Wednesday, December 17, 2008

Introduction to Online Business

While it may be true that anyone can sell something online, not just anyone can run a business selling products online. Selling something online is as simple as creating an eBay and Paypal account, and following directions. I know because my mother was basically computer illiterate, and I told her how to do it over the phone. She sold a few things she didn't want, and hasn't sold anything online since. She was a seller, not a business.

There are many differences between an online seller and an online business, including office setup, software, and shipping supplies, just to name a few. A seller may have a few envelopes, and a box or two in their closet in case they decide to sell something. A business may keep 500 envelopes and several dozen boxes just as a backup if their supplier ships late. A seller will have a program that came with their camera, or from a 1-hour photo booth to edit their photos, while a business will likely have the latest version of Photoshop on their system to enhance and place watermarks on their photos. Last, a seller will typically have things scattered around a makeshift office in their den, while most businesses need extensive organization to save time on their busy schedules.

These are just a few differences between sellers and businesses. Now, it's time to focus on the businesses, and more importantly, the successful ones and what they do.

1. Successful businesses live by two rules: Consolidation and organization.

Without a consolidated business, an operator will find himself scrambled and have more than he can deal with. This may include maintaining a presence on more than 3 selling channels, attempting to sell a wide variety of products, or running dozens of non-focused marketing campaigns instead of a to a few targeted audiences.

Multi-channeling a business presence has turned some businesses into ecommerce giants since the early days of Amazon and eBay. It can give the same exposure as JC Penney or Parisian's could have by opening a store in two malls within the same city, except without paying far too much in rent. A professional seller can use two volume channels, and sell twice as much, and with services like Fillz and ChannelAdvisor, it is much simpler to manage inventory. When a business owner tries to fill orders on many different channels though, it can become too much to handle and seriously harm the business, especially when the owner stocks their own inventory. This can cause long delays or cancellations, and ruin the chances of repeat business from the customer. It is always a good idea for a business to use multiple channels, but never more than they can handle.

I have seen ad and marketing campaigns for sites that have absolutely no relevance to the sites on which they advertise, or even worse, for products that the general public know they can get elsewhere much cheaper. For instance, you can visit nearly any news site and find ads for hair loss treatments, Netflix, and Weight Watchers. Obviously, there is an audience for those products on a news site, but how many wasted clicks could you have compared to advertising hair loss treatments on a site like GQ Magazine. I have seen Netflix ads plastered all over FoxNews, and at the same time on the TV they were advertised at $3 a month cheaper. And when Weight Watchers runs ads all over the internet for a special that ended weeks before, that's a lot of wasted marketing dollars. I have seen all of these types of ads, and they are quite frankly a waste of resources to the companies.

My very first attempt at buying PPC ads on Yahoo several years ago was a complete disaster, but had success written all over it. I found a great liquidated lot of 300 Anime DVD sets, all retailed more than $50 at, and I purchased them for $15 each. I took a position to make at least $25-35 on each set, and walk away with as much as $10,000 in profit. My problem was that I didn't take into account how many people search Yahoo for "Anime" which was my primary keyword. I burned $200 in 5 days, and sold only one set. Then, I realized I needed to select targeted keywords. Instead of using "Anime DVD Sale" as my lone keyword, I changed the campaign to the actual set titles, and even a little more specific into the directors and studios. If I remember correctly, my highest conversion keyword was something like "Trigun Anime Geneon Pioneer Nightow Complete." I spent another $500 in a month by targeting specific keywords over the next 2 months, and sold nearly all the sets. I then sold the rest off on Amazon for about $10 profit on each, and ended it with about $7,000 in total net profit. If I had stuck to the course where I burned $200 in 5 days, I would have spent $2400 on ads, and been trying to liquidate them just to pay off the credit card I charged the ads to. Anytime I advertise now, I select the most detailed keywords possible, and while I may not get the traffic, I get the conversions.

Last on the two rules is Organization. I started selling pro wrestling videos and DVD's on eBay in 2002. I immediately stood out in the crowd, because I had an eBay store dedicated to just that line. About 6 months into it, I had a few things I wanted to sell, such as a SDRAM card and video card I never used for my computer, so I listed them for sale in my store as well and they sold right away. That's when I had a brainstorm, and decided to buy a bulk lot of computer components on to sell from my store. Now sure, I sold most of them, but my business selling the wrestling videos took a major hit because customers couldn't search my store without running accross 10 computer "things" on a page. Not only was the store disorganized though, but can you imagine a 1 bedroom apartment with 200 drives, webcams, scanners, and speakers, on top of 3 bookshelves holding 500+ videos? That is what can happen when businesses try to diversify their products. The end result was a full sell of what was left through in a single auction, at a loss, for all the computer "stuff" and a return to the primary business focus targeting wrestling fanatics.

