E-commerce is about using internet technologies to buy and sell goods and services online. British consumers now spend over £1 billion a month online -six per cent of all UK retail sales. And, last year, half of all UK firms bought goods and services online, spending £23 billion in the process. Obviously these figures don't tell the whole story - some industries have been quicker to adopt e-commerce than others and some firms have benefited more than others. What is certain though is that e-commerce represents a real opportunity for businesses to find new markets and serve existing customers more efficiently. THE BENEFITS An e-commerce website offers enormous potential benefits to businesses, whatever their size. The benefits include: * Access to a global market - the internet allows businesses access to a huge market of potential customers worldwide. * Cutting out the middleman - businesses can sell direct to end-users. * A level playing field - a small business can show itself to be as professional and credible as its larger competitors. * 24-hour business - with a website that accepts payments online you are always open for business to customers even if your office is closed. Greater customer satisfaction - an e-commerce website can be a powerful tool for building customer loyalty. A well-designed website puts the customer in charge of the relationship - they can buy, browse, ask for help or track the progress of their order when they want. Reduced marketing costs - word of mouth can be incredibly powerful on the web through e-mail recommendations and search engine ratings. You can achieve a great deal through organic growth by treating customers well, keeping them informed about your activities and benchmarking yourself against competitors. * Better customer information - giving online customers passwords to your site saves them having to re-enter their details every time they shop. But it also gives you information about buying habits to refine your marketing, pricing and purchasing strategies. * Streamlined business processes - increasingly companies are integrating their business processes. Orders come in to their website, card details are processed, goods dispatched and stock re-ordered seamlessly, dramatically reducing the cost of each sale. The options The basic requirements for an e-commerce site are not onerous and many companies will be able to run pilot schemes without significant investment. However, a strategic approach is essential. If you launch a website that disappoints your customers or, conversely, is overwhelmed by traffic, you risk damaging your reputation and losing sales. You have three options when building a site: * basic * intermediate * sophisticated Basic Facilities * At the most simple level, all you need for an e-commerce website is a PC, internet access, e-mail, a website and hosting services. * This will provide you will the ability to construct a serviceable online shop. * You will be able to handle a small range of products - with photos, descriptions and prices - and accept online orders. Costs * DIY - using web authoring software like FrontPage or Dreamweaver, you can build the electronic equivalent of a mail order form for nothing. Customers e-mail their order and payment details to you, you process these details offline like a normal credit card payment and then e-mail confirmation to them. * If you already have a website, you can get software to add e-commerce functionality. Companies like Shopfitter.com and qhost.com offer this free in return for a cut of future transactions, typically £1 on transactions above £10. Pros * Low cost. * Simple to set up. * Fine for a small range of products. Cons * Design and functionality will look slightly limited. * Payment information will be e-mailed to you Ð this can worry some customers concerned about security. Intermediate Facilities * These will vary from package to package, but you can expect catalogue management, enhanced order processing, encryption for secure ordering and a broader range of design templates. * Others will offer a degree of backend systems integration, ie they will connect to your product database and accounts systems streamlining the order process and keeping the website up-to-date. This software should be more straightforward to use. Costs * Something like Actinic and EROL will offer all of the above features for around £600. * If you have a broadband connection, you will be able to receive orders in real time and update your website automatically. Broadband costs from around £30 a month upwards. * Some ISPs, like Claranet and Business Serve, offer a web hosting and software package all-in-one from about a £1,000. Pros * Full e-commerce and payments functionality. * Value-added features like account information, customer references and mechanisms to alert customers when goods are available. Cons * Products such as technical equipment that require sophisticated options or user configuration may be too complex for this type of off-the-shelf system. Sophisticated Facilities The range of options is huge and limited only by your budget and your ability to maintain the site. * On the site itself, you could have a product configurator allowing users to specify their exact needs. * Intelligent cross-selling features can select and promote related products. * Personalised pages can recognise previous visitors and display content, like product news, that they are most interested in. * Back-end systems can be integrated to trigger order confirmations and to automatically dispatch goods and replenish stocks. Costs * At this level of sophistication, you will certainly need professional assistance from a development company to scope your technical requirements and build a website that integrates your existing systems. * You may also want the services of a professional design agency. * To custom design and build a sophisticated e-commerce website will cost well over £10,000. Pros * Cutting edge design and functionality. * Site can be built to integrate with your existing systems. * Provides a rich, interactive shopping experience for your customers. Cons * Takes longer to create than buying off-the-shelf. * Bespoke software can lock you into one service provider. * Cost can be prohibitive for smaller businesses. Issues Building an e-commerce site isn't simply a matter of getting