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What
You Need to Know About Selling Online
By Terry Murphy
As
a venue for business, the Internet has no equal. Buyers and sellers
alike have discovered it is a boundless marketplace, and many companies
are taking advantage of the boom by opening online storefronts.
Witness the success of amazon.com, the Internet's first bookstore.
In 1997, amazon.com booked $148 million in sales - an increase of
more than 825 percent over 1996.
Software developers, publishers and merchants are well-poised to
benefit from this business trend. Given the competitive nature of
the software industry - and the difficulty of getting shelf space
at traditional retail outlets - online selling is a solution worth
exploring.
Electronic commerce is already proving a fruitful enterprise for
companies that traditionally relied on bricks and mortar. For a
point of reference, visit Egghead Software's Web site, http://www.egghead.com/,
where you can order an advance copy of Windows 98. Or visit http://www.cnet.com/,
where you can arrange to have applications delivered to you via
electronic software distribution (ESD). As savvy entities like these
set up shop on the Web, going online is no longer a question of
"if" for their competitors, but a matter of how and when.
Do-It-Yourself vs. Outsourcing
A software publisher who's decided in favor of selling online will
need to tackle an important question up front: "Should I set
up my own store and sell products direct, sign up with an online
reseller, or both?" Before you take the do-it-yourself route,
consider the implications. A "cheap" e-commerce system
can set you back $30,000. And, running a successful store involves
complex tasks and time-consuming responsibilities, from merchandising
to taking orders around the clock. Ask yourself who would generate
the store, who would host it, and who would address security and
other issues. Also ask yourself if you want to spend time creating
an e-commerce system or strengthening your core business.
If you don't want to divert resources, then contracting with a third-party
e-commerce service provider may be your most productive solution.
Going this route lets you outsource management, marketing and fulfillment;
offload worrisome tasks, such as fraud screening and software licensing;
and dispense with the time-intensive chores associated with transaction
processing and billing systems. If software publishers as large
as Symantec have reached the conclusion that outsourcing makes good
business sense, it stands to reason that companies of all sizes
could profit by doing the same.
Top Factors for Successful Online Selling
If you plan to join the growing ranks of online software sales,
be prepared for a new business model. A successful e-commerce initiative
entails issues you may be unaware of, and knowing how to address
them helps sharpen your competitive edge.
Distribution
One of the first questions to consider is whether to pursue online
distribution, ship traditional boxed products, or both. You may
be better served by the channel and traditional delivery methods
than electronic delivery as some distribution partners consider
ESD competition to the channel. Though ESD was predicted to account
for nearly half of online software sales by 1999, limited bandwidth,
channel concerns and customer preference for traditional boxed goods
have kept ESD from meeting industry expectation. What's more, certain
software products are more suitable for traditional methods than
electronic (see "Does Your Product Lend Itself to ESD?").
Security
Payment security and product security are effectively addressed
in e-commerce, despite public perception. Payment is received before
the order is filled, and a credit card transaction via the Internet
is at least as safe as giving one's card to, say, a gas station
attendant. Product security - making sure products aren't tampered
with or intercepted before they reach customers - can be assured
with the appropriate technology. And, when a product travels over
the Internet, it can be "wrapped" in a highly secure encrypted
envelope to eliminate the worry of tampering.
Fraud
Protecting yourself against credit card fraud is imperative. As
a software publisher, how do you verify whether a customer submitting
an order is the authorized credit card user? As a software merchant,
how do you minimize your risk of liability to the publisher for
lost goods due to illegitimate transactions? The best solution is
likely to be an e-commerce service provider with fraud detection
mechanisms in place. For example, eWarehouse uses a multi-step fraud-screening
process for scoring potential purchases. The publisher or merchant
sets the threshold score below which sales must be confirmed by
phone.
Reporting
Assume you want to know how many trial ware products are in the
field as the end of Q1 nears, or how many units of a certain product
sold on Monday. The value of timely access to reports and sales
figures can't be overstated, especially in a fast-paced online sales
environment. If you're running your own store, insist on a system
that provides you with useful information quickly. If your store
is being hosted and run by a third party, choose an e-commerce service
provider who supports real-time, online inquiries that let you generate
sales and activity reports at will.
Order routing
Order routing is typically not a concern with ESD because the order
processing is handled within the system and occurs at the time of
payment. However, it becomes a concern if you need to associate
physical goods with an ESD product. For example, if your fulfillment
house ships a CD-ROM with an order, you'll need to ensure that your
e-commerce system or service provider can communicate with the fulfillment
center. Choose a service provider who understands order routing,
and note that a provider who supports EDI (the preferred mechanism)
has an advantage.
International considerations
Going online means going global immediately, so from the outset,
you're offering an international product. Taking advantage of that
position is much better than feeling plagued by it. Your best option
is to deploy an e-commerce solution that proactively addresses the
international issues associated with being online. For example,
ask prospective service providers whether they allow Japanese customers
to pay in yen, rather than paying in dollars and suffering conversion
uncertainties. Other international considerations include localization
of Web pages (e.g., local languages, a storefront interface similar
to that of local retailers) and any territory restrictions, such
as trade regulations, legal restraints or export controls.
The Next Step: Going Online
Once you've considered the key issues highlighted here, you're ready
to get online. Assuming you don't want to invest in creating an
e-commerce system and aren't prepared to dedicate a fair amount
of internal resources to setting up a store, it's time to closely
examine your third-party e-commerce service provider. You should
look for a partner in business, not just a service provider.
To become an effective partner in your business, an e-commerce service
provider should score highly in the areas of concern outlined below:
· Distribution options that best meet your business needs
· Adequate security mechanisms employed
· Effective fraud screening methods to minimize risk of liability
· Instantaneous, online reporting tools
· Familiarity with order routing, including EDI support
· Proactive strategy for handling international issues
Proven expertise is another important attribute of an e-commerce
service provider. Until certification standards are in place, look
for tangible signs of credibility - specifically, a track record,
industry references and customer lists. Also insist on longevity
- at least two years of experience, ideally, in the software arena
is important. Finally, choose a provider who meets breadth of services
criteria. A single, turnkey solution from a full-service provider
is highly preferable to the piecemeal approach of signing agreements
with multiple vendors.
An Eye to the Future
The boom in Internet commerce is virtually certain to continue.
An April 1998 report published by the U.S. Commerce Department projects
that electronic commerce - a business sector that didn't even exist
several years ago - may exceed $300 billion by 2002.
Though selling online continues to evolve and change as it matures,
planning for a strong online presence in the near future is wise
for any software publisher. Your customers will increasingly grow
accustomed to the convenience of the Internet, with many consumers
already demanding the ability to order products online and have
goods shipped to them. This demand speaks volumes about the need
for viable e-commerce solutions. Software developers and merchants
are well-advised to equip themselves now for this large new market.
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