Source: Used with permission from Vermont Teddy Bear.
In 1980, John Sortino got the idea for making teddy bears. He was playing with his young son, Graham, and noticed that none of Graham’s 38 stuffed animals was made in the United States. This inspired John to make a teddy bear for Graham—named Bearcho. John then went on to make others, falling in love with the idea of making them by hand. Bearcho was soon followed by Buffy, Bearazar, and Fuzzy Wuzzy, all made in his wife’s sewing room. By 1983, John was selling his bears from a gift cart at an open-air market in Burlington, Vermont. The sale of his first bear took 4 days, and it took 1 year to sell 200 bears.“The Vermont Teddy Bear Story,” Vermont Teddy Bear Company, accessed March 24, 2012, www.vermontteddybear.com/Static/Our-Story.aspx; “Vermont Teddy Bear Company,” Score.org, accessed March 24, 2012, www.score.org/success-stories/vermont-teddy-bear-company. Today, the Vermont Teddy Bear Company produces about 300,000 bears a year.
The Vermont Teddy Bear Company has tapped into America’s long-standing love affair with teddy bears by creating a wide variety of customized teddy bears and shipping them to customers via the well-recognized Bear-Gram, “…a customized bear placed in a colorful box with an air hole and game printed on the inside, and enclosed with a personalized greeting and candy treat.”“The Vermont Teddy Bear Story,” Vermont Teddy Bear Company, accessed March 24, 2012, www.vermontteddybear.com/Static/Our-Story.aspx. The company has experienced many changes, including John’s departure in 1995 to pursue other interests and the addition of Pajamagram and Calyx Flowers as additional unique brands, but the Vermont Teddy Bear Company remains a household name and a Vermont icon.
Jay Bruns, vice president of branding, talks about the importance of knowing how to present the product so the company can grow further. Right now, a Vermont Teddy Bear is a unique gift item that promises quality for life, but the dynamics of gifting have changed. Same day or overnight delivery is not special anymore, so a Vermont Teddy Bear must offer something more than convenience. It needs to be a “go-to” gift of choice rather than an emergency or “last-minute” gift. This requires presenting the product as fresh and special.Telephone interview with Jay Bruns, vice president of branding, Vermont Teddy Bear Company, March 9, 2012. E-commerce is an integral part of Vermont Teddy Bear’s marketing strategy, with online sales accounting for more than one-half of its total sales. The company saw the growth in online buying and launched its website in October 1996 in an effort to reach the online consumer base. Elisabeth Robert, the CEO at the time, saw the potential synergy between radio and the Internet and used the power of the company’s radio advertising “…to direct customers to the company’s website where they could actually see the bears they were ordering.”Portland Helmich, “Not Your Average Bear,” Business People Vermont, 2002, accessed March 24, 2012, www.vermontguides.com/2002/2-feb/teddybear.htm.
Victor Castro, director of e-commerce, describes the company’s e-commerce strategy as direct marketing with a focus on easy ordering and the customer being able to interact with the brand. Convenience has become even more convenient, and the Vermont Teddy Bear Company makes things simple. As the consumer becomes more proficient online, it will be necessary to communicate properly what the Vermont Teddy Bear gift is all about (i.e., the experience of owning the bear). Castro says that the company has been very successful at that. However, the company’s e-commerce strategy must evolve with changes in the online customer.Telephone interview with Victor Castro, director of e-commerce, Vermont Teddy Bear Company, March 9, 2012.
To learn more about the Bear-Gram, go to www.vermontteddybear.com/Static/Bear-Grams.aspx. To take the online factory tour, go to www.vermontteddybear.com/Static/tour-welcomestation.aspx.
PBS Curiosity Quest—Vermont Teddy Bear
(click to see video)A tour of the Vermont Teddy Bear factory.
As stated in Chapter 1 "Foundations for Small Business", e-business and e-commerce are terms that are often used interchangeably. But e-business and e-commerce are not the same. This section will elaborate on the differences between the two and some of the foundational knowledge that is critical to understanding and using e-commerce in particular.
Chapter 1 "Foundations for Small Business" talked about e-business in terms of using the Internet and online technologies to create operational efficiencies, thereby increasing customer value.Kelly Wright, “E-Commerce vs. E-Business,” Poole College of Management, November 27, 2002, accessed October 10, 2011, scm.ncsu.edu/scm-articles/article/e-commerce-vs.-e-business. It is important that small businesses understand the nature of e-business and how it can facilitate operations as well as growth—if growth is desired. It has been said on other occasions, and it will continue to be said, that not all small businesses look for growth, choosing instead to happily remain small. For the small businesses that do want to grow, however, e-business can help them do it.
E-business involves several major components:Terri C. Albert and William B. Sanders, e-Business Marketing (Upper Saddle River, NJ: Prentice-Hall, 2003), 2–4; and Efraim Turban et al., Electronic Commerce: A Managerial Perspective (Upper Saddle River, NJ: Pearson/Prentice Hall, 2008), 4. business intelligence (BI), customer relationship management (CRM), supply chain management (SCM), enterprise resource planning (ERP), e-commerce, conducting electronic transactions within the firm, collaboration, and online activities among businesses.
Figure 4.1 Components of E-Business
Business intelligenceThe activities that a small business may undertake to collect, store, access, and analyze information about its market or competition to help with decision making. is about the activities that a small business may undertake to collect, store, access, and analyze information about its market or competition to help with decision making. When conducted online, BI is efficient and quick, helping companies to identify noteworthy trends and make better decisions faster. BI has been described as “the crystal ball of the 21st century.”Lena L. West, “Business Intelligence: The Crystal Ball of Champions,” Small Business Computing.com, April 11, 2006, accessed October 10, 2011, www.smallbusinesscomputing.com/biztools/article.php/3598131/Business -Intelligence-The-Crystal-Ball-of-Champions.htm.
As defined in Chapter 2 "Your Business Idea: The Quest for Value", customer relationship management (CRM)A service approach that hopes to build a long-term and sustainable relationship with customers that has value for both the customer and the company. refers to “…a customer service approach that focuses on building long-term and sustainable customer relationships that add value for the customer and the company.”Efraim Turban et al., Electronic Commerce: A Managerial Perspective (Upper Saddle River, NJ: Pearson/Prentice Hall, 2008), 759. It is a company-wide strategy that brings together information from all data sources within an organization (and sometimes from external data sources) to give one holistic view of each customer in real time. The goal is to reduce costs and increase profitability while providing customer satisfaction.“What Is CRM?,” cestinationCRM.com, February 19, 2010, accessed October 10, 2011, www.destinationcrm.com/Articles/CRM-News/Daily-News/What-Is-CRM-46033.aspx. CRM applications are available for even the smallest businesses.
Every small business has a supply chain, the network of vendors that provide the raw components that are needed to make a product or deliver a service. The management of this network is known as supply chain management (SCM)Efficiently and effectively improving the way that a company finds raw components and then delivers the product or the service to the customer.. SCM is about efficiently and effectively improving the way that a company finds those raw components and then delivers the product or the service to the customer.Thomas Wailgum and Ben Worthen, “Supply Chain Management Definition and Solutions,” CIO, November 20, 2008, accessed October 10, 2011, www.cio.com/article/40940/Supply_Chain_Management_Definition_and_Solutions. SCM applications are now available for small businesses. More details about SCM are presented in Chapter 12 "People and Organization".