the right technology. There are a number of other important issues that you need to consider before you begin selling online. Fulfilment Taking orders and payments online is just the first step. You've got to have a fulfilment process that means you can dispatch and deliver goods or services in a reasonable time. The danger is that if your site attracts a large number of orders before you are geared up for them you could be overwhelmed. It's essential to test your site and processes thoroughly. Start with a soft launch - perhaps just to existing customers and see how the website beds down before you begin to give it stronger marketing support. Security It is still a relatively common myth that the web is insecure. In fact, with the use of encryption technology, virus scanning software and a 'firewall', e-commerce transactions can be much more secure than offline ones. For example, your customers are more likely to have money stolen from their credit cards in a restaurant than on the internet. Half the battle here is creating confidence. If you have a professional-looking website, you explain your security precautions and you consult with larger customers prior to launching your site, customers will respond positively. For more on this subject, visit the security section of our website at www.dti.gov.uk/bestpractice Regulation If you are selling online, there are a number of pieces of legislation and regulation that you need to be familiar with. These include: * The Data Protection Act - which governs how you use and store customer information. * The EU's Distance Selling Directive - which covers cooling-off periods, returns and the information you must display on your site. * The Electronic Communications Act - which sets out how the government is reforming the law to support e-commerce. Another major consideration is that, if you are selling overseas, you will be subject to other countries' regulatory regimes. For more on this subject, read our E-law brochure at www.dti.gov.uk/bestpractice Payment options Most goods bought on the internet are paid for by credit or debit card. There are several methods for accepting card payments Ð each with different set-up costs, pricing structures and technology requirements. The two most common are: * Getting an Internet Merchant Service (IMS) from a bank to let you accept credit and debit card payments and a Payment Service Provider (PSP), which is a piece of software that collects card numbers and passes them to your bank. * Using a Payment Bureau. These bureaux, like WorldPay or Netbanx, collect and process card details for you without the need for a IMS or PSP. For more details, visit www.electronic-payments.co.uk, which has a comparison tool to help you choose the most appropriate method for your business. Promoting the site Once you have your website up and running, you need to promote it effectively. There are three main ways that people arrive at websites: * Direct navigation - where people type in the web address. This accounts for around two-thirds of web visits. * Web referrals - like links and banner adverts, which account for 21%. * Search engines - like Google and Yahoo!, which account for 14%. The balance of these three methods is changing. Search engines still play a key role in information retrieval, but they have steadily dropped in commercial importance as companies have got better at promoting their web addresses. Direct navigation * The best way of generating web traffic is also the cheapest to implement - simply make sure you include your web address on all printed material: business cards, letters, flyers, newsletters and posters. * If you have chosen a simple URL, it will also make it easier for people to remember from television and radio adverts or personal recommendations. * If you operate exclusively in the UK, choose a .co.uk address. If you trade abroad, you might want to consider a .com address as well. To make it easy for someone to find your website, avoid hyphens or other punctuation in your web address. Web referrals Over a fifth of web visits come from web referrals. There are number of ways you can generate these: * Include your web address as a standard part of all e-mail footers. * E-mail marketing - targeted electronic newsletters and offers to customers can be very effective. If the offer is interesting, it is also very easy for people to pass the e-mail on to colleagues. * Online advertising - the use of banner and pop-up adverts on other websites to drive people to yours is a contentious issue. Response rates tend to be very low, however, the amount of money spent on them continues to increase. If you are considering paying for online advertising, it's essential to have a clear idea of your objectives and to take advice from an agency on the best way to reach your audience. * Reciprocal marketing - this involves finding sites with complementary content and agreeing to have links or banners to each other's sites, such as your trade association. Search engines While search engines are far outstripped by direct referrals, they can still prove useful for attracting customers if you are in a very price sensitive market or you provide a niche product. Over 90% of all referrals to e-commerce sites come from the four largest search engines: Google, Yahoo, MSN and AOL1. Competition for a high ranking on these sites is intense because only 10% of web users look beyond the second page of results. Different search engines rank websites in different ways -some by a site's popularity, some by relevance and some by quality. Many also offer the option of paying for a place on the first page. For more information and advice, read our fact-sheet on Search engine optimisation. Troubleshooting Not all businesses have found their sites to be as successful as hoped. Sometimes this is due to underlying strategic problems. However, because web users are impatient and have high expectations, minor easily repaired flaws can often be enough to scupper a sale. Tips for a successful site e-commerce site: * Your contact details Ð phone numbers, e-mail and postal addresses (or a prominent link to them) should be on the homepage. * All the information (especially prices) must be current and accurate. * Navigation needs to be clear - this doesn't necessarily mean that you have to reorganise your whole site; sometimes