In ECommerce Solid Planning Is A Must

June 13, 2002
| By Katy Rent |
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GRAND RAPIDS — The best-laid plans are usually the ones that work best and reap the highest rewards.

This holds true for all businesses, including the Web variety. The bottom line is that nothing is free, and even sites that appear free have costs and revenues.

Each site is stored on a computer, uses Web software, accesses telecommunication resources, and must be maintained — all services with a price. Someone pays for the computers, telecommunications charges, software and time.

Experts differ on whether there are five Web business models or three.

One author lists five vanity, advertising, subscription, storefront and information sites. Another author says three: transaction, subscription and advertising sites.

Vanity is actually where many sites begin, being a form of self-expression: outlets to share a hobby, promote a cause, or seek others with similar interests. Vanity sites are usually created by people with no intention of deriving revenue and no delusions of grandeur, and while they range from being as simple as a one-page family site to as complex as a forum on political issues.

The individual or organization — ranging from universities and libraries to associations and businesses — often underwrites the costs. Even these sites that are free to surfers incur costs.

Advertising sites are often the model for network television, radio and many periodicals. Sites following this model fund programming and content through advertising revenue with consumer viewing being the measurement of value. Surveys are often conducted by agencies to measure the value and establish the pricing. For e-commerce, advertising can be in the form of banners, sponsorships, e-zine ads or other promotions. This model receives much attention but is still largely unproven.

While a few sites are entirely supported by advertising, the lack of concrete viewing statistics (like TV’s Neilsen Survey) hinders mass adoption by advertisers.

As Web consumer behavior become clearer, experts mayl be able to prepare purchase pattern analyses, providing advertisers with experiential data to support their promotion campaigns.

Subscription Web sites are cautious because consumers still don’t accept them widely. The key to survival as a subscription model is to target populations with easily understood needs. Such sites — ranging from Civil War enactors’ pages to medical practitioners’ sites — usually are highly specialized with expert content and timely information.

Revenues from subscriptions fund the development and maintenance of the site. Subscriptions are paid in many ways depending on the site: weekly, monthly or annually. Credit card payment is the most popular and user-friendly method.

The virtual storefront is what many consider to be the “true” Web site: an electronic version of a catalog offering products for sale.

Such sites are built to display and describe the product, promote it, provide a so-called shopping cart, complete purchase transactions, and set up delivery just as with hard copy catalogs. Most such sites offer tangible products, but some now are venturing into services.

Information sites, aka brochure or billboard sites, derive revenue indirectly either through referred sales, reduced cost or both. The sites aim to get the product name into surfers’ view. Revenue comes from creating product or service awareness through the Web with sales offline.

The recent past makes one thing clear: in following e-commerce dreams, companies must forge and follow a sound business plan based on an accurate understanding of their industry and the customers who comprise its market.

The harsh reality is that the Internet is no longer a place for experimentation. Locally, the Small Business Development Center is available for help.

“We provide assistance with obtaining loans, starting a business plan, and any other questions a small business owner may have,” said Nancy Boese, Region 7 director of the Michigan Small Business Development Center at Grand Valley State University.

“Starting up any type of business, whether it be a Web-based business or a physical business, is difficult in the beginning and anyone is welcome to any of our programs, seminars and classes to learn where help is available and where to get answers to questions they may have.”

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