E-Business Basics: Making A Risk List For Your E-Commerce Venture

Inventory, website, credit cards, shipping, etc. Here's what you need to know (including avoiding being scammed) to assess your risks of your e-commerce venture.

Before starting any business you need to weigh your pros and cons. However, the pros and cons for an e-commerce venture are different than those of a traditional business. The best way to assess your risks is to be aware of what you need to succeed.

Product / Service: First you need a product or service that can be sold online. You most likely already have something in mind if you are reading this article. Services are generally less risky because you aren't buying inventory that needs sold to recover costs. However, it is very difficult to have a service that can be sold online so product e-commerce is much more common. Because there is an insane amount of products being sold on the internet, you need to do your research. Look up everything the least bit similar to what you would like to sell. See how much other companies charge for it and if possible, find out how well the product is selling. Remember, just because someone charges $10 for something doesn't mean they are actually selling enough inventory at that price to pay for their overhead (overhead is combination of product inventory costs as well as business expenses).

Website: E-commerce indicates an online business, so obviously you need a website. You may need to buy a domain name. This is needed if you want a specific ".com" This will be a annual bill, but not usually an overwhelming one. It only gets expensive if someone else already has the website domain name you want and you have to buy it from them. In that case you may want to consider renaming your website and business. Then you have to buy web hosting. This is what gets your site on the internet and keeps it there. Most web hosting comes with technical support, which can be extremely useful if you run into problems along the way. Now you need a website. A lot of people hire website designers, but there are computer programs that can help you design your own. These usually offer pre-made templates, so if you do want a completely original and creative website you might want to hire a designer.

Perhaps you want to do e-commerce through an already existing website such as an auction or store site. Then you probably won't have to worry about the above. Instead you will need to very carefully learn the fee policy of the website. These can be listing fees, final value fees, even store fees. Whatever they are, take these into careful consideration. The most risky are listing fees. You will only make that money back if you sell the item. Final value fees can be configured into your price. Therefore this fee is hardly risky at all because you only spend that money if you sell the item.

Payment: Being able to accept payment is the most important factor in running a successful e-commerce business. You will need to be able to accept credit and / or debit cards. You may also want to use an online service that allows customers to pay through e-checks. These payment services are also the easiest way to accept credit / debit cards because the do all the technical stuff for you for a small fee. This is where the big risks really come in. There is a danger in accepting credit card payments that most people starting out don't know about. If someone buys something from you with a stolen credit card, when the card is reported stolen there will be a charge-back to your account. Usually by the time this happens the order has already been sent out. This means you are out your product plus the money that was in your account plus fees charged from processing credit cards. Unfortunately, there isn't much that can be done to prevent this, at least not yet. The best thing to do is try to find a company that offers protection from fraudulent customers.

Shipping: This is another way customers can scam businesses. How? They can claim that their order never got there, whether or not it really did. If you are using one of those online payment services, they can force you to send a refund or suspend your account. That is unless you can prove you did send the order. The easiest way to do this is with Delivery Confirmation. It costs a little more than a stamp (in addition to the postage). This provides you with a number code that you can either go to a website or call an 800 number to verify that the package was delivered. It will even tell you when. That way if any customers have any disputes you have that delivery confirmation number as proof that you indeed sent the order. You can also buy a tracking number which is similar, but more detailed on where the package is but also more expensive. Also, shipping itself is yet another expense. Be sure when charging your customers shipping and handling you figure in all of your expenses so they will be completely covered.

Now that you know the basics of each category, go back and think about how each applies to you and your e-commerce venture. Write down everything you need to do in each category to avoid risk and then figure out how much it will cost to do so. Then add up the money from all of the categories and then you have your total ultimate risk, the amount of money will be investing in this e-commerce venture. If you can afford to indeed risk that amount of money and the time and energy it will take to run an online business, then most likely you are ready to get started. Good luck!

© High Speed Ventures 2011