This paper examines ecommerce solutions for small start-up businesses, finding hosting services that specialize in off-the-shelf ecommerce site the best solution. This determination occurred primarily through the comparing the available solution to the criteria of expertise, time, and cost required to construct an ecommerce site. The possible solutions reviewed are categorized as custom or off-the-shelf services and then compared to the aforementioned criteria.
Table of Contents
Situational Analysis
Monogram Mama is a home-based business started in May 2008, primarily creating products focused on alphabet letters for home décor, clothing, and gifts. Initially starting with embroidery, she stitched letters on a wide variety of products to include bags, purses, towels, clothing and key chains. The business expanded in May 2010 to include alphabet letters and decorative shapes made from stick-on vinyl and steel sheeting.
The customer base began through word of mouth and placing products in two commission sales stores. While these venues generated sales, as in all businesses, there was a need to increase the sales and profits. Monogram Mama conducted a simple investigation into opening a local retail storefront or an ecommerce site, or both.
The internet on the surface appeared to hold the most promise for increasing sales while maintaining low overhead and mobility due to the spouses' frequent job relocation. This paper contains a detailed look at what ecommerce hosting solutions Monogram Mama attempted to use and what the results of those attempts were, and what alternatives are available.
For small start-up businesses, the use of the internet provides a low-entry cost method to gain entry into the market place using ecommerce and social media. To take advantage of it, a small business owner needs some master of it.
Premise Statement
Because custom ecommerce sites are expensive, time consuming, and require expertise in site design and development, the best solution for a small startup business is an off-the-shelf ecommerce site.
Key Definitions of Terms of Premise
Custom - doing work to order
Development - the act or process of developing
Ecommerce site - a technology-enabled application environment that facilitates an on-line, automated business transaction
Expensive - requiring a large expenditure; costly
Expertise - Skill or knowledge in a particular area
Off-the-shelf - readily available from merchandise in stock
Require - to impose a compulsion or command on
Site design - the art and process of creating a single Web page or entire Web sites and may involve both the aesthetics and the mechanics of a Web site's operation although primarily it focuses on the look and feel of the Web site - the design elements
Small start-up business - a new business operating on a limited scale
Solution - an action or process of solving a problem
Study Limitations/Disclaimers
The most significant limitation of this work is the nine-week deadline for completion of the work. The author also works a full-time job and as well as family medical issues. The amount of time allotted is not sufficient to conduct detailed research of the premise to review and verify all of the research used in this paper. To accomplish that, more time would be required to research, analyze, and reflect on the data available and articulate that in an easily understandable form.
The researcher did not have time or financial resources to evaluate a significant amount of ecommerce hosting services. Review of features, pricing and customer reviews on the hosting services was conducted to the greatest extent possible. A custom site, a off-the-shelf site, a Facebook Business Page, and an Etsy.com ecommerce site were established and evaluated. But, the researcher is not an expert at ecommerce site evaluation, construction, or operation.
Due to limited time, one local business owner was interviewed to provide their experience on establishing an ecommerce site. They were not a start-up business, but an established seven year-old business with a three year-old established physical storefront.
Another limitation is the fact that this work narrowly focuses on providing a solution to a home-based start-up business producing products for sale primarily to females at this time. The disclaimer here is that the solution supported is not necessarily the correct one for all small start-up businesses, but a solution any small business can apply in a very general sense. Many of the concerns factored into this work, in considering the best small start-up ecommerce solution, apply to all small start-ups.
The research resources available were limited to online resources found primarily through the U.S. Army's Combined Arms Research Library's access to online periodicals, books, and papers. This online portal provided a plethora of resources, but very little when compared to a major university library.
The ecommerce sites used to create the data substantiating the premise were intentionally limited. There are far more businesses out there providing services than can be reasonably expected to be included in this work. The services that were included were representative of the entire field available.