Enterprise resource planning (ERP), as mentioned in Chapter 1 "Foundations for Small Business", is about integrating all departments and functions across a company (sales, marketing, human resources, finance, accounting, production, engineering, etc.) into a single computer system that can serve the particular needs of each department. The objective is to provide information quickly and efficiently to those who need it. Small businesses have many vendor choices for ERP systems. There are more than thirty vendors in the field, and they are looking to small and midsize businesses as their primary growth market.Mary O. Foley, “ERP for Small Business: The Time is Ripe,” Inc., October 1, 2007, accessed October 10, 2011, technology.inc.com/2007/10/01/erp-for-small-business -the-time-is-ripe. More details about ERP are provided in Chapter 12 "People and Organization".
E-commerce, as defined in Chapter 1 "Foundations for Small Business", is the marketing, selling, and buying of goods and services online. It generates revenue, which e-business does not. E-commerce is typically associated with e-marketing, discussed in Chapter 8 "The Marketing Plan", but most of this chapter is dedicated to the operational, nonmarketing dimensions of e-commerce.
Conducting electronic transactions within a firm can occur through an intranetA private network within a business that is used for information sharing, processing, and communication., e-mail, and instant messaging. An intranet is a private network within a business that is used for information sharing, processing, and communication. The goal is to “streamline the workplace and allow easy information exchange within an organization.”Dachary Carey, “What Is Intranet Technology Used For?,” Life123, accessed October 10, 2011, www.life123.com/technology/internet/intranet/what-is-intranet.shtml.
Collaboration can occur internally or externally, and it often involves business partners. The goal is to help teams or business partners communicate with each other more effectively and efficiently, manage projects and shared materials, save companies the costs of travel, and reduce travel-related productivity losses.Gerry Blackwell, “Altogether Now: Comparing Collaboration Software,” Small Business Computing.com, January 28, 2008, accessed October 10, 2011, www.smallbusinesscomputing.com/buyersguide/article.php/10729_3724501_/Altogether-Now-Comparing-Collaboration-Software.htm. E-mail, instant messaging, newsgroups, bulletin boards, discussion boards, virtual team rooms, online meetings, and wikisA web page that can be viewed and modified by anybody with a web browser and access to the Internet unless it is password protected. are common means of collaboration. A wiki is a web page that can be viewed and modified by anybody with a web browser and access to the Internet unless it is password protected.“7 Things You Should Know about Wikis,” Educause Learning Initiative, July 2005, accessed October 10, 2011, net.educause.edu/ir/library/pdf/ELI7004.pdf. The most well-known wiki is Wikipedia.
Online activities between businesses focus on information sharing and communication via e-mail, online meetings, instant messaging, and extranetsThe part of an intranet that is made available to business partners, vendors, or others outside a company.. An extranet is the part of an intranet that is made available to business partners, vendors, or others outside a company. It allows a business “to share documents, calendars, and project information with distributed employees, partners, and customers” and “it enables 24/7 private, secure access to collaborative tools with just an Internet connection.”“Communicate Quickly and Efficiently Through Intranets, Extranets and Portals,” Gozapit Interactive, 2009, accessed October 10, 2011, www.gozapit.com/intranet-extranet.htm. They make communication easier, eliminate redundant processes, reduce paperwork, increase productivity, provide immediate updates and information, and provide quick response times to problems and questions.“Communicate Quickly and Efficiently Through Intranets, Extranets and Portals,” Gozapit Interactive, 2009, accessed October 10, 2011, www.gozapit.com/intranet-extranet.htm. The result is money and time saved for employees, the company, vendors, and your customers. Commercial transactions typically do not take place on extranets.
As integral as e-business may be to many small businesses, however, there will be small businesses that choose not to go the e-business route. Small businesses that are nonemployers and/or are very small operations that choose to stay that way—for example, local delis, gift shops, restaurants, dry cleaners, and ice cream shops can be and are successful without having to make a commitment to e-business. Therefore, a small business can choose to incorporate all, some, or none of the e-business components. Given the ways in which the Internet continues to transform small businesses, however, it would be virtually impossible for a small business to operate totally outside the realm of e-business.
The moment that an exchange of value occurs, e-business becomes e-commerce.Elias M Awad, Electronic Commerce: From Vision to Fulfillment (Upper Saddle River, NJ: Pearson Education, 2005), 4. E-commerce is the revenue generator for businesses that choose to use the Internet to sell their goods and services. Some small businesses rely on the Internet to grow and survive. As stated in Chapter 1 "Foundations for Small Business", many small businesses also look to e-commerce for their own business needs, such as computers and office technology, capital equipment and supplies, office furnishings, inventory for online sale, or other business-related goods.“E-commerce: Small Businesses Become Virtual Giants on the Internet,” accessed October 10, 2011, www.score.org/system/files/become_a_virtual_giant.pdf. This is not surprising considering the pervasiveness of the Internet for business transactions of all shapes and sizes.
Every Internet business is either pure-playA business that has an online presence only. or brick-and-clickBusinesses that combine a physical presence with an online presence.. A pure-play business, such as Amazon and Zappos, has an online presence only and uses the capabilities of the Internet to create a new business. Brick-and-click businesses, such as Barnes and Noble and Vermont Country Store, combine a physical presence with an online presence. These businesses use the Internet to supplement their existing businesses.Sandeep Krishnamurthy, E-Commerce Management: Text and Cases (Mason, OH: South-Western, 2003), 73.
There are several different types of e-commerce. A common classification system is with respect to the nature of transactions or the relationships among participants.Efraim Turban et al., Electronic Commerce: A Managerial Perspective (Upper Saddle River, NJ: Pearson/Prentice Hall, 2008), 8. There are seven major types of e-commerce:
Figure 4.2 How P2P E-Commerce Works at Tamago.com
Source: “Peer to Peer Profit,” http://www.tamago.us (accessed October 10, 2011).
Although these types of e-commerce have been discussed individually, there are many instances in which one company engages in multiple types. Office Depot and Staples are brick-and-click businesses that engage in B2B, B2C, and perhaps B2G e-commerce. Carbonite and Gourmet Gift Baskets are both pure-play small businesses that engage in B2C and B2B e-commerce.
The decision to engage in e-commerce is an important one. The advantages are clear: lower business costs; 24/7 accessibility anywhere; the potential for stronger customer service; the ability to introduce a niche product; the ability to reach global markets on a more equalized basis with larger firms, making mass customization possible; and greater customer loyalty. But the risks are there as well. Internet problems, website problems, security and privacy breaches, intellectual property theft, legal liability, product and/or service failure, customer deceit, and customer dissatisfaction are but a few of the risks. Therefore, the choice of an e-commerce business model must be made carefully. Each model will have different implications in terms of business planning and strategy.
An e-commerce business modelThe method that a business uses to generate revenue online. is the method that a business uses to generate revenue online. “The business model spells out how a company makes money by specifying where it is positioned in the value chain. Some models are quite simple. A company produces a good or service and sells it to customers. If all goes well, the revenues from sales exceed the cost of operation and the company realizes a profit. Other models can be more intricately woven.”Michael Rappa, “Business Models on the Web,” DigitalEnterprise.org, January 17, 2010, accessed October 10, 2011, digitalenterprise.org/models/models.html. Another way to look at a business model is that it “reflects management’s hypothesis about what customers want, how they want it, and how the enterprise can organize to best meet those needs, get paid for doing so, and make a profit.”David J. Teece, “Business Models, Business Strategy and Innovation,” Long Range Planning 43, no. 2–3 (2010): 172–94. There are many models to choose from, and new models will continue to emerge as technology evolves and businesses look for new and creative ways to generate revenue. Some of the many e-commerce business models are as follows:For additional discussions of business models, see Michael Rappa, “Business Models on the Web,” DigitalEnterprise.org, January 17, 2010, accessed October 10, 2011, digitalenterprise.org/models/models.html; and Robert D. Atkinson et al., “The Internet Economy 25 Years After .Com: Transforming Commerce & Life,” Information Technology & Innovation Foundation, March 2010, accessed October 10, 2011, www.itif.org/files/2010-25-years.pdf.
