An Inside Track to Online Retail Success
So … you want to sell your brand-new, one-ofa-kind widget on the Web? Good
for you. It’s an essential part of overall business success these days.
According to comScore figures, online retail spending totaled $81.6 billion for
all of 2005, up 24 percent from $65.8 billion in 2004. Impressed? With spending
on that level it is more important than ever to have the lowdown on e-commerce.
The Web helps merchants sell everything from music CDs to flower bulbs (and
several things you simply would not believe in between). Even if you are not
selling a tangible good, the sale of services and information also falls under
the e-commerce umbrella. So being able to make a sale and collect payments for a
membership-based website or a Web hosting or advertising service is of immense
and obvious importance.
As most Web businesses quickly learn, however, the land of e-commerce is replete
with substantial barriers. And that’s the real trick — getting your customers to
breeze through your site by removing as many obstacles as possible along the
way, before they get frustrated and search for their needs with one of your
competitors. By gaining a greater understanding of how e-commerce works, website
owners can get a clearer picture of the inside track to online retail success
and have a better chance to secure those often elusive e-commerce riches.
While it is virtually impossible to cover all the important aspects of running a
successful e-commerce business, what we as merchants can do is focus on aspects
that are not fully utilized within online stores. Support functionality and
techniques to control fraud, for example. Along with some insider tactics such
as in-site search and feed promotion, website owners should get a solid
understanding of how to take their online storefront to a higher level.
A Closer Look:
Let’s take a close look at the components that make e-commerce happen, and
discuss how to optimize each of those areas.
While you could sell products or services online without a shopping cart,
e-commerce is smoother as a process when one is available. Shopping cart
software allows a website to build a database of products and integrate them
into website pages. Solutions can range from basic, free types such as PayPal to
more comprehensive solutions, such as the Miva Shopping Cart.
When selecting a solution for your online business, several considerations
should be made; including cost, the availability of support, compatibility with
the gateway, modules for affiliate marketing and customization in relation to a
site’s existing design. Marc Goldman, CEO of Goldbar Enterprises LLC (Goldbar.net),
a provider of integrated e-commerce solutions for small businesses, suggests
finding a shopping cart that can manage customer interaction via email.
Through his own experience, Goldman found that email is essential in marketing
to consumers and vital to managing the day-to-day business of an online store.
“If an e-commerce system does not offer an integrated email marketing solution,
then it’s just another ‘me too’ service. You must have the ability to add your
customers to a post sale newsletter and/or send out automated sequential emails
that handle everything from customer support to up-selling,” says Goldman.
Selecting a shopping cart solution is an integral part of your e-commerce
success. It should be easy for your customer to use and find, and fit your needs
as a merchant. Choosing a system that fails to meet your needs or, conversely,
provides much more than you need, can present significant barriers to your
bottom line — especially if you are spending more time managing the back-end
instead of managing your overall business.
For many merchants the realm of e-commerce tends to get overwhelming when
selecting a provider to process consumer payments. Aligning shopping cart
functionality with payment gateways and corresponding merchant accounts often
presents barriers that seem too daunting for many online merchants.
In order to accept credit payments online, merchants need a business bank
account; often called a Merchant Account. These accounts are usually set up
through a Merchant Service Provider (MSP) but can also be obtained through your
local bank (this tends to be more costly and offers less support, however).
MSP’s are authorized by Visa/MasterCard (American Express and Discover are
separate) to sell merchant accounts which allow the merchant access to the
interchange system — a network of financial institutions that dictates the fees
paid by the consumer’s bank (the acquirer). When a transaction is complete, a
merchant account provider deposits funds in a place that is accessible to you,
such as a standard checking or savings account.
A payment gateway is the digital equivalent to a point of sale (POS) terminal.
Payment gateways work to authorize payments by encrypting information and
transmitting a customer’s order to and from the merchant account provider. When
a secure server receives billing information from the shopping cart, it connects
to a payment gateway (in essence the intermediary) in order to verify the credit
card, deduct the funds and approve the sale. Payment gateways are often
recommended by the MSP, but there are stand-alone options as well.
Payment Processing Barriers
While most shopping carts can be configured to automatically send information to
various payment gateways in an acceptable format, ensuring that a cart works
with the specific gateway (and that the gateway works with the merchant account)
is essential. If a shopping cart fails to communicate properly, transactions
will fail and result in abandoned shopping carts and unhappy shoppers.
Don’t Forget the Fees
You weren’t under the impression that there were not any fees associated with
online merchant accounts, right? Good, because there are. Some fees are to
protect you the merchant and to some, seemingly, some fees just for the sake of
fees. Upfront application and setup fees, fixed monthly fees, discount rate (a
percentage of the sale price) and fixed transaction fees (typically from $0.20
to $0.30 per transaction) are the most common.
