E-Business Busters

Entrepreneur, Jan, 2000 by Melissa Campanelli

What you read about the Internet is not always the real thing. Here are four e-commerce myths debunked.

We've all heard the hype: Putting up a good Web site takes only a few hours, and you can start taking orders immediately. It's easy to start generating sales, and you'll begin to achieve ROI right away. You don't need a Web consultant. And don't worry too much about advertising and marketing; if you have a good Web site, your customers will always find you.

Are any of these statements true? Nine times out of 10, no. But they're just the kinds of Internet myths entrepreneurs read about every day, leading many to frantically start e-commerce operations without taking the time to seriously consider the issues--and difficulties--involved.

The growth in the number of small-business Web sites has been significant. According to a recent study by high-tech market research firm International Data Corp., the number of small businesses (defined as businesses with fewer than 100 employees that are neither homebased nor branch offices of larger firms) conducting business on the Internet at the end of 1997 was 150,000; that number had grown to 850,000 by 1999.

We don't have to tell you why these small businesses are going online--a good Web site can build a company's image, provide better customer support, make technical information more easily available to customers, help you develop a prospect list, conduct customer surveys, offer products and take orders. But the actual process of setting up a Web site is not always as easy as it may seem. Following are several prevailing Internet myths that continue to distort the realities of getting into e-commerce:

Myth No. 1: Setting up a Web site is easy and inexpensive.

Product literature and, yes, even magazine articles can be blamed for spreading the rumor that great Web sites are easy and inexpensive to set up. While a static page can be put up in no time and at a low cost, setting up a professional Web site can be a very costly and time-consuming endeavor.

"If you're doing 'brochureware,' it can be pretty cheap," says Charles Rutstein, an analyst with Forrester Research. "You can do it in your spare time with off-the-shelf software in the couple-hundred-dollars range."

But putting up a good transactional Web site takes several months and costs anywhere from $10,000 to the six- or even seven-figure range. "You have a whole new spread of things to think about, such as how you're going to take orders, track inventory and fulfill orders," says Rutstein.

And then there's the burden of keeping your product information up to date. "Keeping inventory information current is a difficult task that many small-business owners don't even think about when they first decide to venture onto the Web," says Martha Frey, an analyst at Patricia Seybold Group, an e-business research and consulting firm in Boston. "This usually means integrating your Web site with some back-end systems. The major challenges arise when you enter this world of integration."

Well-designed Web sites should also have sophisticated customer support mechanisms in place, such as customer support software and a strong support staff that can respond to the whole world 24 hours a day.

Effective Web sites often require the work of agencies, consultants and integrators. "You really need a Web advertising agency and a Web engineering firm," says Frey, "so you cover both the creative side and technical side."

Myth No. 2: If you build it, they will come.

Some Web site owners think that after spending money to set up their sites, they don't need to spend more money on advertising or promotion.

That's simply not true. Setting up shop is no guarantee visitors will come. If you want a successful, well-visited site, you must embark on an advertising or promotional campaign to get customers there. In fact, Web retailers probably spend more on advertising and promotion than their offline counterparts. According to a 1998 study conducted by the Boston Consulting Group, an international strategy and general management consulting firm, and shop.org, a trade association focused on Internet retailing, Web retailers reinvest about 65 percent of their revenue in marketing and advertising, compared with offline retailers, who reinvest only about 4 percent.

A good place to start, according to Frey, is to spend a minimum of $1,000 per month on a keyword banner ad on Yahoo!'s Internet directory, www.yahoo.com. When you purchase this service, an ad for your company will pop up on the search page each time your company name is keyed into Yahoo!'s search engine.

"Often, small businesses get lost in big directory listings," says Frey. "But [buying a banner ad] helps people who are looking to find you--especially if you weren't able to secure a URL that is really obvious, which commonly happens to small businesses."

Frey also touts the importance of using banner ad exchanges and another emerging type of banner exchange program called "check-out banners," which are postage-stamp-sized ads that pop up on a Web page after a visitor has placed an order for a product. The ads are usually for products and services similar or complementary to the product or service the visitor has just purchased. You can place a check-out banner on another Web site or have companies buy banners on your site. These ads are designed to entice Web buyers--the type of Internet browsers most likely to buy again--to come to a Web site.