Developing a Business Plan
Developing a Business Plan
| Introduction | Follow On | Products/Services |
| Business Needs | Business Processes | Success Stories |
| e-Marketing | Business Opportunities | Business Case |
Setting up an e-commerce site is a detailed process that involves a number of processes. Simply put, you need to do some planning, preparation work, development, execution and then optimization through a process of maintenance. An Internet e-commerce site should be used as just one component of an Internet presence. Not only can one be thinking about selling products, but one can be looking to reduce costs, market products or services - depending what your business is, support your current and future customers, and manage public relations.
For instance, if you are already a retailer, than you can try and encourage your customers to use the Internet for follow-on customer service or for repeat purchases. This in turn may potentially reduce your costs while at the same time enhancing your relationship with that customer. When making service based or technical decisions on how to set-up an e-commerce offering over the Internet, there are a number of business questions that should be addressed which in turn will drive your technical decision.
While e-commerce focuses on the buying and selling of products or services on the Internet, and it may be your primary goal, it may also include a complete sales process which encompasses marketing, sales, customer support and relationship management. It also may be one of many ways that you can use the Internet to enhance or change your business. In addition to selling goods or services, this may be an opportunity to use the internet for other process such as process changes and cost reduction.
Of course the primary goal is to produce more revenue. Sometimes you only have to re-design what you already have or enhance what you already have. For example, 1-800-Batteries , the leading US distributor of batteries and accessories for laptops, cell phones and camcorders - experienced a 59 percent increase in sales and an 111 percent increase in Web traffic since they re-designed their website and improved product search and retrieval capabilities
According to a Gartner Group report, businesses that have implemented
electronic commerce as part of their business strategy have been more
successful in reducing business cycle times, improving cash flows, reducing
inventories, decreasing administrative costs and opening new marketing
and
distribution channels.
The real power of moving your business model to the web comes from the ability to integrate the proven business applications systems and data that you're using today with the rich functionality of the web. This allows you to protect your investments while capitalizing on what you know now. Effective e-commerce solutions incorporate back-end integration to dynamically update information . The size of your business, its position in the marketplace and your objectives may direct exactly how you use this medium.
As an example, REI (Seattle) is selling as much product via the web with 20 employees as it does in one of its retail locations employing over 80 employees. They also reported that their e-commerce site is driving more sales than all but their largest stores. And REI's internet sales are increasing by 30 to 100% each month.
Give customers access to your site through browsers , offer easy-to-navigate online help to give customers useful in-depth information will provide a timely alternative to waiting for technical support through telephones. Let them check product availability- thus saving them valuable time. Cutting costs from the support end of your business makes a direct contribution to your bottom line.
In business to business e-commerce environments, you can create customized catalogs for each company you do business with. As your customers needs dictate, terms and conditions can be pre-negotiated and the approval process automated. Your customers will spend less time sifting through large catalogs, checking on product availability, calling for price quotes, filling out requisition forms and obtaining approvals. Their productivity is increased and so is yours. Companies are developing intelligent agent technologies, creating tools that will enable you to build customer profiles, leverage users tastes and interests. This will allow an e-commerce site to delivered personalized product listings, advertise in real-time, and allow your customer to communicate with each other.
When you adopt an e-commerce model, customers and suppliers can use direct order entry for transactions shortening order cycles and improving order accuracy. You'll be able to employ a dynamic pricing model that gives you the flexibility to offer customers such features as pricing in real time and volume discounts. When it comes to accept payment, you can have a variety of options available, including open credit card terms, credit cards, debit cards, purchase orders and electronic data transfer (EDI).
Seven New Marketing Challenges for an Electronic Age
1. more information for
sellers about their customers
2. more information for
buyers
3. new intermediaries
4. new technology "interconnectivity"
5. more automation
6. world-wide sourcing and
access
7. greater value consciousness
Read the following articles:
How to Acquire Customers on the Web from Harvard Business review May-June
2000 - Consider CDnow, which has developed a multifaceted customer-acquisition
strategy that reflects a clear understanding of the economics of an on-line
business.
Marketing Secrets for the New Economy from ZDNet's Smart Business site
- what tricks and cost-effective methods can help you get customers coming
to your commercial web site?
Product or service information in some type of on-line catalog is only a small portion of what can be accomplished using the internet.
1. Are you prepared to deal with the after effects of on-line selling
such as customer support?