renaming pages can be enough. * Conduct some user testing - ask a group of people to find and buy a product, and get their feedback on how easy it was to do. * Make sure text is easy to read - web users rarely read whole pages. So write more simply than you would in printed publications. Break text up with headings and bullet points. Remember also that English is a second language for millions of potential customers. * Registration puts some users off - it is best used in the purchase process or in return for something people might value, like exclusive content. In these circumstances, users don't mind giving out personal information because they can see what they get in return. * Make your checkout procedure as quick and simple as possible, between 60-75% of shopping carts are abandoned. One of the main causes is slow or unclear checkout procedures. A simple remedy is to have some text about the buying process explaining how long it will take and how many stages there are. * Download times are key - users expect pages to load in less than eight seconds. If your site is slow due to sheer weight of numbers, you have little choice but to upgrade it. However, if it is slow due to the size of individual pages, you can speed it up by removing large images, graphics or animation from key pages like the homepage. * Regularly check internal links on your site, if they don't work, or a page has been removed, it reflects very poorly on your site. * Users like links to other sites - but there is a balance to be struck, if there are too many links, you risk sending customers away from your website. * Give people a reason to return - news, product launches or a promotion keep your site looking fresh and encourages repeat visits. * Benchmark your site - check the functionality and performance of your sites against your competitors but also against the biggest names on the web. Amazon and eBay, for example, are praised for their innovation and ease of use while the BBC site is renowned for its presentation of information. Implementation checklist Research & analyse Set targets Set goals for your e-commerce website: for example, to bring in new business or cut the cost of each sale. Agree specific, measurable objectives for what you want to achieve, such as a percentage increase in sales or new customers. Cost benefit analysis Compare the costs of an e-commerce site, like design, software and maintenance, with benefits like improved sales, greater order handling capacity and global representation. Consult Professional advice If you lack the skills in-house, contact a Business Link adviser (or equivalent if you are in Scotland, Wales or Northern Ireland), in the first instance, for help on how best to: outline your requirements establish how much you can afford to pay scope the project advise on implementation provide training and software support design your website. Plan & test Evaluate options There are three broad approaches to consider: Basic - using simple software you can create your own site Ð but will it have sufficient functionality for you and your customersÕ needs? Intermediate - you can buy an off-the-shelf package from many providers that will give you a professional looking site with online payments advance functionality. You need to be sure that your product lends itself to the generic purchasing and checkout procedures of these solutions, though. Sophisticated - using a software company you can build a bespoke site to match your needs. The costs can be high and you need to be sure that they are justified by the increased flexibility and functionality of this approach. Plan the roll out phase: Will you have a soft launch to existing customers? How will you market the site? Look at training implications: Will staff need to be shown how to update the site? Who will handle customer orders and queries? Decide which staff will require training and allow time for them to adjust to the new system. Act Implement your e-commerce website Rollout any necessary training. Encourage staff involvement and feedback. This will help smooth implementation, as staff buy-in can make or break a technology project. Consider setting up a cross-departmental taskforce to manage the implementation process - it will help with staff buy-in and ensure that implementation works company-wide. Launch the site: Encourage existing customers to use it. Make sure you promote the URL and make the site easy to find on search engines. Evaluate Monitor and review the impact on your business and against your objectives. Continue to benchmark your site against competitors and market leaders. Get feedback from staff, customers and suppliers on the changes. Evaluate the impact after 6 months and 1 year. Have you achieved your objectives? Establish how you could improve things further. Further help and advice Basic solutions * www.microsoft.com/frontpage - the website for Microsoft's FrontPage software. * www.dreamweaver.com/software/dreamweaver - the website for MacromediaÕs Dreamweaver software. * www.Shopfitter.com - an e-commerce web hosting company. * www.qhost.com - also an e-commerce web hosting company. Intermediate solutions * www.actinic.com - sells e-commerce packages. * www.erol.co.uk - also provides e-commerce packages. * www.claranet.co.uk - provides e-commerce hosting packages. * www.businessserve.co.uk also provides e-commerce hosting packages. Sophisticated solutions * www.4-ecomm.com - provides bespoke e-commerce solutions. * www.networthsolutions.co.uk - also provides bespoke e-commerce solutions. * www.coastdigital.co.uk - provides bespoke e-commerce solutions as well as design, marketing, multimedia and hosting solutions. * www.dynamicwebs.co.uk - provides bespoke e-commerce solutions as well as design, marketing, multimedia and hosting solutions. Payment options * www.electronic-payments.co.uk Ð a DTI-Scottish Enterprise site that sets out your options and includes a price comparison tool. Legislation * www.informationcommissioner.gov.uk/eventual.aspx?id=2042 - the principles of data protection, as set down in the Data Protection Act. * www.dti.gov.uk/industries/ecommunications/regulation.html - details of the Electronic Communications Act. * www.oft.gov.uk/Business/Legal+Powers/distance+selling+ regulations.htm - guidance on the Distance Selling Directive from the Office of Fair Trading.