Business Model

business model

Important issues to consider before you jump!

Below is a list of business related issues you should think about before you begin developing an e-commerce site. You probably have a general idea about how to structure your site already. But if this list brings to mind even a few things you haven’t considered yet, you’ll probably save yourself some big bucks and a lot of headaches later during the development phase.

Feel free to use this list to generate your own Requirements Document. Or if you are planning to outsource the development, these questions can be used to put together a thorough Request for Proposal (RFP).

Presenting Your Product/Service Offers

Remember to put yourself in the customers’ shoes when you define the business model. The more you can think like them, the more likely you’ll create a solution that effectively caters to them.

Product Mix
What is the range of products that you plan to offer? Are all of your products hard goods? Or do you offer intangible products such as warranties, service agreements, and guarantees? Do you sell software products that you want to make available for download through the Internet? How many unique products to you plan to offer? How often does this product data and product mix change?

Is all pricing the same, regardless of who is making the purchase? Do different groups of customers see different pricing on the same items? Do you ever offer promotional or temporary pricing or price reductions? What is your pricing strategy for other channels?

Incentive Purchases
Do you use coupons or club memberships? Do you support manufacturers’ rebates? Do you up-sell, cross-sell, or bundle items to create purchase incentives? Are quantity discounts offered?

Compatible Accessories, Substitutions
Do you let users know what accessory items are compatible with a purchase about to be made? Do you recommend a substitution if an item is not in stock?

Categories, Subcategories, and More Subcategories
Will you want to help customers locate items by navigating through your product categories and subcategories? What categories and subcategories do you envision? What are the words your customers use to categorize your products?

Do you want to let users search for keywords? Or do your users want to search for simple product attributes such as brand, model, and price range? Do your customers need tools to help them look for products with specific features?

Configuration Views
Can you build custom orders? Do you want to let customers specify the components of the products they want to purchase? For example, what if they want a CPU tower with a 4-GB hard drive, 256 MB of RAM, plus a 12x CD-ROM?

Providing Sales Service

Solution Views
Do you recommend products based upon a profile of the customer’s needs? For example, you may sell a home office solution or a corporate cubicle solution.

Comparison Views
How much information do you want to provide to your customers to facilitate their comparison of products? Is brand, model, price, and description enough? Or does your customer prefer a table with a full comparison of features by type of feature? Would providing comparisons help or hinder the sale? Too much information may cause a customer to leave confused.

Dialog with the Customer
Do you plan to allow your customers to ask product questions? How will you handle the incoming email with the expertise your customers will expect? If you offer complex products that have many variations, how will you guide your customer through the decision-making process toward the right solution for him or her?

Transaction Management and Processing

If you plan to let customers purchase more than one item at a time, then you will need to implement an online shopping cart, shopping basket, procurement list, or whatever metaphor is appropriate to your brand.

Building an Order
Do you envision enabling customers to collect a number of items in their carts before checking out? How many unique items typically comprise an order? One to 10? Hundreds?

Do your customers typically purchase the same items again and again to replenish their stock? Do you want to enable registered users or groups to save a permanent shopping list from which they can reorder items they’ve ordered in the past?

Tax and Shipping
Some online stores precalculate tax and shipping expenses. Others ask that you trust them to add regional tax and reasonable shipping expenses to the total that appears on the screen. Should taxes and shipping be automatically added to the total cost for a customer to accept prior to placing an order? If you will be preauthorizing payments, you must calculate tax and shipping in advance.

Tax Nexus
In what states is tax applicable to your sales? Are all items taxable or only certain items?

What shipping options do you want to offer? FedEx? UPS? USPS?

Payment Types
What types of payments do you need to support for your customers? Credit cards? Cybercash? Debit cards? Procurement cards? Purchase orders? Corporate credit accounts? Private label cards?

Authentication, Validation, and Transaction Clearing
How much authentication do you want to force upon the user? Extensive authentication lowers your risk but decreases the ease with which customers can conduct transactions, possibly leading to lost sales. What will be your policy? What level of risk from potential fraud are you comfortable with? Will you want to check card numbers against card algorithms? Do you want to authorize cards and transaction amounts with a bank, and then reserve funds, before issuing order numbers?