Work Plan
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Core Course Content
ITM 5000 Information Technology Management Overview provided a good overview of information technologies and their applicable use in business. Determining how to best integrate information technology into your business strategy to achieve the organizations goals, increase productivity, profits was very useful. The use of these methodologies will determine whether the use of an ecommerce site or a retail storefront would best benefit Monogram Mama.
An evaluation on the information technology use in the business was conducted. Small business accounting software was considered for use over physical books. The accounting software was selected based on reducing the amount of time required to do repetitious tasks on income and expenditures. The designs required to run the embroidery machine, vinyl cutter, and plasma cutter were found to be easier to use and provided more versatility with regard to resizing, reshaping, and creating original designs than through online purchasing of existing designs. These decisions were made after review of available options and then considering their impact to the profits, operating capital and other financial considerations.
BUSN 5200 Basic Finance for Managers provided a background in basic finance allowing Monogram Mama to make better fiscal decisions when considering buying new equipment, software, creating new product lines and managing operating capital and debt. The decision to buy a plasma cutter was driven by the metal product market demand, profit margin, cost of the cutter and existing supply chains, and potential earnings. These factors when considering the purchase of a plasma cutter or continuing to purchase the metal products from a vendor, very clearly made a case for the purchase of the plasma cutter.
This decision does not make sense in the short term, but when you consider the potential earnings long-term of the plasma cutter it does. The concerns of market saturation and the potential of introducing new products into the market to maintain a competitive edge supported the purchase. These methodologies were borne out several times in other purchases and in the decisions to not purchase certain equipment, software, or rent a retail storefront.
ITM 5100 Information and Communications Systems and Networks provided the background to determine the best practices for information and communications requirements. The use of separate emails to address sales, customer service, and technical support made it easier to focus on specific areas of the business. The use of social media as the main medium of communication to the customer base was a sound decision. The use has proven to greatly increase the number of customers following the launch of new products and events for the company.
ITM 5200 Project Management of Information Technology practices and processes provided the basis for creating new product lines. Coupled with basic finance, information technology management, and procurement principle, decisions were made on starting those new product development projects. The scope of the project, work plans, specific goals and the product development itself all followed the project management process or used elements thereof to create the new products. The creation of this paper utilized many of the elements of the project management process.
ITM 5300 Procurement and Contract Management for Information Technology taught Monogram Mama how to procure the online services required to create the ecommerce sites discussed in this paper. Those processes and procedures also are useful in managing supply chains and establishing long term procurement strategies and relationships with suppliers.
ITM 5400 Systems Analysis, Design, and Implementation assisted with determining the requirements for the ecommerce sites to ensure that the right amount of capability was purchased to support Monogram Mama's business strategy and goals. To ensure that the owner and customers had a reliable, efficient and effective ecommerce sight, careful consideration of design elements greatly assisted in achieving the desired results.
The implementation plan considered the impacts of rapidly providing the service, while reducing any unforeseen flaws in the design, capabilities, or capacity of the ecommerce site. The impact on revenue could be significant if the site does not perform to the satisfaction of the owner or the customers. This is very important since once a customer has written off your site, gaining their business again can be very difficult.
ITM 5600 Information and Communications Security is an important consideration when trying to determine an ecommerce solution. Customers want to know that their personal information, shopping preferences, and financial information is secure. Selecting an ecommerce site with a known reputation for securing owner and customer data, while providing a reliable and easy to use site, is critical.
Main Body
What is an ecommerce site?
The number of ecommerce sites is staggering (Ayanso, Lertwachara & Thongpapanl, 2010). An individual could browse and search for days and not view all of them. The options open to a small start-up business establishing an ecommerce capability are almost as plentiful as ecommerce sites. They range from custom-built websites costing tens of thousands to off-the-shelf ecommerce websites with everything integrated for thirty dollars a month. There are sites that provide product information but no online transaction capability, some have products and shopping carts, some allow full customization of your order, and these are just a couple of the functions and combinations available.
