Are E-commerce Solutions a Good Business Option?

Information Technology (IT) revolution has been widely touted as having equal if not greater impact on us than the industrial revolution. The application of electronic commerce or e-commerce has led to many changes in the way business is conducted. The understanding of e-commerce solutions, the different options available today, issues regarding web hosting, difficulties in creating a merchant account and the like will be discuused in order to make effective business decisions through e-commerce solutions.

What exactly are E-commerce Solutions?

By definition electronic commerce or e-commerce is the purchasing or selling of goods or services and the transfer of funds in any way using electronic communications in inter-company and intra-company business activities.

An e-commerce solution is a solution to conduct business using technology, through an intra-, extra- or Internet solution. There are two types of e-commerce: Business-to-consumer (B2C) e-commerce involving companies selling products or services to individuals; and business-to-business e-commerce (B2B), in which companies sell to other businesses.

E-business, as shown in the Fig 1, by contrast, is an umbrella term that includes e-commerce and refers to the use of the Internet and private intranet to transform a company’s value chain (i.e. internal processes, supplier and partner interactions, and customer relationships) with the ultimate goal of creating value for customers. A firm with an effective e-business strategy develops the capabilities needed to improve the flow of information and business intelligence among partners, suppliers, employees and customers. It also aims to solve problems for all parties that comprise its extended value chain.

What are the different types of E-commerce Solutions?

Opportunities evolve rapidly in the e-commerce market segments. Here are the different types of e-commerce solutions you can opt for:

Business-to-business (B2B) e-commerce: B2B is defined as exchanging of structured messages with other business partners over private networks or Internet to create and transform business relationships. B2B e-commerce is companies buying from and selling to each other online. But there's more to it than purchasing. It's evolved to encompass supply chain management as more companies outsource parts of their supply chain to their trading partners. B2B applications aim at improving and simplifying the various business processes within a company and increasing efficiency of transactions among companies that have business relations. The companies use B2B in order to achieve faster and error-free transactions, control and maintain limited inventory, efficient product refill etc.
 

Business-to-consumer (B2C) e-commerce: B2C ordinarily refers to on-line trading and auctions, for example, on-line stock trading markets, on-line auction for computers and other goods.  B2C e-commerce refers to the emerging commerce model where businesses /companies and consumers interact electronically or digitally in some way. One of the best examples of B2C e-commerce is Amazon.com; an online bookstore that launched its site in 1995. This type of e-Commerce application has grown during the last few years especially after the widespread use of the Internet and the improvement of the services offered over the Internet.  The solution can support effective promotion of products and services to all kinds of potential customers.

Consumer-to-business (C2B) e-commerce: C2B is a rather peculiar Internet phenomenon. An example of C2B e-commerce could be the following. A student wants to fly from London to New York, but has only £200 ($320) in the bank to pay for this round trip. They put up an ad in an Internet C2B site, seeking airlines that are willing to offer the transatlantic round trip for £200 or less. The beauty of the Internet is that it brings together a large number of customers to create a marketplace that a number of airlines (that will have to otherwise fly with empty seats) will be interested in.

Consumer-to-consumer (C2C) e-commerce: C2C is the Internet equivalent of the traditional classified advertising market. You put up an ad on the Internet for other consumers to respond to (similar to a newspaper classified ad). The Internet makes the process of placing an ad cheaper, faster and easier.

Consumer-to-government (C2G) e-commerce, Business-to-government (B2G) e-commerce and mCommerce (Mobile commerce) are other options that are gaining importance today.

Are there E-commerce Options for every business?

People use e-commerce for purposes ranging from fund-raising to selling products. Is there a suitable solution for everyone? Yes! The options range from "easy to set up" and "cost-effective" to comprehensive and expensive. Learning all the options and making the right e-commerce solution choice is the key. You will need to identify an e-commerce solution that suits your need, technology and budget.

Some of the options are:

# 1. Store Front Option

If you are a small business and e-commerce is not a significant part of your business, a "store front" could be a good option for you. You can sign-up with a store front solutions like www.storefront.net. This is an option that requires very little technical knowledge and can be completed by the average store owner.

You will have to start building your product catalog by adding products to the store front site on the e-commerce provider's site. Everything will take place within that site (i.e. storefront.net).

Customizing the catalog and the shopping cart will need a little design knowledge and some patient hours of online time. Since you use the store front's catalog, shopping cart and payment facilities, you will save quite a lot of time, but you will be restricted by their facilities. Integrating product pages to your site will be possible to the extent permitted by the storefront service provider.

The store usually comes with a tie up with any one of the available payment processing services.

You can find several store front solutions like StoreFront.net. Other store front options are YahooStore, Dxshop and Bigstep. Among them, Bigstep is a free service. StoreFront is one of the the best store building-solutions available. Look at the comparison table for more information.

# 2. Verisign Payflow Option

If you have a medium-sized business and e-commerce is not the focus of your business but is an integral part of it, then solutions like Verisign's Payflow Link could be ideal for you. If you use this option, you will develop your own product database, product catalog, and shopping cart. Payment will be processed by Verisign.

This option is costlier compared to the store front because of the development involved but you will have better control over your product, presentation and integration. You will need to hire a web developer to assist you if you chose this option.

One of Verisign's two solutions called Payflow Link, will be good for medium budget businesses which have less than 1000 transactions a month. Since the payment processing is carried out in Versign's server, you will not need to host your site in a secure server. The other solution called Payflow Pro is costly but comes with full customization, administration and premium support.

# 3. Complete Customized Solution

If e-commerce is critical to your business, then a completely customized solution with www.cybercash.com or www.authorize.net would be the right option for you. If you want to build an amazon.com, this will be the best choice. You will need a competent technical team to develop and implement this solution.