Because the business model will be at the center of the business plan, the model must be designed carefully. If a successful model is to be built, the model should effectively address the eight key elements listed in Table 4.1 "Key Elements of a Business Model". Although value proposition and the revenue model may be the most important and easily identifiable aspects of a company’s business model, the other six elements are equally important.Kenneth C. Laudon and Carol G. Traver, E-Commerce: Business, Technology, Society (Upper Saddle River, NJ: Prentice Hall, 2007), 58; Efraim Turban et al., Electronic Commerce: A Managerial Perspective (Upper Saddle River, NJ: Pearson/Prentice Hall, 2008), 8.
Table 4.1 Key Elements of a Business Model
| Components | Key Questions |
|---|---|
| Value proposition | Why should the customer buy from you? |
| Revenue model | How will you earn your money? |
| Market opportunity | What market space do you intend to serve, and what is its size? |
| Competitive environment | Who else occupies your intended market space? |
| Competitive advantage | What special advantages does your firm bring to the market space? |
| Market strategy | How do you plan to promote your products or services to attract your target audience? |
| Organizational development | What types of organizational structures within the firm are necessary to carry out the business plan? |
| Management team | What kinds of experiences and background are important for the company’s leaders to have? |
Source: Kenneth C. Laudon and Carol G. Traver, E-commerce: Business, Technology, Society (Upper Saddle River, NJ: Prentice Hall, 2007), 59.
For businesses already engaged in e-commerce and for those that are thinking about it, being aware of the latest e-commerce trends is important because they could have a long-term influence on the future of a company’s market. This influence, in turn, could mean life or death for your e-commerce operations. Several general e-commerce trends can be identified, and they are relevant to all e-commerce operations.
The following e-commerce trends specifically apply to small businesses:
Naked Pizza on Twitter
(click to see video)Naked Pizza can now be followed on Twitter.
Despite the popularity and pervasiveness of e-commerce, not all small businesses may be interested in pursuing e-commerce as a part of their businesses. Many small businesses survive without an online presence. However, business analysts have agreed for a long time “that for any company larger than a local mom and pop store, e-commerce is now a business requirement.”Beverly Kracher and Cynthia L. Corritore, “Is There a Special E-Commerce Ethics?,” Business Ethics Quarterly 14, no. 1 (2004): 71–94.
Joan Watson is the owner of Joan’s Gourmet Baskets, a small brick-and-mortar business that specializes in gourmet gift and picnic baskets. Joan has been keeping up with the fancy food and gourmet food trends (being a great fan of the Fancy Food Show that is held several times a year), and she thinks she should tap into this sector by creating an online business that will complement her physical business. This would make her baskets available to a wider market. She is proud of the quality of her products and the customer loyalty that she has earned through her hard work and hopes she will be able to be just as successful in the e-commerce environment.
Joan knows that she needs more information before proceeding further. She has asked you to prepare a report that answers the following questions: How will her physical business compare to her online business; that is, where will things be the same, and where will they be different? What business model should she use? What are the special challenges and obstacles she will face as she moves from traditional commerce to e-commerce? What is Web 2.0 all about and does she need to be concerned about it? She expects that you will do additional gourmet foods research to support your ideas.
There are multiple parts to the creation of an e-commerce website: the infrastructure (the nuts and bolts building of the site), the e-marketing side (the design and creation of a web presence, which is discussed in Chapter 7 "Marketing Strategy"), and the operational side. The operational side is the focus of this section.
Unless a small business owner is technologically savvy or employs someone who is, building the company’s website in-house from the ground up is not a particularly good idea. An effective website presence requires a good looking, professionally designed website. There are several approaches to having someone else build that website. Two are described here.
Domain Name Dollar Store
(click to see video)A humorous look at getting a URL for your website at a rock bottom price.
The ultimate cost for a website will be a function of its size, complexity, and the level of design. No two projects will cost the same. Part of the process of building a website, however, should be conducting some research and talking with website designers. The Internet offers a variety of sources on how to determine how much a website should cost. WebpageFX.com offers a historical perspective on website costs, a cost calculator to find out how much a web project would cost, and examples of specific web design and website development projects with cost figures.“How Much Should a Web Site Cost?,” 2010, accessed October 10, 2011, www.webpagefx.com/How-much-should-web-site-cost.html.
Consider the following two scenarios:
There is no easy answer to the question of how much a website will cost. “A simple answer is that it will cost whatever a business is willing to spend—anywhere from free to millions of dollars.”“How Much Does a Website Cost?,” Planetlink.com, accessed October 10, 2011, www.planetlink.com/articles/how_much_does_website_cost.html. A better way to address cost is to answer the following questions:“How Much Does a Website Cost?,” Planetlink.com, accessed October 10, 2011, www.planetlink.com/articles/how_much_does_website_cost.html.
There is nothing easy about the law. It is complex under the best of circumstances, but it is necessary to protect the rights and privileges of people and businesses. Companies that choose to engage in e-commerce must be aware of the legal environment because “a lack of awareness…can lead to missteps as well as missed opportunities….”Kathleen Mykytn and Peter P. Mykytn, “The Importance of the Law for E-Commerce Strategies,” Information Systems Management 22, no. 2 (2005): 50–56. A summary of important legal issues for e-commerce is in Table 4.2 "Important Legal Issues for E-Commerce". However, the focus here is on three areas: electronic transactions, intellectual property, and jurisdiction.
Table 4.2 Important Legal Issues for E-Commerce
| Issue | Description |
|---|---|
| Jurisdiction | The ability to sue in other states or countries. |
| Electronic transactions | All transactions that take place online. |
| Liability | The use of multiple networks and trading partners makes documenting responsibility difficult. How can liability for errors, malfunctions, or fraudulent use of data be determined? |
| Identity fraud | The Identity, Theft, and Assumption Deterrence Act of 1998 makes identity fraud a federal felony carrying a three- to twenty-five-year prison sentence. |
| Defamation | Is the Internet service provider liable for material published on the Internet because of services it provides or supports? (Usually not.) Who else is liable for defamation? What if the publisher is in another country? |
| Intellectual property law | Protects creations of the human mind. |
| Digital signatures | Digital signatures are recognized as legal in the United States and some but not all other countries. |
| Regulation of consumer | The United States allows the compilation and sale of customer databases. The European Union does not. |
| Time and place | An electronic document signed in Japan on January 5 may have the date January 4 in Los Angeles. Which date is considered legal if a dispute arises? |
| Electronic contracts | If all the elements to establish a contract are present, an electronic contract is valid and enforceable. |
| Taxation | Taxation of sales transactions by states is on hold in the United States and some but not all other countries. Expect this issue to be revived because the potential for increased revenue to the states is significant. |
Source: Efraim Turban et al., Electronic Commerce: A Managerial Perspective (Upper Saddle River, NJ: Pearson/Prentice Hall, 2008), 795.
Electronic transactionsAll transactions that take place online. are the many kinds of transactions that take place online, including contractual dealings, buying and selling of goods and services, information exchange, financial transactions (credit card payments; payor services, such as PayPal; and money transfers), and communications. When developing a website, the small business owner must ensure that all online business transactions will be secure, particularly those involving money. This discussion must take place with whomever is developing your website.