The definition of an ecommerce site varies, but the following definition captures the essence of most of the definitions found in various publications: "E-commerce is a technology-enabled application environment that facilitates an on-line, automated business transaction." (Farah & Higby, 2001). In 2006 there were $136.2 billion in online sales (Ayanso, Lertwachara & Thongpapanl, 2010), in 2010 that number rose to $165.4 billion (Winters, Davie & Weidenhamer, 2011). Whether a business uses a multichannel approach or an ecommerce only solution, they recognize that ecommerce is here to stay.
It is no longer a question of whether a successful business has a web presence; it is a matter of how robust of a presence. Grandon and Mykytyn (2004) "found that 36% of the small businesses established web sites primarily to advertise and promote their business, compared to 9% who established a web site to sell or market products or services online" (p. 44). Determining which model fits your business is key, and it starts by defining what your business does.
This paper focuses on a small startup business establishing a website focused on ecommerce with the intent to sale products, provide company information, and take advantage of electronic business practices to grow the business. Small businesses during a startup period typically operate in a budget-constrained environment, without an established customer base, and with limited expertise in online sales (Http://Www.Go4funding.Com/Articles/Startup/Calculating-Costs-Before-Setting-Up-A-Business.Aspx, 2010). Monogram Mama does not intend to establish a physical storefront downtown, or as it is referred to commonly as a "brick and mortar" store due to the high overhead.
Establishing a brick and mortar store requires a significant amount of resources. Assuming a business intends to rent vice buying the storefront, research in the Leavenworth, Kansas area shows it will still cost anywhere from $700 to $1500 a month to rent approximately 1200 to 2000 square feet of space. This does not include insurance, utilities, inventory, decorating, furniture, and labor to name a few of the considerations. Without taking out a loan or starting with significant operating capital, a brick and mortar storefront is risky. An ecommerce storefront on the other hand, can be significantly cheaper to establish and maintain.
An ecommerce storefront can cost a startup business anywhere from pennies to create all the way into the tens of thousands ("Web design cost estimate calculator," 2011). They have functions that range from listing products with images and accepting an electronic payment to sites that include that and provide marketing, sales and inventory analytics, and much more.
This paper is divided up into three major sections composed of: costs, time, and expertise. The types of sites considered against those criteria are custom and off-the shelf ecommerce platforms. These two types comprise the vast majority of ecommerce solutions available on the market at this time. Deviations from these two are really variations and combinations of their features and capabilities. All sites referred to in this paper, unless otherwise noted, are ecommerce. Therefore, the term ecommerce is dropped and the sites are referred to as a custom site or an off-the-shelf site throughout the paper.
This paragraph provides a basic definition of the different site types, for the purposes of this paper. Throughout the paper, a more detailed discussion occurs on the types of sites and the range of capabilities and functions. The definition of a custom site is a site that requires a site designer and developer to create and maintain it. A off-the-shelf site takes a site template from a hosting service and personalizes it to their business. This site still could require a developer to modify it to your needs. The integrated services site provides the majority of services the custom and off-the-shelf sites do, but in a much more integrated and simplified format for the do-it-yourself person.
Goals and Functions
The first thing in creating a successful ecommerce site starts with determining the goals of the site. In this paper, we will consider the primary goal is ecommerce, with a secondary goal of establishing a customer base and marketing, and a tertiary goal of providing information about the company. With the goals set, what functions are required to achieve those goals?
The basic functions of an ecommerce site are common to all despite the type of site selected: product listings, transaction processing, and shipping. With those three functions, a business can provide to its customers the ability to view products, select them for purchase, select a shipping method, receive a total cost, provide payment and receive the product to complete the transaction. Without customer service and marketing, a site likely will not achieve a high-level of success, but the three basic functions allow it to conduct ecommerce.
Marketing the site is important to grow and mature the business, as well as increase sales. The costs associated with advertising for a small-business ecommerce site start at tens of dollars and limited only by the companies advertising budget. Many sites of small, and primarily home-based businesses, do not use any paid advertising. They rely on social networks and word of mouth to market their products (Evans, 2009). Research on the internet also revealed that many did not use social sites despite being free. It is possible they do not properly understand the power of social networks in Web 2.0.
