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Determining your client’s goals for their new e-commerce site is probably the single most important factor in your client’s ultimate happiness with your work. If your client’s goals are unrealistically high, for example, I want to make a $100,000 per month profit starting in the third month, they won’t be met and your client will be unhappy. On the other hand, if your client’s goals are too low, it’s possible that they are not going to be willing to devote the time and energy it would take to make an e-commerce site successful. The site won’t bring any benefits at all and your client would still be unhappy. There are many, many resources for analyzing the financial components of an e-commerce web site. For this training, we will do only a brief summary of the financial possibilities for Hanchy’s site. Hanchy has an interesting set of goals for her business and e-commerce web site. While she needs it to provide financially for her and her family, she understands that she won’t be able to rely on income from calalilly while the business is growing. To her, having her own business and being able to work with and around beautiful objects are also primary goals for her venture. Financially, by the end of the first year, Hanchy would like to have an average customer purchase of $50 with about 3 orders per day or a total of about 90 per month. This would bring in approximately $4500 per month in revenue. Because Hanchy offers such a wide range of products, it’s tough to establish a real inventory cost. We will do a ballpark estimate though and say that for every $10 of retail sales, the cost of the product is approximately $7. This matches the retail gift industry average and means that Hanchy’s revenue goal would provide about $1350 in profit each month. Credit card payment fees, overhead, office supplies, internet access, site hosting and other overhead costs are taken out of this amount leaving Hanchy about $950 per month. Because none of the customers in her target market would return every month to make a purchase, to receive 90 orders per month, Hanchy would need to develop a loyal customer base of approximately five to six hundred people who would return to this site every three months or so. This is going to be Hanchy’s biggest initial marketing challenge but once that group is established, its maintenance and growth is much more straightforward. In addition to the financial goals though, Hanchy has other expectations of her e-commerce site. She loves everything about the product itself. Choosing it, buying it, photographing it and selling it. She feels that her enjoyment of her work is a very important part of her experience with the e-commerce site. What she doesn’t enjoy so much though is the paperwork and ongoing maintenance tasks of the business. She is also not particularly comfortable at social events with people she doesn’t know and she doesn’t like speaking in front of groups. This means that while Hanchy is perfect in the background, she will need to find ways to market the site that don’t require a lot of public activity on her part. She would like to find a marketing partner during the first year to help her with advertising and publicizing this site. After the first year, she would also like to hire an employee to handle the administrative details of the business. For some businesses, additional sales are not the only financial goal. Reducing customer service expenses and streamlining business operations are also very appropriate goals for an e-commerce site particularly for an existing business. When a business already has a sales channel like a mail order catalogue or a physical store location, there maybe concern that adding an e-commerce web site would just move current customers from one channel to another. This is often a very reasonable worry. But there are usually mitigating circumstances. First, when customers move sales channel, for example, from a mail order catalogue to an online store, there is often a bump up in the average purchase amount. Second, many times a business will discover that customers who receive a mail order catalogue and don’t place an order using the catalogue will in fact place an order online after they receive the catalogue. This emphasizes the need for most businesses to market the web site presence aggressively in conjunction with the existing sales channels. Figuring out if your client’s goals for their e-commerce site are reasonable is a process that is tricky at best. Sometimes it’s easy when goals are clearly too high or too low but much of the time it’s anybody’s guess whether a goal is reachable. All you and your client can do is make reasonable estimates based on research and statistics and continue to evaluate their accuracy as time goes on.
Course: | Introduction to E-Commerce |
Author: | Darcey Spears |
SKU: | 33628 |
ISBN: | 1-932808-79-5 |
Release Date: | 2005-08-25 |
Duration: | 7.5 hrs / 102 lessons |
Work Files: |
Yes |
Captions: | No |
Compatibility: |
Vista/XP/2000, OS X, Linux QuickTime 7, Flash 8 |