How to choose a provider
There are fundamental questions you should ask of your company and your potential providers before selecting your e-commerce solutions.
Perry Steiner, president of the e-commerce service provider Digital River, is ecstatic: "You've got tens of millions of businesses going online. And every one of them needs helpâ€"every single one of them."
Perhaps so, but if help comes from an e-commerce service provider, what kind of return should you expect from your investment? And how do you find a provider that lives up to billing? Dozens of outfits promise e-commerce solutions. Yet few have been around for more than five years.
First, let's dispense with a myth. The one-stop solution is a rarity, not the norm. In an executive survey of 39 top companies, Jupiter Research found that more than half required three to six partners to set up shop on the Web. Ten percent required more than that. Even if your partner provides the front-end of your operationâ€" transaction processing, order management, and customer serviceâ€"who's providing order fulfillment?
Once you have a realistic sense of what partners you'll need, you'll want to know if your provider's hardware has what it takes to handle your show: scalability, redundancy, and bandwidth. That means you should plan on a visit to the provider's site to check these items. Virtually all e-commerce providers offer transaction processing and order management. Do these include fraud screening; calculation of tax and shipping charges; e-returns management; and connectivity to your suppliers, fulfillment houses, and call centres?
Customer serviceâ€"for your customersâ€"is key. Round-the-clock online help is great, but you'll also want a way for customers to contact you by phone. Some service providers deliver this option, but watch out for costs. Also find outâ€"and testâ€"the average length of phone calls and the response time for e-mail.
Another issue to consider: Can you sufficiently customise your storefront? Generic product pages don't make for sticky customers. Find out how quickly you can change products and pricesâ€"or embed promotions in your site's content. And what tools does the service provide to let you manage sales campaigns on the fly?
Better providers are application agnostic, which allows you to change your site as your business changes. To shepherd those changes along, you'll want sales and customer analysis tools. Daily sales and host activity reports are key. So are product-level sales reports. Better providers deliver page drop-off rates, transaction detail reports, customer detail reports, and a raft of site performance reports including close ratios.
Also have an eye to the future. Do you plan to expand globally? Better providers transact sales in local currencies. Some will even present products in local languages. Can the service integrate all the partners in your value chainâ€"suppliers, distributors, and manufacturers?
E-commerce providers are getting faster at ramping up their customers. But you need a realistic timetable. Obviously, the more customisation you require, the longer it will take your site to go live. A good provider will help you anticipateâ€"and avoidâ€"delays.
Your setup fee will depend on the degree of customisation you require, the need to integrate suppliers and other partners, and time delays. These should be spelled out in detail. Your ongoing (typically monthly) fees are usually based on a share of your gross marginâ€"which can be any amount between 30 percent and 60 percentâ€"or a revenue share (6 percent to 12 percent is common). Either pricing scheme is based on anticipated transaction volume. Beware of surcharges and minimum volume commitments.
Finally, ask about confidentiality. Your provider will be privy to lots of sensitive company information. Policies about how it uses this information should be spelled out in writing.
Additional reporting by Renuka Rayasam.