Intellectual propertyA creation of the mind—such as inventions; literary and artistic works; and symbols, names, images, and designs used in commerce. is “a creation of the mind, such as inventions, literary and artistic works, and symbols, names, images, and designs, used in commerce.”Efraim Turban et al., Electronic Commerce: A Managerial Perspective (Upper Saddle River, NJ: Pearson/Prentice Hall, 2008), 774. Music, photos, videos, digital news, and artwork are forms of intellectual property that can be transmitted over the Internet. All small business owners need to be concerned about the theft of intellectual property. They are afforded multiple protections, which are summarized in Table 4.3 "Intellectual Property Protections".
Table 4.3 Intellectual Property Protections
| Law | Protection Provided by the Law |
|---|---|
| Intellectual property law | Protects creations of the human mind |
| Patent law | Protects inventions and discoveries |
| Copyright law | Protects original works of authorship, such as music and literary works and computer programs |
| Trademark law | Protects brand names and other symbols that indicate source of goods and services |
| Trade secret law | Protects confidential business information |
| Law of licensing | Enables owners of patents, trademarks, copyrights, and trade secrets to share them with others on a mutually agreed-on basis |
| Law of unfair competition dealing with counterfeiting and piracy | Protects against those who try to take a free ride on the efforts and achievements of creative people |
Source: Efraim Turban et al., Electronic Commerce: A Managerial Perspective (Upper Saddle River, NJ: Pearson/Prentice Hall, 2008), 779.
It is important to protect intellectual property because businesses will not realize the full benefits of their inventions and would be inclined to focus less on research and development. Additionally, without intellectual property protections, “exporters face unfair competition abroad, non-exporters face counterfeit imports at home, and all businesses face legal, health and safety risks from the threat of counterfeit goods entering their supply chains.”“Why Protect Intellectual Property?,” StopFakes.gov, accessed June 1, 2012, http://origin.www.stopfakes.gov/learn-about-ip/ip/why-should-i-protect-my-ip. Unfortunately, US small businesses are at a disadvantage because“Why Protect Intellectual Property?,” StopFakes.gov, accessed June 1, 2012, http://origin.www.stopfakes.gov/learn-about-ip/ip/why-should-i-protect-my-ip.
Because of the complexities of intellectual property protections, this area requires the services of an attorney, preferably one experienced and knowledgeable in cyberlaw.
JurisdictionThe right and power that a court has to interpret and apply the law in a particular geographic location. refers to the right and power that a court has to interpret and apply the law in a particular geographic location.Peter LaSorsa, “Selling Products Online: What Legal Jurisdiction,” Practical eCommerce, November 5, 2008, accessed October 10, 2011, www.practicalecommerce.com/articles/860-Selling-Products-Online-What-Legal -Jurisdiction-Applies-. “A court must have jurisdiction over the litigants and the claims before it entertains a lawsuit. In the context of Internet commerce, this issue erupts when a dispute arises between businesses from different states [or countries].”Elias M. Awad, Electronic Commerce: From Vision to Fulfillment (Upper Saddle River, NJ: Prentice-Hall, 2005), 387. Many small businesses will be selling products online in other states and in other countries, so it is important to understand the jurisdictions that might be applicable to any online transaction. “In many cases, laws from the customer’s state are the ones that will apply in the event a problem arises. This is equally true regarding the laws of other countries.”Peter LaSorsa, “Selling Products Online: What Legal Jurisdiction,” Practical eCommerce, November 5, 2008, accessed October 10, 2011, www.practicalecommerce.com/articles/860-Selling-Products-Online-What-Legal -Jurisdiction-Applies-. From the perspective of any business, but particularly a small business, it would be much easier from both a time and a money perspective to have an issue litigated in the home state of a business. Although there are no guarantees, these steps can be taken to increase the chances of a dispute being settled in the home state of a business:Peter LaSorsa, “Selling Products Online: What Legal Jurisdiction,” Practical eCommerce, November 5, 2008, accessed October 10, 2011, www.practicalecommerce.com/articles/860-Selling-Products-Online-What-Legal -Jurisdiction-Applies-.
All these steps should also be considered when selling to other countries. However, the laws in other countries will undoubtedly introduce complications into protecting the US-based business. Take the example of Yahoo! and the sale of Nazi memorabilia on one of its auction websites. A French court ruled that such sales breached French law against the display of Nazi items. Yahoo! took steps to remove and ban all such hate paraphernalia from its auction sites, but it continued to fight jurisdiction of the French ruling in American courts.Kathleen Mykytn and Peter Mykytn, “The Importance of the Law For E-Commerce Strategies,” Information Systems Management 22, no. 2 (2005): 50–56. It would be very easy for a small business to inadvertently find itself in a similar situation. That is why a business needs to be careful when selling outside its home country. Be familiar with foreign laws. This is not an easy task because the minute a business website goes live, the business goes global. The laws of the world suddenly become relevant.
It is known that “ethical factors do play a significant role in e-consumers’ purchasing decisions.”Avshalom M. Adam, Avshalom Aderet, and Arik Sadeh, “Do Ethics Matter to E-Consumers?,” Journal of Internet Commerce 6, no. 2 (2007): 19–34. Therefore, ethical factors should be of major concern in e-commerce and, accordingly, in the information and protections offered by an e-commerce website.
It has been observed that the “Internet represents a new environment for unethical behavior,” and “ethical transgressions are more likely to happen in e-transactions as compared to face-to-face transactions.”Sergio Roman, “The Ethics of Online Retailing: A Scale Development and Validation from the Consumer’s Perspective,” Journal of Business Ethics, 72 (2007): 131–48. To a large extent, this is due to the absence of physical and interpersonal cues that are present in traditional retailing or business settings. The implication is that e-commerce operations should focus more specifically and explicitly on the ethics messages that are being conveyed by the website. Thus the focus of this ethics discussion is on three major components of e-commerce ethics: security, privacy, and trust.
Website securityThe protection of a company, its suppliers, its customers, and its employees from criminal activity. (the protection of a company, its suppliers, its customers, and its employees from criminal activity) is a critical consideration for any small business engaged in e-commerce. The Internet is a global playground for criminals. It is less risky to steal online because “the potential for anonymity on the Internet cloaks many criminals in legitimate-looking identities, allowing them to place fraudulent orders with online merchants, steal information by intercepting e-mail,…shut down e-commerce sites by using software viruses,”Kenneth C. Laudon and Carol G. Traver, E-commerce: Business, Technology, Society (Upper Saddle River, NJ: Prentice Hall, 2007), 248. and steal financial information and money. This new type of crime is referred to as cybercrime, and it is a serious threat to e-commerce.
CybercrimeAny criminal activity that is done using computers and the Internet. refers to any criminal activity that is done using computers and the Internet,“Cybercrime,” TechTerms.com, accessed October 10, 2011, www.techterms.com/definition/cybercrime. and it includes a wide range of offenses. Downloading illegal music, stealing from online bank accounts, stealing credit card numbers and personal information, stealing identities, posting confidential business information on the Internet, and creating and distributing viruses on other computers are only some of the thousands of crimes that are considered cybercrimes.“Cybercrime,” TechTerms.com, accessed October 10, 2011, www.techterms.com/definition/cybercrime. Cybercrimes can take place anytime and anyplace. It has cost American companies a median loss of $3.8 million a year, and data protection and information technology (IT) practitioners from 45 US organizations from various sectors reported that, across their companies, 50 successful attacks were experienced over a four-week period.Alejandro Martinez-Cabrera, “Cybercrime Costs Firms $3.8 Million Yearly,” Computer Crime Research Center, August 3, 2010, accessed October 10, 2011, www.crime-research.org/news/03.08.2010/3807.
The State of Cybercrime
(click to see video)Do not be fooled. Cybercrime is on the rise.