Customer service is a requirement for all business, ecommerce or otherwise. In an environment where the customer does not see the retailer face-to-face, it requires fast and courteous service by the provider. Research shows that it is not crucial for repeat or experienced customers on ecommerce sites, but it became much more important for first-time customers. A higher rate of unfinished transactions or one-time only purchases occurred if answers to product questions and transaction issues did not transpire in a timely manner (Oldenburger, Lehto, Feinberg, Lehto & Salvendy, 2008).
First Site Development
Monogram Mama's spouse purchased a domain name, a hosting service, and began to build an ecommerce website. The design of the site provided company information, products for purchase, specialty orders, and past special orders as examples. Unfortunately, the initial site build in December 2007 used Adobe Dreamweaver without any prior experience or training on the program. This led to many difficulties and eventually it was determined that the overhead of learning Dreamweaver to build this site was too significant and the build abandoned.
The second effort in August 2008 used a standard template the web host made available. The template was limiting in its design and capability, but it was marginally acceptable. Credit card processing service purchased for the site never fully integrated due to complexities and time available. Building the site with a template proved difficult and maintenance intensive. The owner did not want to dedicate scarce resources required to maintain a site of this level and after almost two years of neglect, closed the site.
The next attempt was in November 2009 with the creation of a Facebook Business page. This proved to be very easy to establish, maintain, no initial costs, and received payments through PayPal. Using Paypal did not require credit card service setup or fees as compared to a merchant account on a regular hosting service. The Shop Now feature provides product display, shopping cart, ability to discount to certain shoppers, and many other appealing features. There are no listing fees or commission fees, just advertising costs and PayPal service fees, making the Facebook Business page a low overhead and easy to use solution. The question was whether it can reach the right audiences and produce sales while requiring the least amount of limited resources.
The same time the Facebook Business page was established, an Etsy.com account was established. Etsy is an online commission sales website that only hosts vendors with goods handmade by the vendor themselves. This site was as easy to establish as the Facebook Business page and provided roughly the same capabilities.
The Etsy site does have many additional applications to assist with taxes, listings, sales data and many other capabilities. The advantage of the Etsy site is the customer base drawn to it is the same one needed for Monogram Mama's business. That can also be a disadvantage as the customers have a wide selection of handmade products from which to choose. Another disadvantage is Etsy also charges 3.5% commission on a sale, and 20ยข for a 3 month listing for each item.
The different ecommerce capabilities each have strength and weaknesses. Which one suits the Monogram Mama's business requirements? The long-term maintenance, sales generation, and costs are the driving factors in establishing Monogram Mama's ecommerce site. The site build costs of a custom site are typically prohibitive to a startup business ("Developing an ecommerce website," 2009). One business acquaintance of the Monogram Mama recently paid over $5,000 to establish a site that conducted regular updates, maintenance, upgrades and other tasks required to stay competitive in the ecommerce market (Mullins, 2011). The Monogram Mama is seeking answers to what is the best ecommerce solution for a business of its type, size, and funding.
Expertise
Custom Sites
The expertise required for the three types of sites considered here varies significantly. A custom site requires design and development expertise to create. If created by a contracted third party, it can involve multiple people with expertise in design, developing, marketing, graphics, and content writing. Some sites might require other disciplines for very specific requirements further driving up costs. The personnel required can range from one to an entire team. The more sophisticated the site, the more expertise it takes to design, develop, and maintain.
The site starts with determining the design requirements and preferences ("Access eCommerce," 2008). The majority of custom sites start with a template or existing site the developer already has. A positive experience by the customer relies on a good site design, this also is crucial in the development of return customers. If a site is not user friendly, the return rate on a site significantly decreases. A visually appealing site that is easy to navigate, select products and complete the transaction greatly increases the customer return rate (Oldenburger, Lehto, Feinberg, Lehto & Salvendy, 2008). The design process typically undergoes multiple iterations of draft, submit to customer, receive back change requests and repeat the process again until an agreed upon design that meets the customer's requirements is reached and the development begins.
