NZ Business May 08

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              About e-commerce
E-commerce is a big step up from a basic website. How can small business owners ensure an online
  sales channel pays its way and helps grow the business? Vikki Bland talks to those in the know.

         mall businesses contemplating an                                                         for eMedia says before outlaying money for
         e-commerce website would do well                                                         e-commerce, businesses first need to know
         to start with a realistic budget. Whilst                                                 how to drive people to the site, what path
it is possible to launch a basic e-commerce
site for a few thousand dollars; customised
features, site tools, marketing and legal
expenses soon add costs.
                                                       “   An e-commerce
                                                         site needs to be
                                                           structured so
                                                                                                  visitors will take through the site, and how
                                                                                                  search engine optimisation will be achieved.

                                                                                                  Getting it right
      David Kelly, a director for e-commerce              that visitors are
consultants Zeald, says it’s surprising how             persuaded to buy                          All three consultants believe e-commerce
many customers have unrealistic ideas                                                             is an excellent and successful channel for
about e-commerce site costs.
      “We’re amazed how many times people
tell us they ‘want a site like TradeMe.’ When
                                                                              ”                   business – but this depends on how it is set
                                                                                                  up and operated, and how well the business
                                                                                                  understands what its customers want from
we tell them a site with that functionality         ‘information only’ site.                      online sales.
would cost around $750,000 to $1 million to              “As sites get bigger and there is more        “Product and service information and
develop, they say ‘but we thought it would          integration with back-end databases, it can   a payment facility are not enough. An
be about $5000’!”                                   get much more expensive. However, it’s        e-commerce site needs to be structured so
      Duncan Shand, an online consultant            worth comparing the cost of establishing an   that visitors are persuaded to buy online,”
for Inside Out, agrees small businesses             e-commerce site with say just one full page   adds Kelly.
underestimate the capital needed for                print advertisement,” says Shand.                  He says visitors have to trust an
e-commerce as opposed to a simple                        And James Wigglesworth, a consultant     online business, and there are different

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                                                      One example of an online retailer looking
                                                 internationally is www.shopnewzealand.
                                        which offers New Zealand-made
                                                 product lines and spends $20,000 a month
                                                 on Google and Yahoo advertising. Managing
                                                 director Chris Berryman says he markets
                                                 his products in several different languages
                                                 because people’s qualities and desires are
                                                 different according to location (for example,
                                                 while the Japanese love sheepskin products,
                                                 the Koreans enjoy health products – and the
                                                 company’s Manuka Honey range is a best
                                                 seller in Europe).
                                                      Berryman says employing a large                 James Wigglesworth: “There’s no reason
                                                 multi-lingual workforce, well educated               e-commerce can’t be used to lower manual
                                                 in marketing and IT expertise, is also an            ordering, faxes, phone calls, and numbers of
                                                 integral part of the strategic business plan.        back-end staff...”
                                                 And it’s working – around 60 percent of the
Rod Drury: “Most New Zealand e-commerce          company’s business now comes from non-
ventures put too much focus on technology,       English speaking customers.                          or services or an excessively large product
when they need to focus more on selling,”                                                             range – for example books or DVDs.
                                                 Tips and realities                                        Shand adds that it’s important to attract
ways to build that trust. Examples include                                                            natural Google search engine traffic as
testimonials, guarantees or certifications,       Businesses often underestimate the amount            soon as possible; creating a Google ad
and providing enough information through         of product and service information needed            words campaign can be useful because it
the ‘About’ button on the site.                  for online sales. Instead of one paragraph           can take a while for a site to come up in
     “The more you know about someone,                                                                Google’s natural searches. And e-commerce
the more you trust them. So you need plenty                                                           businesses also need to pay attention to
of detail in that area – there is a common                                                            customer service.
misperception that one paragraph will do                                                                   “Try to over-deliver; do something
it. Tell visitors everything they would want                                                          surprising; email as a follow up, or call
to know, including business vision, time in                                                           customers and thank them,” says Shand.
operation, and areas of operation,” says                                                                   He says the ‘Web 2.0’ features of
Kelly.                                                                                                e-commerce sites – those inviting interaction
     Rod Drury, director for online accounting                                                        – can be a two-edged sword. Whilst
service, agrees the number                                                                 testimonials, customer reviews and allowing
one goal of an e-commerce business is to                                                              blogs and forums onto a site can be
build trust. When people buy from a smaller                                                           beneficial, site owners have to be prepared
e-commerce site they understand it might                                                              to take the good with the bad. However,
be a part-time venture, but that’s no excuse                                                          Shand says receiving bad feedback can be
for not communicating with customers                                                                  a useful learning curve.
regarding delivery times and any problems.                                                                 Besides online sales, e-commerce
     Drury, who is also a member of the                                                               sites can also be used for business to
TradeMe board, says e-commerce sellers                                                                business transactions, such as sales
also need to ensure supply chain issues are      Shopnewzealand’s Chris Berryman: Employing a         between wholesale business partners, says
sorted – where will the business hold stock,     large multi-lingual workforce was an integral part   Wigglesworth.
do you have to pay money up front for it?        of his strategic business plan.                           “There’s no reason e-commerce can’t be
And online service providers also need to be                                                          used to lower manual ordering, faxes, phone
funded properly because it can take a long                                                            calls, and numbers of back-end staff; it’s
time to build up customer commitment.            and one picture per item, site owners should         about leveraging the power of the Internet,”
     “We did a public offering to raise the      think about four pages and ten pictures,             he says.
money to run our online business properly,”      says Kelly.                                               One business doing just that is taxi
he says.                                              Shand, who has consulted for                    billing service, TaxiCharge NZ. TaxiCharge
     Drury says e-commerce entrepreneurs         e-commerce sites such as House of                    processes some 250,000 taxi transactions
also need to look at international trends and    Travel, Barkers, and Vodafone, says site             per month and lets customers view scanned
opportunities.                                   owners need to know what their online                copies of their used vouchers, and current
     “Most New Zealand e-commerce                proposition is, and if it is significantly            and past invoices. The online facility
ventures put too much focus on technology,       different from other, more established sites.        has dramatically cut the number of calls
when they need to focus more on selling,”        And Wigglesworth says e-commerce sites               to customer service staff, says general
says Drury.                                      should offer either unique niche products            manager Mark Lines.