Cybercrime is more profitable than the illegal drug trade (more than $100 billion globally per year). Every three seconds an identity is stolen, and without security, an unprotected PC can become infected within four minutes of connecting to the Internet.“What Is Cybercrime?,” Symantec, accessed October 10, 2011, us.norton.com/cybercrime/definition.jsp; and “Cyber Crime ‘More Profitable Than Drugs’,” 9News, June 9, 2009, accessed October 10, 2011, news.smh.com.au/breaking-news-national/cyber-crime-more-profitable-than-drugs-20090609-c1qm.html. A Microsoft security intelligence report maintains that cybercrime is fast maturing as a profession, with cybercriminals becoming more sophisticated and packaging online threats that can be sold to others.Rudolph Muller, “Cybercrime Getting More Sophisticated,” Mybroadband, June 24, 2010, accessed October 10, 2011, mybroadband.co.za/news/internet/13279-Cybercrime-getting-more-sophisticated.html.
The Computer Crime & Intellectual Property Section of the US Department of Justice keeps a running list of press releases related to cybercrimes. Here are three examples.
Cybercrime hurts the bottom line of any business, but small and medium-sized businesses are the new cybercrime target. “Hackers and computer criminals…are taking a new aim—directly at small and midsize businesses…Smaller businesses offer a much more attractive target than larger enterprises that have steeled themselves with years of security spending and compliance efforts.”Tim Wilson, “Small Business: The New Black in Cybercrime Targets,” Dark Reading, March 19, 2009, accessed October 10, 2011, www.darkreading.com/security/perimeter-security/215901301/small-business-the-new-black-in-cybercrime -targets.html. Small businesses are potentially very lucrative targets for several reasons:
The cybercriminal is looking to steal and disrupt. Securing a website should be a top priority for any company—small, medium, or large—that uses the Internet to conduct its business.
How SSL Security Works on E-Commerce Websites
(click to see video)How Amazon.com grew so fast by incorporating SSL security.
Given the state of cybercrime, assuring the security and the privacyThe protection of personal information of customers on the Internet. of e-consumers (the protection of the personal information of customers on the Internet) are necessary to build and maintain confidence in the e-market, particularly because the risk of privacy invasion and security flaws is significant.Avshalom M. Adam, Avshalom Aderet, and Arik Sadeh, “Do Ethics Matter to E-Consumers?,” Journal of Internet Commerce 6, no.2 (2007): 19–34. Further, such assurances have been found to have a significant impact on the willingness to purchase.Naresh K. Malhotra, Sung S. Kim, and James Agarwal, “Internet Users’ Information Privacy Concerns (IUIPC): The Construct, the Scale and a Causal Model,” Information Systems Research 15, no. 4 (2004): 289–304, as cited in Avshalom M. Adam, Avshalom Aderet, and Arik Sadeh, “Do Ethics Matter to E-Consumers?,” Journal of Internet Commerce 6, no.2 (2007): 19–34.
E-customers voice their privacy concerns in different ways. Here are some examples:Sergio Roman, “The Ethics of Online Retailing: A Scale Development and Validation from the Consumer’s Perspective,” Journal of Business Ethics, 72 (2007): 131–48.
The scope of failure in protecting customers’ personal information can be potentially devastating because of the global reach of the Internet; the effect can easily reach millions of people.Beverly Kracher and Cynthia L. Corritore, “Is There a Special E-Commerce Ethics?,” Business Ethics Quarterly 14, no. 1 (2004): 71–94. Heartland is a payment processor responsible for handling about 100 million credit card transactions every month. They disclosed in June 2009 that thieves had used malicious software in its network in 2008 to steal an unknown number of credit card numbers.Eric Larkin, “Massive Theft of Credit Card Numbers Reported,” PCWorld, January 20, 2009, accessed October 10, 2011, www.pcworld.com/article/158003/massive _theft_of_credit_card_numbers_reported.html.
Fortunately, the theft of credit card and other personal information originating from websites accounted for only about 11 percent of the identity theft or fraud that affected 11 million Americans in 2009.“Javelin Study Finds Identity Fraud Reached New High in 2008, but Consumers Are Fighting Back,” Javelin Strategy and Research, February 10, 2010, accessed October 10, 2011, www.javelinstrategy.com/news/831/92/Javelin-Study-Finds-Identity-Fraud -Reached-New-High-but-Consumers-are-Fighting-Back/d,pressRoomDetail. This is why the act of providing credit card information on a website for a purchase is still considered by some people to be so risky that they refuse to conduct any Internet transactions. This has obvious implications for any small company that hopes to do business online.
Fortunately, there is a very straightforward way to provide the security and privacy that online customers seek: the use of Secure Sockets Layer (SSL)A security protocol that is used by web browsers and web servers to help users protect their data during transfer., a security protocol that is used by web browsers and web servers to help users protect their data during transfer.“FAQ: SSL Basics,” VeriSign Authentication Services, 2011, accessed October 10, 2011, www.verisign.com/ssl/ssl-information-center/ssl-basics. Companies like VeriSign offer SSL protection certificates, and the placement of its icon on a website can offer security and privacy assurances to online customers. The inclusion of SSL protection should be discussed with your website designer.
Trust is about believing—believing that someone will do what they say and that they will not intentionally do something to hurt you. Trust is an important part of all business relationships. Without trust, all e-commerce would come to a halt. “Trust is central to establishing successful e-commerce ventures and to ensure the continued success of this business paradigm into the future.”Albert J. Marcella, Establishing Trust in Virtual Markets (Altamonte Springs, FL: The Institute of Internal Auditors, 1999), as cited in Beverly Kracher and Corritore, “Is There A Special E-Commerce Ethics?,” Business Ethics Quarterly 14, no. 1 (2004): 71–94. Trust will improve competitiveness, reduce the costs of doing business, build loyalty, and increase the effectiveness of websites. In short, trust can be an important source of competitive advantage. Trust is essential.
In the physical world, trust is much easier to develop. Physical cues from spaces and buildings, face-to-face voice and body language, and salesperson effectiveness can translate easily into trust relationships. In the online world, however, trust develops as a result of the complex interaction of multiple factors that have design implications for the website. Here are some examples of trust:Avshalom Adam, Avshalom Aderet, and Arik Sadeh, “Do Ethics Matter to E-Consumers?,” Journal of Internet Commerce 6, no. 2 (2007): 19–34; Andrea Everard and Dennis F. Galletta, “How Presentation Flaws Affect Perceived Site Quality, Trust, and Intention to Purchase from an Online Store,” Journal of Management Information Systems 22, no. 3 (2005–6): 55–95; William Hampton-Sosa and Marios Koufaris, “The Effect of Web Site Perceptions on Initial Trust in the Owner Company,” International Journal of Electronic Commerce 10, no. 1 (2005): 55–81; Beverly Kracher and Cynthia L. Corritore, “Is There a Special E-Commerce Ethics?,” Business Ethics Quarterly 14, no. 1 (2004): 71–94; and Sergio Roman, “The Ethics of Online Retailing: A Scale Development and Validation from the Consumers’ Perspective,” Journal of Business Ethics 72 (2007): 131–48.
Another element of trust is order fulfillmentMeeting customer expectations with respect to processing the order and delivering of the product.. Order fulfillment is all about meeting expectations, and some argue that this is the most important element of trust.Terry Newholm et al., “Multi-Story Trust and Online Retailer Strategies,” International Review of Retail, Distribution and Consumer Research, 14, no. 4 (2004): 437–56. Delays in the delivery of a product, the delivery of the wrong product, and the hassles of returning merchandise are stresses that can contribute to a less-than-satisfactory Internet buying experience. Such experiences contribute to a lack of trust. In contrast, satisfied consumers express themselves this way:Sergio Roman, “The Ethics of Online Retailing: A Scale Development and Validation from the Consumers’ Perspective,” Journal of Business Ethics 72 (2007): 131–48.