Integrating with Inventory and Fulfillment

Product Availability
Do you want to offer for sale only items that are in your immediate inventory? Or do you want to offer items for sale even if they are not immediately on hand?

Out-of-Stock Notice
When should customers be notified that the items they selected are either out of stock, not available for immediate delivery, or can be back-ordered?

Back Orders
When do you want to notify the user of a back order? When they are checking out? After they have placed the order? Do you want to recommend a substitution if one is available?

When do you stop offering items for sale? When inventory count is at a minimum or when there are none left in inventory? Is this policy consistent for all products? Or is it different for each product?

Processing Orders
How often should orders be sent to order entry? In real-time? Every hour? Once a day? How do you want to handle the order you take at 4:55 p.m. with a request for next-day delivery, while the FedEx truck is pulling out of your dock right now? What does the customer expect? What can you deliver?

Providing Customer Service

Updating Orders
How will your fulfillment center let the system know that an order has shipped? Do you need to let the system know? Is there a shipping number that needs to get attached to the order? Does shipping status need to be updated more than once, if at all?

Order Status Look-Up
Do you want to enable customers to look up the shipping status of their order online? Do you want to provide UPS, FedEx, or USPS tracking numbers?

Order Status Notification
Would you prefer to be proactive and email changes in the order status to the recipient? Do you want to send messages upon acceptance of the orders? Should you send another when inventory is confirmed or a back order needs to be authorized? Do you need another when it leaves your dock and enters the shipper’s vehicle?

Technical Support
Do you plan to provide online support materials for the products you sell? Is technical support a product or service in and of itself? Does it need to be processed as an order?

Do you need to support multiple languages? Multiple currencies? Regional pricing structures?

What types of policies and disclaimers do you need to make available to your customers? What are the terms and conditions of a sale? What is your return policy? Do you offer a guarantee or a limited warranty on purchases? What should customers do if they need to return items? Are there any locations where you cannot legally sell your products and services?

Managing Customer Expectations
What expectations do you want to set for your customers regarding fulfillment? Will you ship same-day for delivery the next day? Will you charge a premium for such services? What is the cut-off time?

Gathering Metrics and Data

Site Metrics
What metrics will you use to manage the site? What reports will you want to see regarding your customers, orders, online merchandise, site traffic analysis, etc.? You can get access to hits and visits, but how will this information answer what you really want to know?: “What did I do that generated the most sales last month? And why?” Do you want to measure response rates to advertisements and direct marketing tactics? Do you need to evaluate conversion rates on your standard and promotional offers? Do you need to measure and manage your customer acquisition costs?

Customer Profiles
What demographic data do you want to capture as part of the registration or checkout process? What incentives can you offer to encourage anonymous buyers to tell you more about themselves?

Refining Your Marketing Tactics

Data Mining
What do you know about your customers? How can you mine that data in order to become a more effective marketer? Do you plan to target future offers to customers based upon their past purchasing histories or browsing habits with your business? Do you plan to automate these marketing features? Or do you envision managing them manually?

Who are your customers? Do you have more than one type? How educated are they about your product? How much assistance do they need to make a purchasing decision? Are they individuals or companies or both? How savvy are they about your products? How frequently do your customers shop?

Customers and Customer Groups
Do you plan to offer the same set of products to all your customers? Will you sell to anyone or only to people and groups you know? Do you segment your inventory for certain customers and groups of customers?

How much do your customers know about your products? How many are power users and have model numbers memorized? How many are new customers, who are unfamiliar with your products and need your assistance to make purchasing decisions?

Attracting the Customer

Getting the Word Out
How will you get the word out that your store is open for business? Register with the search engines and portals? Buy and manage online advertising? Target potential customers with direct marketing tactics? Get exposure through public relations or news group postings? What about social media? Or include your URL in marketing and promotional materials?

Value Proposition
Why will people shop at your online store? Price? Selection? Service? Speed? Availability? What do you offer customers that makes you competitive?

How do you want to be understood by your customer base? As the fastest way to shop? The smart way to shop? The easy way to shop? What makes your service unique in the marketplace? How are you different from your competitors? How can you communicate these attributes of your business to your customers?