2. Due to the immediate gratification nature of the web, customers
demand more timely responses. Are you willing to integrate an e-mail or
chat component into your site for customers in order to project an image
of
openness and willingness to respond?
3. Do you have answers or policies ready to deal with topics such as
returns and exchanges, warranties and order tracking?
4. Do you have a way or a vision on how fulfillment and shipping will
be accomplished? Its always good to figure out how an order will move through
an on-line store.
5. Are you interested in setting up a community of customers, encouraging
and supporting group discussion through open forums and individual dialogue
through e-mail?
Business to Consumer market will be dwarfed by the Business to Business market
1. Do you have any thoughts about moving any of your business to business
processes to the internet?
2. Do you have an opportunity to change an internal product supply
process to an Internet based?
3. Do you use EDI for supplier interaction - Have you thought about
moving this functionality to the web? Or interfacing it with a web based
model?
4. How aligned is your on-line store going to be with your existing
store if you have one? Are you going to carry the same products/services
in both places?
5. Do you intend to tie-in your online processes to existing processes
such as accounting systems, inventory systems, and price consistency?
6. How do you envision collecting money for your products/services
and how automated do you want this process to be?
1. Can you use the Internet for any other business reasons other than
selling?
2. Can you identify any ways that you can utilize the internet to save
money in other parts of your business?
3. Can you see a way customer support can be moved to the internet?
4. Do you have a mobile sales force/ work force?
5. What tricks and cost-effective methods can help you get customers
coming to your commercial web site?
6. Are your targeted customers new customers or existing customers?
(This
typically translates into how much marketing must be available on your
on-line store.)
7. How are you going to create awareness for your site?
8. Do you work with an advertising/ marketing budget?
9. Are your customers local, provincial, international? Do you need
language specific capabilities?
Know your competitors and what they are doing especially in the on-line environment.
10. Is there anyone out there already selling similar products or services
11. Do you know who your on-line competitors are?
12. Are you familiar with some the best qualities of your competitor
web- sites?
13. Are you interested in merchandising to up-sell and cross-sell products
as well as to accessorize, create bundles or packages and to target specific
customers.
14. Are you interested to work with promotions, coupons and creative
advertising to capture additional market share or revenue.
There are products/services that you may want to sell on the internet as well as which business processes of your company may be affected by going to an internet channel
1. Have you thought about what is the likelihood that your products
or services will sell online?
2. Are you choosing the correct products or services to sell online?
3. Are there any issues with you selling the products or services online?
i.e.. Are there any channel conflicts from your suppliers?
4. Some products require more information in selling than others -
this must be taken into account when designing a on-line store - Do you
have the necessary information?
5. How will your on-line store differ from your competitors? Will it
be based on pricing? Customer Service? Product selection? Are you a niche
product/service seller?
6. Have you identified what your intellectual capital is and will it
be used on the internet?
One of the main elements in a business case is some kind of measurements that justify your decision. In the examples below, you will see what some companies in various industry groups have measured to identify success.
Visibility
Macy's.
Macys.com is deriving significant
revenue from the site. In addition, the average
sale-per-customer is 40%
higher online than in the stores; Macys.com has
extended its core retail
market (35-–50-year-old women) to an online market of
almost 50% men. It has also
been able to better reach both younger and older
audiences; Macys.com has
been able to expand the Macy's brand into markets in
which the name is well known,
but retail presence has not yet been established.
Victoria's Secret.
They are averaging 20-25M
hits now a day, a 20X increase from where they we a
year ago. Sales volumes
has gone up 7% from yesterday's trend already. They
are averaging an order every
10 seconds. i.e. over 8000 orders a day. Another
view is they are getting
400,000 visitors a day, with a conversion rate of 2%.
DuckHead Apparel.
100% ROI; 100% larger profit
margin than on traditional retail sales; 100%
projected annual growth
in online sales for next 5 years.
Best Business Value
EarthSavers.
Potential revenues 24 times
greater than traditional distribution site; one million
dollars expected savings
in direct marketing costs.
Small Company Showing Business Value
Lehmans Hardware.
300% ROI in two weeks; estimated
100% annual growth in online sales; 50%
lower operational costs
than with Microsoft or Oracle solutions.
LeHigh Valley Safety Supply.
Expected 300% growth in online
sales; 60% savings over traditional direct
supplies to customers; extended
market reach; increased B-to-B sales
Virtual Company
SciQuest.
Est. 80% less time to find
and purchase products and 70% reduction in
order-processing costs over
traditional methods; catalog offers 650,000 items
from thousands of vendors;
60,000 visitors each month.
