world that make what we make, so we have a lot of very direct contact with the customers,” Perez said.

Perez is also careful to point out that Carter works hard not to undercut the dealers and retail outlets that carry its products.

Besides allowing the company to have a closer relationship with the people who use its products, Carter’s e-commerce site allows the manufacturer to bring products to market much faster than in the past.

“We are a company known for innovation, and oftentimes, we’ve developed products that don’t fall into the standard catalog retail cycle, meaning these catalogs in a lot of cases print their information in the summertime,” Perez said. “If you’ve got a new product, it’s sometimes really difficult to wait six months to introduce it via the catalog cycle. Being able to introduce these things on an e-commerce website gives us that capability to kind of kickstart the market.”

What are my options as a small business?

Small businesses looking to get into e-commerce have a number of platforms such as Shopify, Squarespace or Weebly that they can use to set up an e-commerce website, said Joe Force, lead UX (user experience design) specialist at Universal Mind in Grand Rapids.

“The hard part comes after: How will they drive traffic to the site? Do they have the budget and time to market the site properly,” Force said. “If you build it, they won’t come unless the business engages with potential customers (through) advertising, social media, content marketing.”

Missy McCall, who owns BoxedGR, a Grand Rapids-themed subscription service that sends a monthly box with locally based samples and gift cards, uses a combination of Stripe, a payment processor that competes with PayPal, and Moonclerk, an app that works with Stripe.

“I don’t have a brick-and-mortar business, so e-commerce is absolutely essential,” McCall said. “I spent a lot of time researching this. Stripe has lower fees than a lot of others and is volume-based, which is great for smaller businesses like mine. I also didn’t have to sign a contract with Stripe.”

McCall’s advice for other small businesses is to do your research and keep an eye out for hidden fees.

Small business basically have three options when it comes to e-commerce:

• Use another website, such as eBay or Etsy (for hand-crafted or vintage items). There are no upfront fees, just monthly subscription fees that increase depending on your needs. Transaction fees for these sites vary. eBay, for instance, charges a fee when you list and a fee when the product is sold, based on a combination of a fixed amount and a percentage of the product’s value.

• Businesses can also build their own e-commerce system, which is expensive but can be highly customized to each individual company’s needs. Businesses should research this option once their volumes are high enough to demand it.

• Finally, there’s the hosted solution option, which in many ways is the best of both worlds. Hosted solutions include a custom website with a business’ own domain name, but to manage the payments, they use out-of-the-box technology such as Shopify, Weebly and Squarespace. There are no upfront fees, but the technology often requires a monthly or annual subscription. Lower-end plans often have a per-transaction fee. However, all hosted solution plans have a credit card processing fee.

Changing consumer spending habits

Thanks to the influence of online retailers like Amazon and eBay along with the explosion of social media, online business-to-business purchases are being made by “prosumers,” a buyer described as a cross between the professional and consumer. Prosumers have been conditioned to prefer self-serve models, rather than the typical business-to-business or business-to-consumer model with sales reps and long wait times.

Prosumers are not only affecting small businesses, but large, multi-national corporations as well.

Citing a shift in consumer shopping habits, Rockford-based fashion and apparel marketer Wolverine World Wide Inc. announced earlier this year it would close up to 140 of its brick-and-mortar operations, mostly the Stride Rite stores it acquired in 2012. In their place, the company planned to invest in e-commerce websites that serve customers where and how they want to shop, Chairman, President and CEO Blake W. Krueger said at the time.

“Consumers have embraced the ease and convenience of online shopping, a trend that has only accelerated for the last several quarters,” Krueger said in a July conference call to discuss the company’s quarterly results. “Today’s consumers demand a sophisticated omnichannel shopping experience and have the available technology to make informed shopping and purchasing decisions. As a company, it is paramount that we evolve to meet and exceed the needs and demands of this new consumer.”

The company said last month that it anticipates using the cost savings from closing the stores to fund e-commerce, mobile and other online consumer channels.

“The strategic realignment plan has been executed to address the shift in consumer shopping habits, optimize our consumer-direct operations, drive profitable growth, and ultimately increase shareholder value,” Krueger said.

Cost of adding e-commerce

Small businesses have many considerations when it comes to deciding whether an e-commerce element is right for them. However, Force from Universal Mind says e-commerce is definitely not for every business.

“Not only does it not fit for some businesses, if the business is not committed to the time and energy, it can reflect poorly on their entire business,” Force said. “People expect an answer now. If you are not prepared for the 24/7 commitment required for e-commerce, or don’t have the staff to handle it, you may want to wait.”

He said a good middle step for companies looking to ease into e-commerce is to optimize their sites for mobile technology first, then look at adding e-commerce.

BoxedGR’s McCall recommends doing lots of research on different service providers and platforms.

“Think every step through and really do your research,” she said. “Price the different options out at different volumes. Read customer reviews.”

McCall also suggests thinking about how your volume will change in the future and how that will affect the fees. Another key consideration to research is how quickly a business will get paid.

“Also, think about ease of use for your customers. Some people don’t like using PayPal, some only want to use PayPal, some don’t like entering their credit card info directly into a website, some only shop online with their credit cards, etc.,” McCall said. “You may want to have a couple of options for them.”

Read 4448 times Last modified on Thursday, 06 November 2014 00:25

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