1. Create Website/Storefront:
   This aspect of building your business should be fun and there are numerous ways to create your storefront. Some of these include: doing it yourself, with many online help sites that provide templates, hiring a local friend, or in most cases using a one-stop company that will design the site with you, as www.ProStores.com or smallbusiness.yahoo.com. They also can add any necessary bells and whistles that make your site unique and host the storefront.
   If you don't have the in-house technical skills and hosting facility to build and manage this part of your business, it is often recommended that a "rookie" online Merchant use a third party vendor that can do all of this for you. A recent phenomenon, which can also answer all of your needs, plus provide you with an immediate "shopping" community, are places such as ProStores.com (partnered with Shopping.com), Yahoo! Shopping, AOL Shopping, and MonsterMarketplace.com. These services offer various pricing structures and packages in accordance with how robust you want your storefront to be, i.e. number of pages, SKU's, and site design sophistication. They will also host your site.
   The real power of sites like these is not necessarily that their solutions are radically superior to an independent software company, but, rather that they provide the online Merchant a popular, well supported and marketed brand name which attracts customers to their site and then to yours, which the online Merchant can then leverage. Other solutions for building websites can easily be found through a quick websearch, but ensure that whomever you work with will be around to help into the future and not build your site and leave you on your own. www.WebSitePros.com is an example of an excellent company that will be around a long time and creates excellent websites for all levels of clients.
2. Host Website/Storefront:
   Never underestimate how important it is always to be “online” and working. Whatever solution you choose, in-house or a third party vendor, make sure that you choose a solution where you have the bandwidth to host your site effectively (don’t forget that a site with a lot of pictures and video feeds requires more bandwidth) and that your hosting solution has a track record of 99.9% of the time of always working. Remember, a site that is down almost always leads to lost sales, upset customers, and the possibility that a customer will never return! Service Level Agreements (SLA’s) typically promise rebates if downtime occurs. Unfortunately, the value of that downtime is determined by your monthly payment divided by the amount of time during that month that the service was down, not by lost sales. So, typically 6 hours of down time might cost you $1000’s in sales, but the SLA would give you back some $10 - $50. So, choose your hosting company more by history than guaranteed rebates, if down time occurs.
3. Payment Processing:
   Again, critical to your business and offered by many companies. There are basically two types of payment processing – standard Credit Card processing, and online virtual processors. Standard card processing companies allow your site to process Visa, MasterCard and such. They typically charge a transaction fee based on a percentage of each transaction and may or may not charge a fixed transaction fee, in addition. When comparing, be careful to compare “apples to apples” as many companies will show you a transaction percentage based on “Card Present” transactions, but when the card is not present there may be a significantly higher fee. With many of the full service website/shopping cart providers, they may specify which payment processing company to use, so there may be no choice for you. You should still, however, negotiate, to the best of your ability, for the lowest rate.
   The two biggest companies offering non-standard, or virtual processing are PayPal (an EBay Product) and now Google Checkout (a Google Product). All the information you could want on these two companies is available online, and I don't think we could add much about them. It is an important decision whether an online retailer accepts these payment types, standard processing, or both. The fees are NOT necessarily lower for non-standard processing companies, but you may increase your possible client base and limit the tedious tasks normally associated with card processing when using PayPal and/or Google Checkout.
   Payment processing should not be assumed and should be thoroughly researched to provide not only payment processing, but fraud protection metrics. "Best Practices", as put forth by Visa/Mastercard, are that a Merchant should not charge a credit card until such time as they know the purchased product is available and ready to ship. So if the merchant does not warehouse their own inventory, there needs to be a solid, quick and open form of communication with the fulfillment department or companies which carry the inventory. This will lessen the time delay to charging a credit card after the product is ready to ship. Merchants are constantly trying to negotiate online processing fees noting that their history of no charge backs is good, or their average transaction fee may increase. Since the processing is the only real service which is being provided, price/percentage is always the main differentiator in the credit card processing arena.
   Conversely, MerchantAdvantage recommends that any online Merchant ensure that a comprehensive order screening process should occur before any order is shown to fulfillment entities. If an order is deemed fraudulent, or even questionable, it is noted within the order, and the order is placed on hold until such time as there is a change within that order. This aids in limiting fraudulent shipments. A screening and scoring process takes into consideration many aspects of the order including the billing address and zipcode, amount of the order, time the order was initiated and many other factors to "Rate" the order as to it's expected validity. The Merchant ultimately chooses whether to continue on with the order or not, after having all details of the origin of the "Score", aiding the Merchant in their decision to process the order or not. To that end, an excellent resource for comprehensive information on payment security and payment management solutions is CyberSource www.cybersource.com. They have white papers for FREE and are a good first step to analyzing and then deciding what is the best final solution for you.
4. Web Upkeep and Upgrades:
   Many online Merchants are enamored with other sites that they think are flashier and evocative. The online Merchant is often seduced by these other sites and tempted to spend a lot of money to ensure that their sites are on par with VictoriasSecret.com and many others. But do remember that the best online storefronts still compete on excellent customer satisfaction, price, brand, and the best product offerings. Just building a “sexy site” does not lead to increased sales. Instead, MerchantAdvantage recommends deciding on marketing tools and companies that can immediately help answer the aforementioned factors.
   The truth of the matter is, there is no right answer. There is no question that excellent digital images and video, state of the art navigation methods, and other marketing "bells and whistles" can make the user experience more pleasant and lead to greater sales, but always put these additional features in perspective of what you can afford to do, what you want to do, and what your long-term strategy is to get customers to come to your site.
   Always keep these two opposing concepts in perspective. If there are no customers coming to your site, what does it matter how the site looks? And if people arrive at your site, do they immediately question the validity of your site, and look for alternative shopping sites rendering your marketing efforts useless? Keep the two concepts in balance, and if you err, err on the side of simple marketing to get customers to your site rather than bells and whistles.