Once the site design is complete, the developer begins creating the site in accordance with the design and functional requirements. The design might require the developer to create custom code to provide the features stated in the requirements. Custom code requires more expertise and typically requires more time than adapting an existing application or template to the customer's needs.
Depending on which features the customer requested, the development phase might take a significant amount of time ("Web design cost estimate calculator," 2011). Customized elements such as Flash introductions, 3-D imaging, interactive customer experiences, and other options specific to the customer's products or industry require expertise that increases the cost and risk. Risk in the form of interoperability between elements of the site increases with the number of advanced functions and custom code elements (Mullins, 2011).
Upon completion of the site, the customer now enters the phase of updating, maintenance, and upgrades. Custom site developers typically offer these services to the customer ("Web questionaire," 2009). Depending on what the customer specified in their requirements, the developer might create a site that requires a level of expertise beyond the customer's to update anything but the listed products (Mullins, 2011). Items as simple as the logo, headings, or menus if created with custom code, can be difficult to impossible to change without knowing how to write code.
The marketing for a custom site might be contracted with the design, development, and follow on maintenance of the site. The firm hired to create the site is prime to create the search engine optimization (SEO) as they developed the site and are most familiar with the terms. This does not take into account whether they have any experience or positive performance in creating SEO. SEO increases the companies search engine rankings without paying to get there (Evans, 2009). Without effective SEO, the site's search engine rankings and recognition suffers, translating into fewer potential customers.
Customer service is another function that the firm hired to create the site might provide, for a fee of course. They should be able to provide excellent support if they own the hosting and built the site. The firm also provides these services to other hosting customers and therefore can provide customer service 24/7 much easier and with more expertise than the typical inexperienced small startup business owner can("Developing an ecommerce website," 2009).
Off-the-shelf Sites
The off-the-shelf site requires little or no expertise to create. This is especially true of Facebook business pages (Evan, 2009). It can however take as much expertise as the custom site if a customer desires to add advanced functionality to the site. Each site hosting service generally provides a selection of off-the-shelf sites, to include ecommerce, for use by customers. Purchasing a plan and a domain name, a small business can have a basic ecommerce site up within hours to days depending on what features you want ("Websites tonight," 2011).
The off-the-shelf site, just like the custom site, requires the business to determine the site goals and design. The design is limited to the style and theme of the selected template, unlike the custom site that is limited only by available funds ("Differences between custom and hosted ecommerce website software solutions," 2011). While the custom site relied on the expertise and experience of the hired firm, an off-the-shelf site requires the business owner to provide the expertise and experience. A little internet research and time provides the owner with enough information to design a site, using a template, which should meet their basic ecommerce requirements.
Most site hosting services researched for this paper, like Big Commerce, provide reasonable technical support. Technical support assists the business owner with setting up product listings, transaction processes, email, blogs, and other items a small startup business might require. This starts with a do-it-yourself section and expands to include services like live chat, email, trouble tickets, blogs, wikis, and the venerable live person on the phone support. With an off-the-shelf site, the owner has a technical support-assisted learning curve to achieve basic services that the custom site achieves with great cost, but minimal effort on the owners part.
The completed site requires updating by the owner at regular intervals or as required by the business. Accomplishing maintenance and upgrades generally falls on the hosting service. The owner developed the site and owns the original content, making the owner uniquely qualified to update the products, their descriptions, pricing information, discounts, coupons and other items directly related to the business. Unlike the custom site where the small business owner could choose the option to pay keep it updated by an expert.
The marketing for an off-the-shelf site is no different from a custom site. The search engine optimization (SEO) that normally is conducted by the development team, now requires the business owner to complete. Without effective SEO, the site's search engine rankings and recognition suffers in a highly competitive market (Evans, 2009). Advertising might have to compensate for a weak SEO, thus reducing the cost savings of using an off-the-shelf site.
