Retail - Setting Up Shop on the Net

Setting up an online retail operation is cheap and easy - but running a successful retail operation online is difficult, and being profitable online is even more so.

Buying Habits Are Hard to Change, But They're Changing

It's difficult to get a person to change their habits, especially when the habit involves money - but they are not immutable. Consumers were slow to adopt credit cards and ATMs, but eventually, these things caught on. Internet commerce is similar - slow to begin, but it's expected to become ubiquitous.

Various factors make people reluctant to buy online: credit card security concerns, inability to physically handle merchandise, the delay between purchase and delivery. The objective importance and validity of the concerns are unimportant - it's the consumer's subjective assessment of them that actually impede their behavior.

But on the other hand, the Internet does have its advantages: it's more convenient, prices are lower, selection is better, and there are certain value-adds that are possible online that cannot (feasibly) be done by telephone or in brick-and-mortar stores.

Even now (1998), the trends show an increasing number of people spending an increasing number of dollars online, and that trend is expected to continue and accelerate as the medium reaches maturity.

Advertising: Your Web Site as a Storefront

The comparison of a retail site to a storefront is very misleading in one respect: it does not occupy a physical space. Hence, people don't happen to be passing by, or shopping next door, and wander inside by chance. Nobody knows it's even there unless they're told.

If you have a brick-and-mortar presence, you can use it to promote your online brand, though this is often contrary to your goals: the purpose of your site is to increase business, not merely cause a channel-switch.

In some instances, it's the information you provide "for free" that acts as bait to lure individuals to your storefront. For example, many smaller stores have a non-commercial collection of articles and tips. In other cases, product information itself is a draw (for example, Amazon lists virtually every book in print, whether they sell it or not, making their site a valuable reference).

Generally, you'll have to spend cash, and quite a lot of it, on advertising to attract people to your store until such time as you've built a regular customer base (at which point, your advertising may defend against others who want a share of the market you've developed).

Taking Transactions Online

The author discusses the process of setting up a merchant account and getting payment processing to accept credit card payments online. There are currently a lot of third-party services and products that make a simple task from what was once a difficult procedure.


The author discusses micropayment systems a precursor to a new era in commercialization. At the time, it was new, and there were several different companies attempting to make a go of it. He expected that it would eventually standardize, but he was wrong about that: it's still not feasible.

However, if it ever does work out, there may come a time when content is monetized: where a person might pay a nickel to read an article or a dime to play an online game - even though content is free in most places, the potential for revenue could drive some entrepreneurs to create original content or develop services that make it worth the few pennies to not have to search it out yourself.

Designing for Retail

Online retail has become fairly standardized: each site has a catalog (product information) and a shopping cart (method for collecting items to purchase). While it's possible someone will discover a "new way" top shop online, there is significant danger in breaking from the standards to which shoppers have become accustomed.

Unintended Consequences

The author provides a few anecdotes about retailers who didn't achieve their expectations, but were surprised by phenomena that did occur - for example, a discount hotel chain that didn't get much business domestically, but got a lot of business from Europe. This underscores the importance of paying close attention to your business, and being prepared to react if things take an unexpected turn.