Managing the risk associated with running an online business is critical. When
accepting credit cards online, abiding by some best practices will help convert
more orders and make your customers feel more at ease with their purchase. Some
of these practices include reviewing the use of your address verification system
(AVS) and card verification number (CVN), which helps merchants confirm that the
buyer is actually in possession of the card they are using. Implementing both
AVS and CVN checks has been proven to increase sales, decrease the manual review
of orders and prevent fraud. Most payment gateways and merchant accounts either
require or provide support for establishing these practices at your own
Another option many online stores may want to consider is implementing card
association payer authentication systems such as Verified By Visa or MasterCard
SecureCode. Using these solutions can shift the liability for fraudulent
transactions away from you and back to the issuing bank. Some online stores are
even integrating multiple fraud management tools through automated decision
systems, which both help reduce the number of manual reviews and consolidate all
available decision data when the need for manual review arises.
MSP’s assume financial risk when merchants sign on to their services. Minimizing
the risk of refunds and chargebacks associated with an online store should be a
key focus. Customer disputes typically arise from dissatisfaction with the
quality of merchandise or services received, shipping and delivery failures, or
a questionable transaction (fraudulent use of a credit card).
Fortunately, you can take a number of actions to prevent or at least minimize
chargebacks. The first step is to make sure you fully comply with the
transaction requirements issued annually by the major credit card institutions.
Your MSP should guide you through this process.
Refunds and Chargebacks
Refunds and chargebacks can be a time-consuming and potentially costly process
for small businesses. A refund is when the consumer tells the merchant that they
want their money back and a chargeback is when the consumer tells their issuing
bank that they want their money back. In the case of a chargeback, the issuing
bank goes to the MSP (who in turn goes to the merchant) to retrieve the funds in
question. If there is evidence that the consumer and not the merchant is at
fault, then there are lengthy procedures to follow to reverse chargebacks. MSP’s
keep very close tabs on the percentage of chargebacks on total sales, and
merchants can risk account termination if that level goes too high (typically if
chargebacks exceed one percent of total sales). In addition, if the refund level
nears five percent of total sales, the card associations (Visa and Mastercard)
can, based on contracts, decide to terminate the account or increase associated
Security with SSL:
When users have loaded up their shopping carts and are ready to complete the
purchase, they enter their credit card information. Using the Secure Socket
Layer (SSL) Protocol, data will be encrypted and transmitted securely over the
Web; a must in order to prevent interception of the personal and confidential
data customers rely on merchants to protect. And any hint of an insecure site is
too much for a customer to overcome, no matter how enticing your product is. In
order to use the SSL Protocol, however, a Web server requires the use of an SSL
certificate, which can be obtained from Certification Authorities such as
While there are nominal costs associated with installing and maintaining the SSL
certificates, (they can be purchased for a few hundred dollars) they provide
consumers and your online enterprise with greater security. If you are looking
for an SSL solution but are not offering services to the public at large,
consider creating a local Certificate Authority using OpenSSL (learn more at
Now that we’re armed with a little more information on how e-commerce systems
work and some helpful insights on how to improve the core components of
e-tailing, we can take a closer look at some other important aspects — site
design, in-site search, and promotion of online stores through feeds, and begin
deconstructing some of the common barriers to success.
The Importance of Site Design:
Regardless of which MSP and gateway service you choose, shopping carts need to
integrate with the existing website design — and do so seamlessly. While most
merchant and gateway providers include detailed integration instructions, it is
essential that you test functionality, repeatedly, within the scope of your site
design before presenting it to the Web public. Inconsistencies in design do not
impart confidence in your online enterprise which can result in shoppers
departing as quickly as they came.
In addition to the inner workings of your actual e-commerce platform and
shopping cart software, there are also site design components that can make or
break your online retailing business. A common barrier to success has to do
primarily with the concept of usability. While an overall site design is the
first thing a potential customer sees, the ease of interaction with the site may
determine whether or not you make a sale. A review of e-commerce design must be
viewed holistically in order to gain a clear picture of how a visitor sees not
just your products, but your business as well.
Sites with a multitude of product pages (as is the case with most online stores)
should seriously consider breadcrumb navigation, a popular means to help
consumers identify their location within the site. An example of breadcrumb
navigation is the following:
WebsiteServices.com Home > Articles > E-Commerce >
This type of navigation provides consumers with easy access to a broad array of
products without feeling as they are leaving what they want behind. Most site
structures do not clearly indicate the user’s current location and this causes
great confusion and results in the abandonment of shopping carts — and no
earnings for merchants.
Good site design usually goes hand-in-hand with consistency — achieved more
frequently in the past year with Cascading Style Sheets (CSS). CSS files provide
some solace to overworked designers in that one small change can impact the
overall look and feel of an entire site. If data reveals that consumers are not
selecting a specific link (such as a “More Product Information” page) one simple
modification in the CSS file can adjust that link’s font size and color,
placement or include mouse-over effects.
A Matter of Support:
You do not need a chart to understand how important customer service and sales
support are to your online business. Making support and service highly visible
is not just best practice, but crucial to reducing shopping cart abandonment.