Buying some products online, such as clothing, furniture, and toys, does not offer buyers the opportunity to touch and feel the product before buying. As a result, order fulfillment becomes even more important to customer satisfaction.
Linked closely to order fulfillment is product reliabilityThe accurate display and description of a product so that what customers receive is what they thought they ordered.. Product reliability refers to “the accurate display and description of a product so that what customers receive is what they thought they ordered.”Sergio Roman, “The Ethics of Online Retailing: A Scale Development and Validation from the Consumers’ Perspective,” Journal of Business Ethics 72 (2007): 131–48. Online retailers should provide a complete and realistic description of the product and its benefits—with high-quality pictures and perhaps even demonstration videos if possible, appropriate, and affordable—along with product availability and likely ship dates. Customers should be notified by e-mail of order acceptance, and the anticipated delivery date with phone and e-mail contacts for any needed assistance.
Inflatable Fruitcake
Inflatable fruitcake with demonstration.
What all this says is that website owners must proceed carefully to create their online presence in a way that will inspire trust. “If consumers trust online merchants and have confidence in the reliability and integrity of merchants, they will likely feel more at ease making purchases and disclosing sensitive information online. Therefore, the success of online merchants and the future of e-commerce may depend heavily on online trust.”Ye Diana Wang and Henry H. Emurian, “Trust in E-Commerce: Consideration of Interface Design Factors,” Journal of Electronic Commerce in Organizations 3, no. 4 (2005): 42–60.
Nowhere are security, privacy, and trust more necessary than at the point of payment. Without this transaction, there is no e-commerce, so it is imperative that small businesses selling online take the necessary steps to reduce customer concerns about shopping online. A recent survey found that retailers operating online may have lost more than $44 billion dollars over a one-year period as a result of transaction problems on their websites; in addition, 27 percent of online shoppers would turn to an offline or online competitor if they encountered an online transaction issue.“Tealeaf Survey Reveals That Online Retailers Potentially Lost More Than $44 Billion Due to Transaction Problems on Their Sites,” Tealeaf, September 27, 2010, accessed October 10, 2011, www.tealeaf.com/news/news-releases/2010/Tealeaf-Survey -Reveals-Online-Retailers-Potentially-Lost.php. More specifically, online shoppers who encountered a transaction problem would react as follows:“Tealeaf Survey Reveals That Online Retailers Potentially Lost More Than $44 Billion Due to Transaction Problems on Their Sites,” Tealeaf, September 27, 2010, accessed October 10, 2011, www.tealeaf.com/news/news-releases/2010/Tealeaf-Survey -Reveals-Online-Retailers-Potentially-Lost.php.
Sixty-six percent would contact customer service, including
Thirty-two percent would abandon the transaction entirely, including
To make matters even worse, the potential for lost revenue when customers have a negative online shopping experience is amplified by the rising use of social media like Facebook and Twitter; the voicing of displeasure on social networks can significantly damage a company’s reputation.“Tealeaf Survey Reveals That Online Retailers Potentially Lost More Than $44 Billion Due to Transaction Problems on Their Sites,” Tealeaf, September 27, 2010, accessed October 10, 2011, www.tealeaf.com/news/news-releases/2010/Tealeaf-Survey -Reveals-Online-Retailers-Potentially-Lost.php. The message is clear. Online transactions must run smoothly.
But there is another important issue: the number of payment options that are offered to the customer. Research shows that the more payment options customers have, the more likely they will complete their purchase.Delilah Obie, “Choosing a Vendor to Process Your Online Transactions,” SCORE, accessed October 10, 2011, www.score.org/resources/online-transactions-vendor; “How to Increase Sales with Online Payment Options,” March 22, 2010, accessed October 10, 2011, www.openforum.com/idea-hub/topics/money/article/how-to -increase-sales-with-online-payment-options-thursday-bram; “More Payment Options Can Mean More Business,” MivaCentral, 2009, accessed October 10, 2011, mivacentral.com/articles/payment.mv; T. Brandon, “Multiple Payment Processing Options Increase Sales,” eZine Articles, October 21, 2007, accessed October 10, 2011, ezinearticles.com/?Multiple-Payment-Processing-Options-Increase-Sales&id= 793303; and Efraim Turban et al., Electronic Commerce: A Managerial Perspective (Upper Saddle River, NJ: Pearson/Prentice Hall, 2008).
Customers shopping online expect convenience and a variety of payment options. Credit cards are by far the most popular means for making an online payment, with one survey indicating that 70 percent of online consumers used this payment method.“Online Retail Payments Forecast 2010–2014: Alternative Payments Growth Strong but Credit Card Projected for Comeback,” Javelin Strategy and Research, February 2010, accessed October 10, 2011, www.javelinstrategy.com/research/Brochure-171. Any small business that does not have its website set up to accept credit cards will lose 60–80 percent of its potential orders. Further, offering a credit card option will increase the number of orders, and those orders will be substantially larger because credit cards enable impulse buying, reassure customers of your legitimacy, and simplify your billing.Delilah Obie, “Choosing a Vendor to Process Your Online Transactions,” SCORE, accessed October 10, 2011, www.score.org/resources/online-transactions-vendor.
Consistent with credit cards being the online payment method of choice, it has been reported that 99 percent of online businesses offer a general purpose credit card, which include Visa, MasterCard, American Express, and Discover.“More Payment Options Can Mean More Business,” MivaCentral, 2009, accessed October 10, 2011, mivacentral.com/articles/payment.mv. However, debit cards are growing in popularity ahead of other payment alternatives.
Table 4.4 Payment Options Consumers Used to Make Online Purchases in 2009
| Payment Option | % Used |
|---|---|
| Major credit card usable anywhere | 70 |
| Major debit card usable anywhere | 55 |
| Online payment service, such as PayPal or Google Checkout | 51 |
| Gift card good only at a specific merchant | 41 |
| Store-branded credit card good only at the merchant that issued the card | 27 |
| Prepaid card or payroll card usable anywhere | 17 |
| Online credit service such as BillMeLater | 17 |
| Store-branded debit card good only at merchant that issued the card | 16 |
The implications of this for small business are that credit cards should be the first payment method that should be set up for online sales. Additional payment methods should be added as quickly as the budget allows because it is clear that more payment options translate into a greater likelihood of purchase. However, the choice of alternative payment methods should be in keeping with the growth strategy of the business. It may be that offering one method of payment provides a satisfactory level of sales, thereby eliminating the need for additional methods for sales growth.
As discussed in Chapter 1 "Foundations for Small Business", digital technology has put small business on a more equal footing with its larger competitors. Although it is certainly true that a commitment to technology is not for every small business, it is also true that technology is transforming small business in important ways: (1) businesses are easier to find online than ever before; (2) communicating with customers is shifting to e-mail marketing and social media; (3) e-mail and mobile phones are improving productivity; (4) collaboration among employees who are working in multiple venues is easier; (5) outsourcing is easier; and (6) more companies are shifting their attention to how they can sell products and services online. Using technology well is proving to be one of the most prominent drivers of business success.Ross Dawson, “Six Ways Technology Is Transforming Small Business,” Ross Dawson Blog, November 18, 2009, accessed October 10, 2011, rossdawsonblog.com/weblog/archives/2009/11/six_ways_techno.html.
Technology specifically related to e-commerce is a large umbrella. E-commerce platforms, customer relationship management (CRM), going mobile, and Web 2.0 will be discussed in this section.