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         Waking up to e-commerce potential
                                                        difference to the business,” she says.             share ideas and feedback and interact – site
                                                             Tanquay and husband Matt have two             owners are beginning to work out ways to
                                                        pre-school age children and another baby           evolve their sites through the inclusion of
                                                        due this year. Their business, which sells         free advice, blogs and forums. However,
                                                        sleep-aid devices for babies, including a          Tanquay says peoples’ enquiries can be
                                                        wrap of their own design, employs them             quite personal and, depending on the topic,
                                                        both full time, with a part time person            not necessarily something they would be
                                                        employed three days per week.                      comfortable placing in a public forum.
                                                             The business is fully online; it broke even   Additionally, administrating the Web 2.0
                                                        on the cost of set up at around six months,        aspects of a site can be time consuming.
                                                        and at two years old is at the point of being          “For personalised sleep advice, it can
                                                        able to support the family.                        take up to a week to get back to people,
Matt and Louise Tanquay.                                     “Matt is working on an affiliated              so we have a lot of articles on the website
                                                        marketing programme to grow our market             designed to offer help. I also do a blog on
                                                        share and I try to keep on top of the emails, but I find I just don’t have
       When Louise Tanquay started her business         every day. These are not only sales and            a lot of time which is why I don’t do a from home, her               product related enquiries; we also get a           blog on my site – in the longer term it is a
       previous e-commerce knowledge was                large number of enquiries for free sleep           possibility.”
       limited to ordering theatre tickets online and   advice,” says Tanquay.                                 Products sold on
       using TradeMe.                                        This is indicative of where the web has       include a wide range of devices designed
            “I have found the learning curve fascin-    evolved to in recent years. The phrase ‘Web        to help babies and toddlers sleep, including
       ating and am amazed how quickly I have been      2.0’ relates to the use of the Internet as         sleeping bags, swaddling wraps, and ‘white
       able to learn things that make a significant      an online meeting place where people can           noise’ machines. Products are sourced

