Even with the dot com
bust of the late 90s, the number of
entrepreneurs who have successfully
leveraged this powerful medium to sell
products, services or information and become
millionaires in the process is phenomenal.
Setting up an Internet
business is easy. Running it successfully is
slightly more challenging. Which is why
countless new Internet businesses emerge
every day, only to fold up immediately or
wind up slowly in a few months’ time.
The truth is that most
of these failures are due to inadequate
planning and preparation; the Internet still
provides one of the easiest means to realize
one’s dream of running a successful,
low-cost and highly profitable business.
Based on my own
experience with running several online
businesses, mainly niche Internet retail
stores, I am confident that some due
diligence before embarking on the Internet
retail business will go a long way in
ensuring its success.
At a very broad level,
an aspiring online retailer needs to follow
three key steps to get the business running
successfully:
• Market research and planning
• Setting up the online store and
streamlining the operations
• Marketing: Attracting visitors to the
store and converting them to buyers.
In this article, I will
briefly cover the first aspect, ie. research
and planning.
Research & Planning:
Laying a strong foundation to your online
business
This is one of the most neglected aspects,
simply because aspiring entrepreneurs often
get carried away by the overall simplicity
of getting their online business up and
running.
However, identifying
the right niche is absolutely critical. Get
this wrong and your Internet business will
flounder.
Here’s how I recommend
going about
identifying a niche market (we’ve used
this process quite effectively). Consider
the factors below, address some of the
questions listed and you are well on your
way towards e-commerce riches:
• Market and market
size: Determine if there a market for the
product you are trying to sell online. It is
important to know whether the targeted
buyers of your product purchase online! Once
you have estimated the size of a market, it
will be prudent to see if the market can be
further broken down into more narrow niches
with lower competition and potentially
better returns.
• Search potential and competition: Analyze
the volume of search traffic (both free and
paid, preferably the former) that you will
be able to generate, as search traffic is
among the lowest-cost means of getting
visitors to your website. There are several
tools available to do this, the most common
being the Overture (Yahoo! Search Marketing)
search term suggestion tool.
• Competition: Are there big players in the
market you are targeting that you need to be
wary of? There is certainly no shame in
locking horns with the big players but you
need to be aware of them and find out means
to be better than them. In fact, being a
small company/ business might even work to
your benefit!
• Profit margins: Does the product offer
sufficient margins to make it a viable,
sustainable business? Take into account all
the costs that you can readily identify and
add a certain percentage to it to estimate
your profit margin. Remember you can only be
better off when you’ve planned and prepared
for a worst case scenario.
• Product supply: Can you ensure regular
supply of the product? Which suppliers would
you like to source your products from?
• Logistics and fulfillment: Does the
product you intend to supply involve high
shipping and handling costs? Does it require
significant level of customer support and
other specialist resources? What is the
likelihood of product returns and how much
should you factor in your estimations?
Once you have addressed
all these questions to base your decision on
the choice of the product(s) to sell, you
would have laid a reasonably strong
foundation for your online store. Moreover,
this research will enable you to formulate
strategies in building your website and its
marketing. The next step is to build on that
strong foundation and begin executing on the
strategies you’ve drawn up, which I will
cover in a subsequent article.