An e-commerce platformThe software that makes it possible for a business to sell online. is the software that makes it possible for a business to sell online. In general, the core e-commerce platform should support basic requirements such as custom styling, search engine optimization, credit card processing, promotions, catalog management, analytics, product browsing, checkout, and order management. Additionally, e-commerce platforms should provide self-service content management systems (CMS), support multiple languages, and support multiple stores.“Ecommerce Integration,” Treehouse Logic, May 20, 2010, accessed October 10, 2011, blog.treehouselogic.com/2010/05/20/ecommerce-integration. These requirements may vary slightly depending on which type of e-commerce is being conducted. AnalyticsThe tools that can track the different ways people use a website and then make sense of the data. refer to the tools that can track the different ways people use your website and then make sense of the data.Justin Whitney, “What Is Web Analytics?,” AllBusiness.com, 2010, accessed October 10, 2011, www.allbusiness.com/marketing-advertising/marketing-advertising/11382028 -1.html. Analytics will be discussed in further detail in Chapter 8 "The Marketing Plan".
The all-in-one e-commerce platform solutionThe core e-commerce platform plus hosting, accounting, analytics, and marketing tools such as e-mail management. has become more popular with online merchants. This solution provides everything: the core e-commerce platform plus hosting, accounting, analytics, and marketing tools such as e-mail management. Because all the tools are integrated, they work together.James Macguire, “Starting Your Own E-Business, Pt 2: Choosing a Platform,” ecommerce-guide.com, September 26, 2005, accessed October 10, 2011, www.ecommerce-guide.com/solutions/building/article.php/3551461. It has also been reported that e-commerce platforms are now enabling online retailers to better reach consumers through mobile devices and social media sites.“E-commerce Platforms Offer Retailers New Social and Mobile Features, Internet Retailer, April 22, 2010, accessed October 10, 2011, www.internetretailer.com/ECTR/article.asp?id=34549. This is great news for the small business that wants to tap into these growing markets.
The list of e-commerce software providers is always growing, but there are many products that are tailored specifically for small to medium-sized businesses. Some of the names that come up frequently for small business are BigCommerce, Magento, Affinity Internet, ProStores (for the smaller merchant), and Miva Merchant. However, this list is not exhaustive, and new products enter the marketplace all the time.
Customer relationship management, as mentioned in Chapter 2 "Your Business Idea: The Quest for Value", refers to “a customer service approach that focuses on building long-term and sustainable customer relationships that add value for the customer and the company.”Efraim Turban et al., Electronic Commerce: A Managerial Perspective (Upper Saddle River, NJ: Pearson/Prentice Hall, 2008), 75. Some small businesses may wonder whether they really need the added complexity of a small business CRM solution. The answer will depend to a large extent on the size of the business and its growth objectives. However, it has been observed that there is no small business out there that, “sometimes in spite of themselves, didn’t benefit from implementing a…CRM or its watered down equivalent—a simpler Contact Management software solution.”Perry Norgarb, “Does Your Small Business Even Need a CRM Software Solution?,” SmallBizCRM, accessed October 10, 2011, www.smallbizcrm.com/does-your -small-business-need-a-software-solution.html. Recent studies have revealed that CRM applications account for the following:Peter Norgarb, “So Where Do You Start? How Do You Start?,” 2010, www.smallbizcrm.com.
It has also been noted that companies can boost their profits by almost 100 percent by retaining just 5 percent of their customers.Peter Norgarb, “So Where Do You Start? How Do You Start?,” 2010, www.smallbizcrm.com. What does this mean for the small business that chooses to go with a CRM solution? As long as the solution is well implemented and actually used, there should be an immediate payoff and productivity improvement throughout the company. Additionally, choosing to engage in e-commerce makes the selection of a CRM solution even more important because the quality of customer relationships is so important to online success.
Although there was a time when CRM solutions were not feasible for small business, they are available today for even the smallest businesses. These CRM solutions are priced and designed with the small business in mind.
As defined earlier in this chapter, mobile e-commerce (m-commerce) refers to the purchase of goods and services through wireless technology, such as cell phones and handheld devices. It consists of two primary components: “…the ability to use a wireless phone or other mobile device to conduct financial transactions and exchange payments over the Internet…and the ability to deliver information that can facilitate a transaction—from making it easy for your business to be ‘found’ via a mobile Web browser to creating mobile marketing campaigns such as text promotions and loyalty programs.”Laurie McCabe, “Mobile Commerce: Coming to Ecommerce Sites Near You,” ecommerce-guide.com, September 14, 2010, accessed October 10, 2011, www.ecommerce-guide.com/news/trends/article.php/3903526/Mobile-Commerce -Coming-to-Ecommerce-Sites-Near-You.htm. It is predicted that in 2015 m-commerce revenues will make up 8.5 percent of all US e-commerce revenue and 20 percent of global e-commerce revenue. In the United States, that will represent only one half of 1 percent of all retail revenues.Ian Mansfield, “US Mobile Ecommerce Revenues Set to Rise to $23.8bn in 2015, Cellular-News, April 14, 2010, accessed October 10, 2011, www.cellular-news.com/story/42841.php. However, even though m-commerce is lagging behind other mobile uses, wireless devices and m-commerce are expected to create another revolution in e-commerce. The most important thing that online retailers can do is to “…take action soon because the mobile environment is adapting much more quickly than the web.”Brendan Gibbons, “To Tap Mobile Buyers, First Determine Their Needs,” Practical eCommerce, March 16, 2010, accessed October 10, 2011, www.practicalecommerce.com/articles/1732-To-Tap-Mobile-Buyers-First-Determine -Their-Needs.
Small businesses need to sort out the hype from what’s real. What’s real are the facts and the trends. Jim Jansen, “Online Product Research: 58% of Americans Have Researched a Product or Service Online,” September 29, 2010, accessed October 10, 2011, http://pewinternet.org/Reports/2010/Online-Product-Research.aspx; “Majority of Online Retailers Plan to Have Mobile Ecommerce Websites by 2011,” Deluxe for Business, August 20, 2010, accessed October 10, 2011, http://deluxesmallbizblog.com/web-design/search-marketing/majority-of-online-retailers-plan-to-have-mobile-ecommerce-websites-by-2011; Laurie McCabe, “Mobile Commerce: Coming to Ecommerce Sites Near You,” ecommerce-guide.com, September 14, 2010, accessed October 10, 2011, www.ecommerce-guide.com/news/trends/article.php/3903526/Mobile-Commerce -Coming-to-Ecommerce-Sites-Near-You.htm; Ian Mansfield, “Mobile Internet Devices Expected to Surpass One Billion by 2013,” Cellular-News, December 9, 2009, accessed October 10, 2011, www.cellular-news.com/story/40997.php; John Lawson, “75% of Online Retailers Are Ramping Up Mobile Strategies,” ColderICE, accessed June 1, 2012, http://colderice.com/75-of-online-retailers-are-ramping-up-mobile-strategies/; Aaron Smith, “Mobile Access 2010,” Pew Internet & American Life Project, July 7, 2010, accessed October 10, 2011, www.pewinternet.org/Reports/2010/Mobile-Access-2010.aspx; and Ian Mansfield, “US Mobile Ecommerce Revenues Set to Rise to $23.8bn in 2015, Cellular-News, April 14, 2010, accessed October 10, 2011, www.cellular-news.com/story/42841.php.
Mobile E-Commerce Capabilities
(click to see video)Gene Alvarez, Gartner Group, discusses m-commerce.