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• Quickly Submit Your Top Selling and High Profit Products Only to the Channels Where They Perform!
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• Quickly Identify and Remove Poor Performing Products!
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• Channel Management Supports All Channels! (Shopping Comparison Sites)

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MerchantAdvantage Wrap Up:
Being online is not enough! Building an online storefront can be more complicated than building a brick and mortar store, so don’t be cavalier. Successful online Merchants create a strategy they can execute effectively within the confines of their budgets and implement excellent systems and solutions to manage their operations and customers. There are hundreds of companies and software solutions in the market to get you online, service you online, and keep you online. The multi billion dollar world of online retail is exciting and also complex. Online Merchants should compare the services of these companies with other cost-effective methods and software tools and then implement solutions that Merchants can afford, are in line with their business strategy and help them manage their business more effectively on their own.

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"MerchantAdvantage is here to be your partner in growing your business in the multi billion dollar and complex world of online shopping. We are here because you are online.^sm"

Michael Lambert, CEO

• Shopzilla Continues its Climb.
Shopzilla continues its climb up the list of retail websites in May with a 59% increase in traffic, bringing in 17.6 million visitors.

Top Retail Sites:
1. eBay
2. Amazon*
3. Target
4. Wal-Mart
5. Shopzilla.com*
6. Shopping.com*
7. Expedia
8. Dell
9. Travelocity
10. Yahoo Shopping*
*supported by Channel Management

• Shopping Comparison Sites (Marketing Channels) Still Growing.
Despite predictions of a slow down because of economic reasons, the online retail industry continued to grow at a very healthy pace. Once again, retail grew at a rate of 25%. Total sales reached $109.4 billion, which is 25% higher than in 2004 ($87.5 billion), which is 25% more than 2003 ($70 billion).

• 88% of young online adults will make online purchases by 2010**.
The number of young adults ages 25 to 34 who make online purchases will increase to 31 million by 2010, representing about 88% of the online young adult population, according to a new report from JupiterResearch. About 27 million young adults made online purchases in 2005, Jupiter said.

Total online retail spending of young adults will reach more than $28 billion in 2010 and will represent about 20% of overall online retail spending, according to Jupiter’s “Demographic Profile of Young Affluents: The Young, Rich and Active.” Average annual online retail spending per young adult buyer will increase to $902 in 2010, up 46% from 2005.