An off-the-shelf site is still reliant on the hosting service to resolve issues with equipment. Another layer of bureaucracy exists in that the owner is in the loop with little or no value added. When the problem is a configuration setting, or something else similar, then the owner has to spend some time troubleshooting it and then getting technical support from the hosting service if the owner cannot resolve it. There is an advantage in that the owner built the site and therefore knows the site design and configurations better than a somewhat disinterested third party knows, but with regard to technical problems, it is a small advantage.
Time
Custom Sites
In the example of a small start-up business, the time required based on estimates was 198 man-hours of work to provide a custom ecommerce solution ("Web design cost estimate calculator," 2011). This translates to at least a month's worth of work. Even if a web firm puts four personnel on the job, it would take them more than a week working constantly and without any delays. Meetings with the customer on design reviews, requirements, functionality, and other considerations alone normally increase the project timeline. Take into consideration that a successful firm has other sites to create, and the timeline further increases.
The time required to design a site varies based on the requested features and the experience of the designer ("Web design cost estimate calculator," 2011). Custom site design inherently takes longer due to the personalization, customization, and other requirements of the customer as compared to an off-the-shelf site. Integrating the features and designing the pages to naturally flow, while achieving the stated goals of the site, requires careful planning and experience in designing sites ("Developing an ecommerce website," 2009).
Like any project, a well thought out plan that details the requirements of the site, greatly increases the probability of success. The number of customer reviews and redesigns that occur can be an indicator of how well the customer stated their requirements or the developer understood them. That communication and understanding is critical to the project meeting scope, time and cost (Stiffler, 2010). The next step involves transitioning the design to the development team.
Development of a custom site can require months of work by a team. In the example above, it is stated how the different features, personalization, and customization can take a significant amount of time to create. The website design cost estimate calculator ("Web design cost estimate calculator," 2011)used provided a estimate of thirty-five hours of labor on the Flash parts and seventeen hours on the other graphics designed. Time equates to more features and functionality, but it also equates to more money.
Now that the firm has the site complete and approved by the customer, they would upload it onto the hosting service that the customer selected, working through any complications that arise in "going live". This is a distinct advantage of hiring a professional firm to create a site. Their experience in uploading a site to a hosting service and working through the complications make the transition easier ("Developing an ecommerce website," 2009).
Once the site is live on the internet, the business owner now has to keep it updated with the latest products, complete with images, product descriptions, inventory numbers, selection, and pricing ("Access eCommerce," 2008). Using the local business interviewed for this paper as an example, they spent approximately ten hours a month doing this task (Mullins, 2011). This business only places a fraction of their products online. Imagine maintaining hundreds of products, while creating new ones. For the small business owner who is most likely acting as the business manager, creative director, information technology director, salesman, janitor and many other jobs, this can be a serious resource requirement and a daunting task in addition. With a custom site, product managing and updating is normally the owner's responsibility, but if the owner wants to change something as simple as a menu or wants to add additional pages, it is likely they will require the services of the firm that built the site (Mullins, 2011).
The constantly changing market sees new functions, features and technologies brought to market frequently. It is well known shortly after arrival on market that a new technology or feature is quickly replaced with another newer and sometimes better capability. Security is a prime consideration to keeping the site's applications and features updated. The most recent updates and upgrades generally have the most recent security fixes. This requires the business owner to periodically review their requirements and determine if updating is required or even feasible. The firm that built the custom site has a stake in providing upgrades to the custom site as another revenue stream for their business.
Off-the-shelf Sites
The time required to design an off-the-shelf site is significantly smaller than a custom site. The off-the-shelf site still requires the business owner to determine requirements and goals. But, now the responsibility of determining how many pages, what types of pages, how the pages are laid out, navigation, and many other design factors are on the owner.
Most of this is removed from the owner through the use of a template with drag and drop functionality for design. A great number of templates are available, with varying layouts, some specific to ecommerce. On the sites that specialize in ecommerce, like Volusion.com or BigCommerce.com, they are exclusively designed for ecommerce. These sites have built their business model on the basis of providing ecommerce solutions to businesses that range from small to medium enterprises primarily.
