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1. Establish an overall framework for what you want your online business to be and do, considering all the elements of the diagram.
2. Create a complete strategy on how you want to execute point 1 above considering:
   
   a. What do you want to sell and how do you get those products, which leads to
   b. Sale's and Marketing, which leads to
   c. Creative, which leads to
   d. Technical and Operational, which leads to the right
   e. Management to execute your business model!
   
   
3. Assess the all-in costs associated with Point 2.
4. Reassess Point 1 in relation to your cash and business resources now and in the future.
5. Rewrite Point 2.
6. Charge ahead.

1. Strategy: Building an online presence without a business strategy of how to get there, what to anticipate while online, and cogent plans to increase sales is a waste of money and time. MerchantAdvantage has spoken to hundreds of on and offline retailers and none of the long-term successful online businesses simply host a shopping cart. Your strategy will evolve over time and one should look at it as a starting point to focus your management team and employees and, also, to share with outside companies and people who will help you get to where you want to go.
2. Legal: It is important that every online Merchant consider the following, whether you retained legal counsel or not: company state, local and federal registration, domain name rights secured, contracts with hosting companies, contracts with third party suppliers of products, vendors, and distributors, security issues related to customer information, and disclaimers on your storefront of services, distribution, and fulfillment to which you are obligated and are not obligated. These steps might sound straightforward, but without them you often lose credibility with anyone who might want to work with you.
3. Banking Relationships: Who supports you in the financial arena is critical in helping you set up company accounts, online storefront payment transactions to your account, and possible short-term loans to help build your company. Never underestimate the power of having a small, or big bank, helping you from the beginning, as their relationships alone will help you move forward in up and down cycles.
4. Product Vendor Relationships: Nothing can kill a business quicker than having bad product or inconsistent product quality, or non-delivery of sold products. Whether you manufacture product yourself or obtain your inventory from a third party, you only have one shot to make a first impression with your clients. An online Merchant must, in fact, be especially selective when working with product suppliers. If the online retailer partially or entirely operates in a drop ship mode, the supplier must be willing to drop ship single items, and should provide some digital representations of the products which are to be sold in the form of images and a catalog with descriptions. These issues would not even be considered for brick and mortar retailers, but are of extreme concern to online retailers because the function of getting the product to the consumer actually resides with the supplier, not the online Merchant. Furthermore, the cost of obtaining photo descriptions of products can be daunting.
5. Distribution and Delivery: Sounds obvious, but think again. Some studies by marketing experts say that over 80% of the reason customers don't come back to buy from an online business is because they never received the product as promised in a timely and professional manner the first time. Furthermore, on the business side, this very important element of the sales cycle often kills a business as they fail to negotiate a reasonable contract and thus watch their margins shrink because of the costs associated with handling, distribution and delivery. If products are to be shipped from your location, seek a strong relationship with the carrier of your choosing. If following a drop ship methodology, be sure the vendor you've chosen has such a relationship.

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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

• Shopping Comparison Sites (Marketing Channels) are the present and future of online retail.
According to Williams from 360i, the shopping vertical in search engine marketing is growing rapidly over the coming years. "We see the shopping feed space as where search engine auction formats were four or five or six years ago--and we really see that space exploding, especially within the retail area"

• Amazon.com's first quarter sales rose 20% to 2.3 billion.
First quarter sales ending March 31st were up from 1.9 billion in the year ago period Their North America segment sales, comprised of Amazon's U.S. and Canadian sites Grew 21% year-over-year to $1.25 billion from $1.03 billion. Its international segment is comprised of its U.K., German, Japanese, French and Chinese web sites. Amazon is No. 1 in the Internet Retailer. Of the thousands of product categories that Amazon represents, Amazon's fastest-growing segment in terms of traffic was its Internet Movie Database.

• Shopzilla has the largest increase in traffic in March in shopping sites. Shopzilla.com rated as the second largest shopping comparison site recorded the largest gain in traffic among the top 10 online shopping site in March, with visits increasing 87% to 19.1 million from 10.2 million a year earlier, according to Nielsen/Netratings.

• Shop.com introduced new and extremely robust online tools for merchants.
SHOP.COM, the destination online marketplace where consumers enjoy one-stop shopping from thousands of trusted brands using a single account, today introduced new and extremely robust online tools for merchants to more easily manage their stores within the SHOP.COM marketplace and considerably increase their sales performance. Located in SHOP.COM`s newly-created MarketPlace Business Center (MBC), the enhanced tools enable merchants to manage product inventory, provide timely and fresh product and/or marketing information, as well as track and manage order information required for providing exceptional customer experiences.

Manipulating the System
Working with Shopping comparison sites can be confusing, time consuming and if done correctly, profitable. Let’s take a quick look back at the growth of Shopping comparison sites – Originally there were only two or three major shopping comparison sites, and your data typically showed up on their sites because they grabbed (spidered) products from your shopping cart. This meant that they took which products they wanted, whether it was 10% or 100% of your products. If only 10% went, then there wasn't enough activity and if 100% went, then there were no, or marginally profitable products being marketed. Each consumer click cost $0.25, even if the consumer arrived at a discontinued product (no chance for sale), or a $2.00 product(no margin). Needless to say, this was not profitable, but there was no other way until…

Shopping comparison sites needed to get more flexible with the standard merchants and allow a more options. So they allowed select merchants to upload their data. This allowed merchants to remove discontinued items, and add new items. This was certainly an improvement over spidering. However, merchants still noticed that the ratio of clicks to purchases were not acceptable. They were, in essence, paying for too many clicks which would never be sales, and were not happy with their results. Savvy merchants began to notice that they could limit which products they sent, and therefore have some degree of control over their product Pay Per Click marketing costs. The problem was now that it could take over an hour to configure a product data feed, and it had to be a technical person. It would clearly be more efficient if the director of marketing could actually do the marketing instead of request the I.T. personnel to perform the task. But then how does a marketing director configure new feeds to try other shopping comparison sites?

Well that’s why MerchantAdvantage created Channel Management. But, whether you use our software or not, here are some terms and concepts we think you should know and use –

Catalog Dipping – selecting portions of your total catalog typically for marketing purposes. EX. Send “ShoppingComparisonSite.com" all products over $50, but nothing in the electronics category, and no products from Manufacturer X.

Collateral Data – Information pieces within the product catalog used for selecting products, but not the data which is actually sent.

CATMAP (global categories)– Mapping categories for maximum marketing impact, for each shopping destination site – For example within audio products an iPod could be within the Audio category, OR computer audio, OR Computer Peripherals, Audio Hardware etc… The Merchant may decide to locate an iPod within Computer Peripherals on a shopping channel because they are one of the few merchants with iPods within that category. If that generates more sales, GREAT CATMAP, if not, try again. Further, once the merchants categories for each product have been decided, that category should be mapped across all channels for a true picture of performance. For more info on selecting more or less frequented categories see the advice section of eTail dTail released on April 4th 2006 entitled Categorization Strategies.

Chanalytics – statistics and/or analytics showing traffic and purchase history for all online marketing channels in one easy location, with the ability to view the data in selected groupings such as; All categories within one channel, one product across all channels etc…

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