Major retailers have been able to easily offer remote access to customers who want to make purchases using mobile devices (e.g., Target and Nordstrom). Software is now available for small businesses to offer some of the same bells and whistles, giving their online customers the ability to shop via smartphones.Stuart J. Johnston, “Small Business Ecommerce Trends: Shop by Smartphone,” Small Business Computing.com, September 7, 2010, accessed October 10, 2011, www.smallbusinesscomputing.com/news/article.php/3902136/Small-Business -Ecommerce-Trends-Shop-by-Smartphone.html.
Mobile e-commerce may not be for all small businesses, but a small business owner who is already in e-commerce or has plans to do so should give it consideration. Multichannel shoppers tend to purchase more, so small companies need to think of ways to “effectively engage customers by delivering consistent, rich experiences across all channels, including mobile, to maintain and fuel double-digit ecommerce industry growth rates.”“Majority of Online Retailers Plan to Have Mobile Ecommerce Websites by 2011,” Deluxe for Business, August 20, 2010, accessed October 10, 2011, deluxesmallbizblog.com/web-design/search-marketing/majority-of-online-retailers -plan-to-have-mobile-ecommerce-websites-by-2011. Online customers are ready and increasingly interested in using mobile devices to make purchases.
There is no agreement about an exact definition of Web 2.0Websites that are more interactive, engaging, and interesting than available with Web 1.0. but, in general, it refers to websites that are more interactive, engaging, and interesting than before. A Web 2.0 site is one where visitors can engage with you, your business, and your site by doing things like the following:Steve Strauss, “Maximizing Your Web Presence Is Key to Building Your Small Business,” USA Today, April 11, 2010, accessed October 10, 2011, www.usatoday.com/money/smallbusiness/columnist/strauss/2010-04-11-building-web-presence_N.htm.
Web 2.0 is about having a conversation with your customers. This is very different from Web 1.0All websites were static, and all you could do was read., where websites were static and all you could do was read. Web 2.0 sites are collaborative and interactive. The small business that creates a site that engages and interacts with people, that makes people want to stick around, will be giving people more of a chance to create a connection with the business.Steve Strauss, “Maximizing Your Web Presence Is Key to Building Your Small Business,” USA Today, April 11, 2010, accessed October 10, 2011, www.usatoday.com/money/smallbusiness/columnist/strauss/2010-04-11-building-web-presence_N.htm. These closer ties will increase customer awareness and consideration of the company’s products and services, improve customer satisfaction, increase the chances of loyalty, increase the chances for sales, and add to the bottom line. There will also be significant benefits realized between the small business and its suppliers and partners: lowering the costs of communication and doing business.
A much smaller percentage of small businesses have adopted elements of Web 2.0 as compared to large enterprises and midsize companies.Heather Claney, “Small Businesses Apparently Slow to Adopt Web 2.0 Philosophies,” IT Knowledge Exchange, June 29, 2008, accessed October 10, 2011, itknowledgeexchange.techtarget.com/channel-marker/small-businesses-apparently -slow-to-adopt-web-20-philosophies. However, many small businesses are using Web 2.0 in a variety of positive ways.Anita Campbell, “Real Life Examples of Business Owners Using Social Media,” Small Business Trends, July 3, 2008, accessed October 10, 2011, smallbiztrends.com/2008/07/real-life-examples-of-business-owners-using-social-media.html.
As Web 2.0 keeps evolving, the value and opportunities it will bring to small businesses will continue to grow. “The increased flow of two-way information between business and customer, the increase in information distribution through blogs and wikis, and the increased participation of customers in product improvement and even design will continue. By adopting Web 2.0 technologies and tools, small businesses can improve market share, profit, and reputation, now and in the future.”Sang-Heui Lee, David DeWester, and So Ra Park, “Web 2.0 and Opportunities for Small Businesses,” Service Business 2, no. 4 (2008): 335–45.
E-business in general and e-commerce in particular can both contribute to increased customer value. In the case of e-business, moving operations to digital technology can improve productivity, reduce or eliminate duplicative processes, streamline supply chain management and enterprise resource planning, improve customer and vendor relationships, improve business intelligence, increase and improve internal collaboration while doing the same with external business partners. In all instances, the customer, the vendor, and the business partner should realize increased value from doing business with the company in terms of greater efficiency, speed of information flows and transactions, and overall satisfaction.
In the case of e-commerce, customer value is provided via convenience, a greater selection of products, the ability to easily compare prices and services, 24/7 availability, privacy protection, multiple payment options, and reliable order fulfillment processes. Web 2.0, in particular, presents “consumers with a whole array of options in searching for value products and services and finding exactly what they need and want with minimum efforts, in line with the current customer desire for personalization, individual approach and empowerment.”Efthymios Constantinides and Stefan J. Fountain, “Web 2.0: Conceptual Foundations and Marketing Issues,” Journal of Direct, Data and Digital Marketing Practice 9, no. 3 (2008): 231–44.
The cash flow of a small business should benefit from all the sources of value just mentioned because they should result in lower operating costs, improved customer relationships, and higher sales. In particular, cash flow should increase as a result of the following:
This is not an exhaustive list. However, it is illustrative of the many ways in which e-business and e-commerce can impact the cash flow of a small business in a favorable way.
Although not all small businesses may choose to go the route of digital technology and the e-environment (e-business and e-commerce), it has been advised on many fronts that small businesses seriously consider creative ways in which to incorporate them all into their operations. Digital technology is difficult to avoid, whether it be computers, smartphones, or iPads (see the story of Lloyd’s Construction in Chapter 1 "Foundations for Small Business"). Even on a small scale, digital technology can help improve business processes and keep costs down.
The importance of e-business and e-commerce to small business has been the focus of this chapter. Realistically, neither can be avoided by small businesses that want to grow. E-commerce in particular has opened up the world to small business. Websites have “created a flattening effect in the sense that small businesses and large businesses [are] suddenly on a level playing field…The web [allows] small companies to have the same reach as a large firm. A small company’s web site [can] be viewed a million times just as easily as a large firm’s web site, and that information [is] available worldwide, 24 hours a day. Small businesses [can] now have some of the same abilities as large companies to reach customers with rich content of information about their products nationally or internationally.”Sang-Heui Lee, David DeWester, and So Ra Park, “Web 2.0 and Opportunities for Small Businesses,” Service Business 2, no. 4 (2008): 335–45. The small business that wants to grow will ignore e-business and e-commerce at its peril.
I’ve Been Hacked!
Not discouraged by the bad economy, Marnie McCormick opened “The Country Store” in the local shopping center. McCormick had done her homework. She originally leased the store front for a temporary stint, selling a line of unique handcrafted products and locally made foods while asking people what sort of products they wished were available in the area. In this way, she was able to build the kind of store that was needed, using the existing demand to decide what kinds of products she would offer.
McCormick had a myriad of concerns at start-up—inventory, suppliers, marketing, outfitting the store, and administrative systems. What she did not know was that someone had hacked into her computer system. From somewhere unknown, the hard drive of her computer in the store had been hacked. The hackers had downloaded a key-logging program (a virus that makes it possible for the hacker to record all your keystrokes, gaining access to passwords and other sensitive information). The hackers were able to see everything that she typed into the computer: e-mails, communications with vendors and customers, passwords—everything. The hackers only had to wait until she logged into her online bank account before they had all the information they needed for the payoff. She soon discovered that someone had been in her bank account, transferring money at will. The hackers had changed the password. The system crashed immediately.
As soon as she had opened the doors to her new store, McCormick had to close them. What should she do to get her store up and running again? How can she prevent this from happening in the future?Jake Lynch, “Hackers Set Sights on Small Businesses, Households,” Issaquah Reporter, August 19, 2010, accessed October 10, 2011, www.pnwlocalnews.com/east_king/iss/news/101077494.html.