The product database, catalogue, shopping cart, order processing and payment processing will take place from your website. Your site will be hosted on a secure server. Because of the inherent security risks, your site will need to be certified by Verisign once implemented. You will have absolute control on how you want to set up your e-business.

This option calls for much more involvement from your end and is the most expensive. You will have to pay for the secure server, web development, and e-commerce components. The control over the site will always will be in your hands, expansion is easy and the professionalism is high, but it comes at a cost.

Since this solution is developed from scratch, it involves a great deal of time, money and dedication, but this can give you a robust, highly customizable, functionally rich solution for your e-business.

# 4. Web Hosting Company Solutions

If you have a web hosting company which offers an e-commerce option, then it may work out well for you. Look for a web hosting company which carries a store front along with its e-commerce hosting plan. It will provide a secure environment. Some other steps like customization could be cumbersome, but because the cost is low and you can start quickly, this is a good option.

What Must You Do For All Options?

Before you can choose one of the above options, there are a few things you need to do. These are costs that apply to all of the above.

Set up a merchant account: An Internet merchant account is needed for any merchant in order to accept credit card processing and transfer of funds into your bank. You have to ask your bank to set up a merchant account for you through one or more financial institutions like American Express. You can set up your merchant account through your store front solution provider or payment processing company and the charges will be less. After setting up a merchant account, you will receive a MerchantID which you will use in your store front set up.

Register a domain name: You need to get a domain name for your online business. It could be www.yourbusinessname.com. It is good to get a domain name that speaks about your business. Many registration services for domain names are available, like registrar.com

Get Verisign certification: This is optional but recommended. E-com sites need to be secure and Verisign is the leading encryption provider. You can buy their certifications and install them in your site for more security. Verisign 128 bit DES strong encryption - decryption mechanism.

Find a web hosting company: This is an important step, since your whole business is going to run on your hosting company's server. You can select web hosting companies based on the technology (UNIX, NT) and your budget at hostindex. Take a look at our article on our site on how to find a good web hosting company.

What is a merchant account?

A merchant account is the bank account that the merchant establishes with the Merchant Bank (as the Acquirer Bank) into which the amounts of the credit card charges made at the Merchants business are deposited. A merchant account is essentially a line of credit extended to the merchant by a bank. The amounts charged by the merchant's customers are credited to the merchant's account upon "settlement". There is the possibility of some returns, however, and other charge backs, caused by insolvent or unsatisfied customers or fraudulent transactions. The money however has already been advanced to the merchant. So there is some risk to the merchant bank. The merchant bank has some security because presumably there will be more credits coming each day to cover the amounts charged back, but that may not always be the case with unscrupulous merchants. Thus the creditworthiness of the merchant is an important factor in getting a merchant account.

Once we have the Merchant Account in place we then have to Sign up for the following:

Payment Gateway: A mechanism operated by an Acquiring Institution or designated third party that processes payment transactions for merchants, including payment instructions from card holders

SSL – Secure Socket Layer - a protocol (data transmission procedure) transparent to the user that implements three cryptographic assurances— authentication, confidentially, message integrity— and provides secure key exchange between an Internet Browser and Internet Server. Its main purpose is to make Internet e-commerce users feel secure about sending their financial information over the Internet. SSL does not offer non-repudiation. Connections always use the prefix https:// (Secure HTTP) instead of http://.

Once we have this in place we then need to write the Processing software that will integrate all these entities.

(Source: Verisign : Online Payment Process – What you need to know)

What are the steps required to implement an E-commerce option?

The implementation of an eCommerce application involves the following:

• Market Research
• Target Audience and Planning
• Project Design       
• Analysis and Design of the Application       
• Software Development & Integration       
• Front-end & Content Development       
• Testing & Training
• Deployment
• Long term Operation

What are the important decisions an e-commerce provider needs to make before he starts developing ecommerce solutions?

Regardless of the approach, all companies should keep in mind a few pointers to reduce risks and ease transition:

Don’t forget the old rules: While the Internet may make doing business faster, easier and even cheaper, it does not change the old precautions – read the contract and understand the risks.

Anticipate problems: Even the best technology will fail sometimes; companies must plan for this by including liability provisions in contracts, and establishing contingency plans for project participants and ensuring security precautions in online transactions.

Invest in good infrastructure and training: Project web sites and extranets can streamline an operation, but only if a company has the technology and employee knowledge base to use it.

Why are E-commerce Solutions a great business option worth considering?

By making a few mouse clicks entrepreneurs can successfully complete an online commercial transaction. Having an e-commerce solution today has become a necessity. Here’s why: 

• Moving a business to the Internet is a sound strategy for increasing business volume- making a business instantly international, and opening up possibilities that can never exist in the "real world”.
• It doesn’t matter even if businesses are small and localized. Going international will facilitate better support since e-commerce solutions will make it a 24×7 business.
• A business with a strong Internet presence can reduce staffing and office space overhead which can result in more competitive pricing of services and products
• The internet can provide a more economical form of advertising. A website with ecommerce capabilities actually draws people back; building brand loyalty and awareness which is rare in mainstream advertising.
• The fear of clients not using the internet is becoming a myth. Consumers have become net-savvy and if clients aren’t using the internet today; soon they will have to! “Mainstream” advertising will increasingly play a bigger part in directing people to the website.
• Integrated payments with Banking and Accounting are possible thereby providing robust support for accounting systems.
• In eCommerce, the interaction with the system takes place in almost real time and therefore allows the customer or bidder to respond more quickly and reduces the lag time between discussion and purchase.

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