Off-the-shelf sites are a great resource for the small start-up business since they remove a significant amount of the work from the business owner ("Developing an ecommerce website," 2009). The small business owner is also limited to the designs available, making the layout of their site limited. The same positive feature that attracts the start-up business owner is at the same time a limitation.
Development of the off-the-shelf site is much more streamlined than the custom site due to the limitations of the design picked. A small start-up might choose to use stock logos and graphics available on the hosting service, an online graphics shop, or create their own. Each takes time, respectively ranging from minutes to hours to complete("Web design cost estimate calculator," 2011). This continues as the owner develops the site, requiring the writing of copy, product images, pricing, shopping cart setup, and many other tasks. Some tasks, like pricing, the owner either would have participated in or completed on their own even with a custom site.
Once the off-the-shelf site is completed and tested offline, the owner goes live with the site. Unlike the custom site, the owner is required to work with technical support to resolve any issues that occur. There are always difficulties with a site going live. They vary from orphaned or broken hyperlinks to non-functional credit card processing. These normally can be resolved through patience and the hosting services technical support.
The specialized ecommerce hosting services that provide a coach, like Volusion ("Pricing," 2011), assist you through the process of setting up your ecommerce site. Many get positive comments for the feature, but it appeared from the research that many received negative comments on the actual performance. The appearance of coaching services is recent and based on past industry trends of new services; this coaching feature has the potential to mature into a useful service. The concept of providing a coach, vice a technical support representative, is more appealing as they understand how to coach someone through the technical requirements with common language instead of a rigid technical solution laden with heavy terms. The use of the coach can greatly reduce the time required in designing, developing, and going live with the site.
Updating an off-the-shelf site is simpler and cheaper as the owner created the site and is intimately familiar with the design and features. Updating still requires the owner's time, but does not require the owner to spend time meeting with the custom site firm to determine what updating is required, costs, scheduling, and the myriad of other factors required to ensure the firm meets the expectations of the owner.
Without the services of a contracted firm, the research of new technology, capabilities and methods reside with the owner. The hosting service will push information on new services as part of their business model. That does not mean they are leading the industry necessarily and therefore the owner still has a requirement to research the latest capabilities and determine relevance to their business. A cutting edge ecommerce site can be a great way for a small start-up business to gain or maintain a competitive advantage over peers.
Costs
Custom Sites
The costs associated with a custom ecommerce site are significant. The Wells Fargo/Gallup Small Business Index estimates the start-up costs on average are $10,000 and primarily personally financed ("How much money does it take to start a small business," 2006). Referring back to the web design cost estimate calculator ("Web design cost estimate calculator," 2011), the estimated cost for a custom site of this level are $17,000 to $23,000 (see appendix A). This is a very rough estimate based industry average costs and the features selected in the calculator. To say that the average small start-up business does not have the kind of money is an understatement.
The design, search engine optimization, and content writing are less than one-third of the estimate. The bulk of the estimate is the design of the Flash, ecommerce, administration, graphics, and public features. These features and the fact that the developer is doing the work, are what set a custom site apart from the off-the-shelf ecommerce site.
The firm that built the custom site normally accomplishes any updates outside updates the hosting site provides. Due to the fact they have the expertise, are intimately familiar with the construction, and most likely built it in a manner to makes it near impossible for a layman to modify it, a small business owner will have to contract for changes with them. Requesting that they build it in a manner that allows the owner to make changes drives up the design and development price.
The costs of researching new technology are not significant since, as previously stated, the firm has an interest in attracting the small business owner to upgrade to the new features or technology. The costs of upgrading to these can be significant and not necessarily relevant. Ensure that the recommended upgrades support your requirements and business goals.
Off-the-shelf Sites
The off-the-shelf site design costs the small business owner in-house labor. While most start-up business' view that as "free" labor, it is the most costly because the small business owner is most likely the only employee at this time. They are also filling several other positions and functions that are important to their start-up, therefore making their time a costly resource. Business owners have to determine the return on investment they expect to receive from establishing an ecommerce site to determine whether it is feasible.