ICON Health and Fitness.
100% ROI, $1.5 million online
sales in six months; expected $10 million sales by
year end; 5% savings in
online order processing costs.
CanadaShop.com.
Revenues growing 200% per month; 100% payback estimated in 1 year.
Cheryl's Herbs.
100% payback in five months;
online sales--5% of gross revenue in six months,
10% expected in one year;
60% of online buyers are new customers.
eChemicals.
20% savings on products for customers; first to market; 7,000 hits weekly.
Web-enabled Business
REI.
REI.com, the biggest outdoor
store on the Web, grew online sales by 350% in two
years, with the average
online order double that of the average retail in-store
purchase. Web site one of
top 5 REI stores in sales; online orders twice the size
of traditional retail; 90%
reduction in IT maintenance costs; decreased transaction
processing costs; increased
customer loyalty and satisfaction. Web sales tripled
between Thanksgiving and
Christmas. They ranked around 26 out of the top 100
web sites in terms of traffic.
Campmor.
Campmor relaunched its Web
site using Net.Commerce and DB2 in November
1998 and recovered its cost
of developing the site within one month. Site traffic
has tripled, and 1998 holiday
sales were 500% greater than in 1997. 100% ROI in
five weeks; online sales
20% of total sales; 400% annual growth rate; Web traffic
tripled.
iGo.
iGo Corporation, formerly
1-800 Batteries, offers mobile computing professionals
over 7,000 items for sale
over their site, and saw a 235% increase in Web traffic
in 1998. Over 100% increase
in monthly Web sales; 100% ROI within one year;
15% monthly increase in
number of visitors; faster search times; improved
business lead tracking;
reduced costs; enhanced targeted marketing.
Queensboro Shirt Company.
100% ROI in one year; annual
savings of $360,000 in overhead costs; 30%
increase in sales in three
months; 30% reduction in catalog printing costs; 30% of
orders received online,
with projection of 50% in two years. 40% of their business
was done through their Web
site in November. Q4 revenue from this year
compared to last went up
50% with 35% of that coming through the Web.
Coolness
eDeal.
Value of goods sold increased
93% in one month; three million hits per month;
50,000 auctions hosted in
nine months.
Big Planet.
Estimated 100% ROI in 18
months; one week time-to-market; 1.2 million visitors
per month; realtime order
generation; $100,000 annual savings in order
processing.
Hawaiian Greenhouse.
100% est. annual growth in
retail sales; 100% ROI in 18 months; 10% to 15% of
new orders online; 50% reduction
in order processing time; improved customer
service.
First of all, are you willing to make a commitment? It takes time and
resources (either people or financial to set-up an e-commerce store and
then maintain it)
1. What are
your critical success factors for having an online store?
2. Why are customer
going to ship on your site versus someone else's? - it is
crowded out there already.
Creating some kind of plan for an on-line store is very important before you proceed and start making decisions on what you want to purchase in terms of products or services. One of the most important factors is your budget - how much are you willing to spend on creating an on-line store. Of course if you have unlimited resources - money and skills, you will not worry about creating the best and largest website your imagination can create. However, realistically, there are limits and you now should be able to start understanding those things that are most important to you and your company. You should now starting to be able to articulate what is most important to you and what questions to ask when you are going out to acquire a product or a hosting service.
Creating a business case or cost justification for your online store
1. When it comes to various features of websites, what are those that are important to you?
2. How flexible must your website be? How often will you change it?
3. How often do you change your products/services and/or pricing?
4. Does collecting personal customer information play a role in your business now or will it in the future?
5. What kind of budget are you working with? Are you dealing with capital dollars or operating dollars?
6. What are your financial goals of your website? From a increase in revenue? From a cost reduction?
7. What kind of skills and resources do you have access to?
8. Are your resources internal or external? How much are you willing to pay for the required skills?
You should now be in a position to create a business case or cost justification. A business case generally proves to many vendors or service providers that the customer has gone through a process to determine roughly what they want and that there is a budget to work with. Also, it is a document that should be referred to at a latter date to compare and see if the outcomes of the business case are in fact being met. Within the business case there should be a number of outcomes listed- more specifically:
1. What is your
goal in terms of increased your revenues?
2. What is your
goal in terms of cost reduction in terms of financial figures?
3. What is your
goal in terms of increasing customer satisfaction?
4. What is your
budget?
5. What is your
ROI in terms of time or dollars?