Jupiter also found that young affluent adults have high online tenure—78% have five or more years of online experience, compared with 64% of the overall online population. They also are more likely to have broadband access at home, with 64% using high-speed connections versus 56% of average users.
**Source: InternetRetailer.com

• Merchants Strive to Overcome Gap in Web-based Order Management, Study Says**.
Multi-channel retailers expect to see significant improvements in order management capabilities through the implementation of web-based order management software, reducing out-of-stock rates by 25%, AMR Research Inc. says in a new study.

“More retailers are recognizing the need to create a persistent shopping experience across all customer touch points,” says Rob Garf, retail industry research director at AMR Research.

The out-of-stock rate was cited by the largest group of study respondents, 22%, as the most important metric in gauging their success in handling multi-channel order fulfillment, and retailers said that implementing a web-based multi-channel order fulfillment system would improve their out-of-stock rate by 25% within the first 12 months. The study was conducted last month of 51 retailers ranging in size from $500 million to over $10 billion a year in revenue.

But the study, “Technology Trends in Inventory and Order Management for Retailers and CP Manufacturers,” also refers to a “significant gap” between the level of importance retailers place on the business issues impacted by multi-channel inventory and order management systems and their level of current performance in these areas.

While 62% of the retailers surveyed in the study cited “creating seamless multi-channel experience” as a highly important business issue, for example, only 28% said they were currently providing such performance through an integrated inventory management system. A similar but slightly smaller gap existed in the deployment of integrated order management systems for creating a seamless multi-channel experience.

The study also found, however, that while less than a third of retailers had already deployed web-based multi-channel order management systems, more than half will have them deployed within the next 12 months, according their current plans. The study found similar usage and growth patterns for inventory management systems.
**Source: InternetRetailer.com

What’s a Product Catalog?
In dealing with technical support we are, oddly enough, often asked this question. The confusion is mostly about the term, as all online retailers have a product catalog whether they realize it or not. In short, the product catalog is the list of products which are available within your shopping cart. The question typically arises when the merchant wishes to share this information with third parties like shopping comparison sites (SCS’s) or marketplaces. To supply the appropriate product information can range from simple to near impossible depending on the following circumstances;
• The original format of the data within the shopping cart.
• Available technology personnel.
• Available technical tools.
• The complexity necessary for each destination (SCS’s).

The first problem revolves around the fact that there isn’t really any standard format for product catalog information. No two shopping carts, or Shopping Comparison Sites are the same. So for a savvy merchant wishing to market through multiple online channels, they must find a way to speak to each of these entities. As new entities become available monthly, a new “language” needs to be accepted monthly. This is very difficult to do without a serious technology budget. However, by not trying new marketing channels, a merchant limits himself as to various marketing options.

The second problem revolves around the fact that each marketing entity performs and is measured in different manners. For example, a marketplace is typically measured quite simply in sales vs monthly fees. A shopping comparison site is typically measured in click cost vs sales profits. So, to maintain control over all of these entities, the merchant MUST control their catalog. By controlling the data within the catalog sent to each entity, the merchant controls marketing costs, sales volume, and basically all necessary control over their marketing vendors. The merchant may adjust descriptions, product codes, keywords, bid amounts, and even which products are and aren’t in the sent catalog to control each marketing relationship. As ONLINE retailers, maintaining control of your products catalog IS maintaining control of your company.

We believe that Channel Management is by far the best tool to use to aid in such endeavors, but we know that these issues must be addressed in some manner. When choosing how to handle these hurdles, consider these thoughts:
1– At the end of the year, if things went well, do you know how to recreate the circumstances that lead to success?
2– What is the overall cost to address these issues, is it within your budget, and is it being handled by the best possible people? (NOTE-no one knows your business better than you and your people do!)

For information on how MerchantAdvantage may help your business grow please contact us:
Chip Arndt
Executive Vice President
Business Development and Strategy
305.895.9466 x113
partnerships@merchantadvantage.com