According to a May 2005 Forrester Research study, when customers interact with
live customer service, website abandonment decreases by 50 percent and closure
rates exceed 90 percent.
Service and support, however, have come in many different forms over the years.
Sections for frequently asked questions (FAQ’s), chat, forums and standard
“contact us” forms have been all the rage since the inception of the Web and
they continue to provide consumers with helpful support and service. However,
these support models present only limited opportunities to directly interact
with the company on a personal level. Thankfully, a whole new suite of
technologies has come about and offers interaction on a level that has not been
One of the benefits in the age of instant gratification is that we can search
anytime to find exactly what we are thinking about and, in most cases, find it
within seconds. As was mentioned in the above section on site design and
e-commerce, it is imperative to limit the barriers to your site’s content. One
of the ways to streamline your site for your customer, (especially if there are
hundreds or thousands of product pages), is through site search.
Search is an action and enables those responsible for understanding e-commerce
metrics to learn from visitor behavior and make more informed choices. By seeing
what customers look for and how often they succeed, deciding which products to
feature (and which to consider dropping) becomes not a matter of flipping a coin
but a decision based on empirical data.
There are several options available to website owners seeking to integrate
in-site search capabilities for their online properties — some are hosted and
some reside directly on the site itself. Products available from Google,
WebSideStory and SLI Systems are all powerful tools which help consumers cut
through the noise and clutter and get to the products or information they are
seeking. SLI's Learning Search is unique in that it is not based on a relevancy
algorithm, but rather the results that consumers have found useful in aggregate.
SLI Systems released a site search feedback tool to help companies better
understand the quality of their existing site search functionality based on
customer input. Shoppers are presented with an opportunity to provide feedback
in the form of a “yes” or “no” question if the information returned was helpful
and offers the option for additional feedback. SLI Systems aggregates the
results on a daily basis and makes them immediately available through an on-line
reporting tool to provide a measure of site search quality.
No Marketing Plan:
There are millions of websites out there, with millions of potential customers.
What will you do to drive sales to your site? You need to have a good marketing
strategy — including search engine optimization, pay per clicks, pop-under's,
banner ads, and affiliates just to name a few. Most successful online stores are
utilizing data feeds to inject their product listings directly into Internet
shopping portals such as Google’s Froogle or Become.com. Feeds work exceedingly
well for gaining exposure for all of your products, especially when optimizing
individual product pages is slow to take off or pay-per-click listings become
too costly to continue.
The most important tips when optimizing a product feed for higher placement in
shopping portals include writing brief, but detailed descriptions. They should
contain terms or phrases that people will most often use to locate your
products. Take special care in properly identifying the category where each and
every product should be promoted. Images also play an integral role in
generating visits to product pages or hosted product pages from the shopping
Managing multiple feeds can be time consuming, as each service has specific
submission guidelines. There are many resources available, however, that can
help online store promoters make the most of shopping portals. MegaFeeder, for
example, offers those that download its shopping search software the ability to
submit, modify and refine multiple product feeds from a centralized location.
The Real Lowdown:
The “2005 Holiday Web Shopper Report” from Web Surveyor Corp. revealed that 70
percent of respondents continue to abandon shopping carts prior to completing
the purchase. According to the report, the top three causes for cart abandonment
were: 1) Comparison shopping, 2) High shipping costs and 3) Not enough time to
complete the purchase process. While these findings can help e-tailers learn
about some of the more common barriers to successfully selling online, a
brutally honest look is required to gain a real understanding of why e-commerce
works or doesn't work.
Few may admit it, but not every product or service can be sold on the Internet.
There are many reasons why some products sell online and others don't. As was
stated in the Web Surveyor report, shipping costs for large products can be very
expensive. Coupled with the fact that most consumers are simply engaging in
comparison shopping, it is easy to see that the Web acts as an information
portal, not primarily a shopping market. In an extreme example, people may
compare features of a car online, but most will make the purchase in person;
where they can touch, sit in and drive the car. The lesson is that online
merchants need to perform thorough research about the products they intend to
sell before ever going to the Web.
Another reason many e-stores don’t survive is in their failure to express
trustworthiness. Well beyond site design (your site must first look the part),
if you are unable to convince users that your product is worth the time to
invest in navigating your site and locating the specific product or service they
are seeking, then what chance do you have of making a sale?
One of the most effective ways to build trust among your visitors is to provide
an effective way to address visitors’ fears about the security of shopping
online and through your site. A good start is to reveal information about your
company — email, a postal address, toll-free and local phone numbers, and the
location of customer support forms and privacy policies. Services such as
BBBOnline, ValidatedSite, TrustE or Thawte enable website owners to convey the
trustworthiness of their online presence as well as the corporation and people
behind the website.
Successful selling online can be an exciting but daunting task. It is important
to find a system and a business model that makes sense for you. And most of all,
focus on removing as many of the barriers, both actual and psychological,
between your customer
and checkout, and the sales will come. That’s the real lowdown on e-commerce. ■