When a business begins carrying too many different types of products, it begins to operate like a yard sale. Any time you have a yard sale, you want to sell the things you can get the most for right away. Look at the weekly classifieds, and you will see TV's, Washer/Dryers, stereos, etc. in the ads for yard sales, but you never see anything like "Come to my yard sale and get some 15 year old pots and pans." The same happens when a business attempts to sell a wide line that have no direct cross-selling potential. This can be found in a multitude of sites, where the shop name is "Mama's Pottery and MORE!" When arriving at the shop, you will find a large line of pottery where the business makes the majority of it's sales with pottery, but adds in candles, towels, books, records, and clothing into the same site to make up the "MORE" aspect. This can cause not only a disorganized shopping experience when browsing a catalog, but can also cause a very disorganized workspace. If selling only pottery, there is a specific way to store and package. When selling all the "MORE" products, the business must not only have medium boxes with foam and wrap, but must also have padded mailers, small boxes, flat boxes, and different sized labels, which can take up the room needed for the primary products. To make matters worse, it can often lead to a "bidding war" with the business owner on which products will create the most cashflow, and the remainder of the items take a backseat, costing valuable space and money for every day they sit on the shelf. This is one good reason to have a basic seller account on eBay maintaining decent feedback, so you can sell off those great finds without confusing our customer base.

2. Customer Service and when to say no.

Customer service is the most important aspect of selling online. With literally millions of sellers and businesses to shop with, it can't be the same as with brick and mortar stores. A B&M store can afford to tick off a customer over something small, say a refund, and that customer may someday come back. If not, they may tell a few friends about the experience, but that's about the extent of the damage. Online, a dissatisfied customer will post on forums, blogs, your own site, your feedback, send emails, IM's, and any other method available to make sure people know you "screwed" them over.

Depending on your business, your return rate may be as high as 5-10%, or may be non-existant depending on your product line. Clothing has a high return rate, but books are usually very low. You can minimize it by following the basics, or what I call "Little Stuff." Add a link in every product listing to your return policies, and do your best to state them clearly at the bottom of your checkout page. This one little convenience for your customer can save you hours down the road.

Everyone has a customer who claims they got the wrong size, wrong color, or wrong item altogether. The first thing to remember is a refund is much easier to deal with than a chargeback. So they bought a hat, and sent the hat back without the tag and smelling like 2 week old baseball field sweat... It may be better to take the loss than deal with your processor and their bank over a $20 hat. If the customer bought a $200 dress, removed the tag and wore it out to a club where she spilled a drink on it, soaked up all the smoke from the people around her, then it may be time to send it back with a polite "Hell No." The way to figure this is to objectively ask, would you expect to get your money back from a store if you returned it like this?

3. Shipping and Packaging

The first rule of shipping is making your shipping policy public. Don't hide that it takes 5 business days for you to ship something unless you want problems. If you say you will, then do it. If not, add an incentive for the possibly dissatisfied customer to return, like 10% off or free shipping on their next order. Next, don't ever say you know how long USPS, FedEx, and UPS will take to deliver. Their shipping times aren't guarantees, and you could leave a bad taste in someone's mouth who likes to tell their friends, chat buddies, email list, and blog readers.

When packaging your order, be sure you know what the industry standard is. If most businesses ship books in bubble mailers, then you'll probably be OK to do the same. But if the majority of businesses ship clothing wrapped in plastic, in a sized box, don't expect good reviews when you stuff your clothing orders into a padded mailer.

And while it may seem logical, even comical to many, if you are shipping electronics, wrap them in plastic to protect from weather. If you are shipping glass, pack one item per box and load it full of foam or paper. And last, if you are shipping something that isn't fragile, there is no need to pack it to the max with bubble wrap and peanuts. This is the one issue I have with Amazon, that they have apparently moved past this year. I used to order a book from Amazon, and would get the 7"x10" paperback in a 12x16x4" box. Inside, I could pull away all the plastic bubbles, paperwork, advertisements, and find my book a few minutes later. This week, I got a book from them delivered in a cardboard mailer, with only a packing slip included. I suppose they realized how much those ads, bubbles, and paperwork cost and cut back their expenses. They finally figured out that usually, a single packing slip (if anything) will suffice when shipping to a customer.

There will be more to come on this article, but since I have hit the high points I believe it's time to stop for the night.

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