Development of the site is a laborious process for a novice. The cost of the owner's labor can be offset using an off-the-shelf ecommerce plan that includes the coaching service previously discussed ("Pricing," 2011). Taking into consideration the owner's labor costs, using the off-the-shelf site significantly reduces the time required to produce a respectable ecommerce site.
The costs of updating are reduced using in-house labor and are value added ("Update your website to help increase sales," 2011). Since the owner constructed the site, and is intimately familiar with the layout and requirements, a labor savings results when compared to the custom site. The use of the off-the-shelf site is an advantage in that new features integrate well with their products through design. In a custom site, this is not always the case as the design of new applications applies across the industry, not for the small business owner's specially built custom site.
The costs to research new technology are similar to updating costs. The owner can conduct their own research to stay current in new features and technologies. Evaluate them to determine relevance to their small business, return on investment, and upgrade costs to implement them. As previously stated, the hosting service is likely to push information to the owner as new features and technologies become available, requiring the owner only to evaluate them.
Key Findings
Social media can level playing field in fully and properly utilized.
Low cost of entry to use ecommerce.
Reach wider customer base quicker with ecommerce vice "brick and mortar".
Custom is nice, but not required to be competitive.
Off-the-shelf sites provide all that is required with some value-added additional features, but requires more work by the owner.
Custom site building - unless a firm with a verifiable reputation is contracted, it is difficult to find a company/freelancer with the requisite knowledge and experience.
Identifying the goals and requirements of the site is crucial to success of the project regardless of contracting the site build or conducting the work in-house.
Even after the site goes live, there are still significant resource requirements to keep it updated, upgraded, and functioning.
A site that has a professional appearance is more likely to be trusted by customers.
The most important qualities of an ecommerce site for a positive customer experience are:
Transaction (shipping/ordering/processing)
Product (price)
Website (organization/navigation)
Current trend in off-the-shelf ecommerce solutions is to write the features list in a flowing narrative vice bulleted technical terms making it easier to identify a true ecommerce focused service.
4 levels of solutions delineated by cost and features
$15-30K full featured custom ecommerce solution plus hosting/domain/merchant fees.
$100 a month off-the-shelf ecommerce solution plus domain/merchant fees.
$30 a month off-the-shelf ecommerce solution plus domain/merchant fees.
$7 a month hosting using a template plus domain/merchant fees.
Need to evaluate the site periodically to determine if it still meets your requirements.
Need to periodically research the latest trends, technologies, and features available in ecommerce. Compare them to your current services, determine if they are value added and implement them if they are.
Conclusion
My initial premise stands correct. On average, the typical small business spends $10,000 on start-up costs. Generally, personal finances pay start-up costs. To expend $17,000 to $23,000 on a custom built ecommerce site is not practical. Off-the-shelf solutions available for under $1,200 a year create a better business case. Even though a custom site provides far more flexibility, personalization, and high end features, it is cost prohibitive for a small start-up business. Most start-up businesses cannot or do not take full advantage of the capabilities available in the off-the-shelf solutions, and therefore do not lose anything through their use vice the custom site. Monogram Mama currently should stay with the Facebook business page and Etsy site, with an eye to future expansion using a service like Big Commerce or Volusion.
Recommendations
Use an off-the-shelf ecommerce solution.
Analyze your business and ecommerce requirements in detail. This significantly reduces the number of changes required prior to launching your site.
Ensure that the solution selected has:
the ability to expand with you as your business grows.
the capabilities and features required to achieve your business goals.
good customer service/tech support
After selecting the ecommerce hosting solution, purchase your domain/SSL certificate/merchant solution to facilitate the build once you start.
Maintain the Facebook business page and Etsy site at this time.
Periodically evaluate the site and when appropriate, expand site capabilities through acquisition of an ecommerce specific hosting service like Big Commerce or Volusion.
