A Web business based on product sales involves selling a physical, shippable product online.

There are three main ways to sell products on the Web:

Each of these three Web-based selling methods is described below, including a discussion of the benefits of each method, the responsibilities you'll be required to assume, the costs of building your site, and how you'll make your profits.

Selling Products from a Web Site Storefront

Think of a Web storefront as a virtual store, possessing all the qualities that a brick-and-mortar business has -- such as a display of products, shopping carts, and a checkout stand --; except everything's online.

Many Web stores feature customer service tools (such as FAQ pages and live chat) that allow customers to get information and provide feedback. Amazon.com, for example, makes suggestions about what you should buy, based on holidays, the season, and what's popular. The site even uses cookies to help it "remember" what you like to browse and order. And just as you might do in a "real" store when you find a book or other item you like, you can make choices in a Web store, such as hardcover or paperback, cherry red or sage green, size 7 or 9, etc. You can add or remove items from your shopping cart, proceed to the checkout stand when you're done, and use various forms of payment.

But Web storefronts have some advantages over brick-and-mortar stores. First, customers are able to get a quick overview of what the store has to offer. Amazon.com, for instance, displays its wide variety of goods (everything from software to shampoo) all on one page. Finding what you need becomes as simple as typing in a keyword or two.

But best of all, Web storefronts have the advantage of community. Imagine that you need a gift for your stepsister's nephew's birthday, and you're in a hurry. He's 5 years old, and you're not sure what he'd like. In a "real" store, you could run around and find a salesperson or cashier to suggest a toy idea. But in the virtual toy store, you have a community to help you find the right gift. You can chat in real time with a toy expert, join a toy discussion group to ask other customers for advice, browse through the site's toy recommendations and Reviews section, or even check to see if the 5-year-old has submitted a wish list to the site.

Responsibilities. Plan what you'll feature in your product catalog and how you'll handle online payments and fulfill online orders.

Consider that you may need to create a content strategy to enhance the value of your site. If you're selling sweaters, for example, you may want to include some articles about what kind of wool makes the best sweaters. So decide which kinds of content you want on your site, such as articles, news, or chat. Then you'll have to either create your own content or acquire content from outside sources.

And make sure to manage your content and develop procedures to update it. If you want to publish an e-mail newsletter about wool sweaters, for example, you, as the owner, may need to be the moderator, so anticipate the maintenance that this will require.

Online stores need some customer service expertise too. As with any business, there will be confusing shipping issues, questions about products, and problems with payments and returns. Make sure that you oversee customer service processes in order to give your customers the best support possible.

Costs. Building a Web store will cost you the fees for Web hosting, the price of e-commerce software components or a turnkey solution, the fees for a payment processing service, and the price of security software to protect customer information, such as names, addresses, and credit card numbers.

If you decide to acquire content from outside sources instead of creating it yourself, that costs money too. Check out iSyndicate for an example of how content is bought and sold. Creating your own content requires that you spend a significant amount of time to make sure that it remains fresh and interesting.

Distribution and shipping both cost money too. You'll need to be prepared to fulfill your online orders. You'll have to ask yourself: Will I rent a warehouse to store the goods? Will I use the services of a drop shipper?

Profits. Your Web store makes you money from the charges to your customers for goods you provide to them.

Of course, your Web site itself can also be a source of income if you sell advertising space for banner ads, sell and manage e-zine advertising space, join an affiliate (or associate) program, or create your own affiliate program.

Examples: Big Horn Fabric Shop, CarParts.com, Sunrise Protea Farm.

Selling Products on Auction Web Sites

An online auction has some advantages over the traditional kind: It can attract a larger audience of bidders because it removes geographical boundaries, it can continue for an extended period of time, and it gives people a way to bid on goods right from their home computers.

Some Web auctions are used to move one seller's inventory, while some invite many sellers to provide their goods and services to prospective buyers. You will need to learn as much as you can about how to sell goods in online auctions in order to participate.

To participate, buyers log on to the auction Web site, look over the products, and enter their bids. Then they find out -- either immediately by watching the screen or later via an e-mail message sent by the auction site -- how their bids compared with those submitted by other bidders. Bidding continues until the auction's time limit expires. The goods are then offered to the highest bidder, and a method of shipment is determined.

Responsibilities. To create an online auction, you'll need the ability to understand and translate trends in consumer buying cycles. For example, having a knack for anticipating the latest fads in collectibles will help you be a successful auction host.