       68 NZB may 08

nationally and internationally, usually arriving        “They have provided wonderful free         Not a chilly idea
in cartons which congregate in Tanquay’s           training. We have also had a lot of help and
hallway.                                           advice from Zeald.”                             When Melissa Hay, her husband Chris,
     Keeping accounts up to date, setting up            One area of e-commerce new site            and friend Rosie Henderson got together
e-commerce site payment facilities, dealing        owners may miss is the legalities of online     to launch an online site selling uniquely
with customs and ensuring supply are all           trading. Because Tanquay imports baby           Kiwi photographic images for advertising
challenges to be overcome, says Tanquay.           care products, she is responsible for           agencies and others, they decided to do
     “Initially I did all the bookwork myself      ensuring these meet legal health and safety     it properly. Rosie, a graphic designer, and
and I still do all my own customs clearance.       guidelines.                                     Melissa, who has a background in the HR
But I now have an accountant, because                   “I did take some legal advice and we do    industry, were frustrated by the lack of
otherwise you spend so much time you               have public liability insurance. But there’s    quality Kiwi imagery at affordable prices and
could be spending growing your sales, filling       not much more you can do except ensure          set out to research the market as well as the
out spreadsheets.”                                 your products meet legislation regarding        e-commerce scene.
     She says there are hidden costs               health and safety. You have to be on top of          “As part of our research, we spoke to
to e-commerce. Around 90 percent of                that if you are importing.”                     a number of photographers and designers
customers prefer to pay by credit card, with   has had a stand        about the concept and functionality of the
the rest making an online banking deposit.         at the Parent and Child Show for the past       site. This dialog was beneficial as we were
Tanquay’s web consultant Zeald, which built        two years and Tanquay says she has put a        able to modify the site to suit the needs of
the site, took care of setting up the payment      lot of effort into search engine optimisation   our customers from the outset,” says Hay.
side of the e-commerce site after Tanquay          with guidance from Zeald. The site also              Each time a customer – usually an
approached her bank and was told the bank          advertises through parenting related print      advertising agency or graphic designer –
was unable to provide an interface between         media, and asks site visitors how they came     chooses to download an image, they pay a
its card systems and the e-commerce                to hear of the business.                        set fee according to the size of the image.
payment vehicle on the site.                            “Over half our business comes from         The photographer who uploaded the image
     “[When] processing credit card                web searches and about five percent of that      then receives part of the payment. Images
transactions, you pay your payment                 is international sales. Long term we would      are checked and graded before they are
gateway and your merchant fee to the               like to expand more into Australia; there’s     accepted or rejected, and they need to
bank; and that can be up to nine percent           massive potential there and in New Zealand,     adhere to the market the site specialises
commission; then you pay your site hosting         especially with the current baby boom,”         in. Photographers retain copyright of the
fee. It is far easier to go with the solution      says Tanquay.                                   images.
your web developer integrates,” says                    She says if the business suddenly took          Once they realised they had struck a
Tanquay.                                           off or received an unexpectedly large order,    market niche, the directors of mychillybin.
     She says it’s a good idea to learn as         supplier relationships come to the fore. went looking for a web consultant and
much as possible about e-commerce,                      “I would be on the phone to our            quotes for the cost of building the website
including using free courses such as those         suppliers in the US, Australia and Canada       and setting up payment systems. While the
offered by Trade and Enterprise New                and New Zealand. Some of them [can] have        site eventually cost between $50,000 and
Zealand.                                           the cartons on my doorstep the next day.”       $65,000 to establish, the quotes the women

                                                                                                                         is the time
                                                                                                                         to change

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                        Rosie Henderson
                         (left) and friend
                          Melissa Hay –
                         co-founders of

received from five different web development companies ranged
from $25,000 to $200,000.
     “The cost was a bit more than what we thought it would be;
but it is a robust and quite complex site as far as the back-end
and functions go; we also have a robust search engine, with all our
images available online,” says Hay.
     Hay says because website developers use image libraries
themselves, they anticipated what the directors wanted to achieve,
including an online database for photographers to upload images,
cataloguing tools and water marks to protect the images from
ending up in the public domain.
     The professionalism of the directors doesn’t end there. After
selecting their web development partner Hot Creative, a public
relations consultant was also hired.
     “The PR company was also a good investment; it has given
us lots of ideas – for example, running competitions within
photography schools and helping photographers to get exposure
and cash for course fees,” says Hay.
     She says with the site fairly new (it was launched in February)
print advertising has yet to appear; in the meantime the site is
being promoted via GoogleAdwords and the Google search engine.
     “As our library gets larger and we develop specific categories
we would target, for example, fishing magazines for fishing images.
Also certain design magazines,” says Hay.
     She says the directors are looking at the community or ‘Web
2.0’ aspect of the site, investigating blogs, forums, and including
photographer details and competitions.
     The ongoing costs of e-commerce are manageable, says Hay.
There are fees attached to online credit card payment facilities, but
as no images are paid for up front, supplier costs to the business
are mitigated. Less straightforward is the legal and privacy
ramifications of dealing in images: those with identifiable people
in them require a ‘model release form’ from each photographer to
demonstrate the person in the photo has given consent to their
image being used. Images of people under 18 have to be approved
by a guardian.
     “We had lawyers who specialise in Net business go over
contracts and site legalities with a fine tooth comb; there are also
unique aspects of the site that can’t be copied,” says Hay.

Vikki Bland is an Auckland-based freelance writer.

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