You'll first need to research the different types of auction software. Look carefully at each program and all its features before you buy. The Auction Patrol has a big list of auction software you can use to begin looking.

Then you'll have to decide what type and length of auction you want. There are several kinds of online auctions: Dutch, Yankee, reserve, private, straight, first bid wins.

The duration of an auction can vary greatly, so you'll need to decide if yours will last only four hours or continue for four days. The frequency can also differ, with some auctions offered every Wednesday at 10 a.m. and others offered only when there are enough products available to auction.

You'll also have to decide how you'll handle sales, payment, and shipping. Once winning bids are made, the auction site typically helps the buyers and sellers make arrangements for payment and delivery. But some auction sites introduce the winning bidders and sellers at the end of the auction so that they can work out payment and delivery among themselves. In that case, once the auction site gathers its fees from one or both participants, its responsibility ends.

But notice that some auction sites merely operate as intermediaries: They first purchase the excess inventory to be auctioned and then handle the financial transactions and delivery. Still others offer strict confidentiality to both buyers and sellers so that everything -- bidding, sale, payment, and delivery -- is done anonymously.

Establish what fees you'll charge. Some sites charge a transaction fee based on the product's selling price and volume. As volume increases, the seller pays a lower percentage. At other sites, buyers pay a fee that equals a percentage of the transaction. The auction host (that means you) might collect fees that run as high as 2.5% of the winning bid. Educate yourself on strategies for making sure you get paid!

Online businesses need some customer service expertise too. As with any business, there will be confusing shipping issues, questions about products, and problems with payments and returns. Make sure that you oversee customer service processes in order to give your customers the best support possible.

Costs. Building an auction Web site will cost you the fees of Web hosting and the price of auction software or a turnkey auction solution. Depending on what kind of auction format you decide on, you will also need to pay the fees for a payment processing service, and the price of security software to protect bidder information such as names, addresses, and credit card numbers.

Also, depending on the auction format you choose, there are the costs of distribution and shipping mechanisms. Ask yourself: Will I rent a warehouse to store the goods? Will I pay the shipping costs of the products? You may need to hire an order fulfillment house or drop shipper to fill your online orders.

Profits. Again, as the auction host, you can make a profit by collecting set fees or a percentage of the winning bids from the bidders or sellers.

Of course, your Web site itself can also be a source of income if you sell advertising space for banner ads, sell and manage e-zine advertising space, join an affiliate (or associate) program, or create your own affiliate program.

Examples: eBay, Pottery Auction, Buck-a-Bottle Auction.

Useful articles: "Attract Buyers for Your Auctioned Items," "Why Sell Goods in Online Auctions?"

Gathering Products into an Online Mall

In this model, a Web company offers a wide variety of goods to the customer, all from one site. Another term for this is "Web mall." A Web mall, like a physical mall, is a one-stop shopping place for various products. Della.com is a good example of such a site. There you can browse over and purchase items from many different online companies.

And there is one other type: the shopping group. The idea behind shopping group services, such as Mercata, is simple: Buyers join together to get discounted prices. Together, the group negotiates a deal with a vendor, which gives them the advantage of getting a bulk discount. The more buyers that join the group, the lower the prices go. The shopping group services have built-in incentives for shoppers to e-mail their friends and acquaintances and encourage them to join buying groups too.

Responsibilities. First, you'll need to decide which products you want to "gather" on your site. Contact the other merchants and agree to some kind of fee or commission model. After all, you are giving them a place to sell their products, and you can charge them for it. (It will help if you already know how to create your own affiliate program.)

Then, you'll have to plan what you'll feature in your product catalog and how you'll handle the online payments and fulfill online orders. Will you process the orders for all the merchants, or will each individual merchant handle its own?

Decide how goods will be distributed and shipped. You will need to set and fulfill expectations in the delivery process, and you may need to hire an order fulfillment house or drop shipper to fill your online orders.

Consider that you may need to create a content strategy to enhance the value of your site. You may want to include some articles about what kind of wool makes the best sweaters, for example. So decide which kinds of content you want on your site, such as articles, news, or chat. Then you'll have to either create your own content or acquire content from outside sources.

If you decide to go the shopping group route, you'll have to establish business relationships with other online merchants and agree to allow for bulk discounts. Then find software or a turnkey solution that will allow the prices of merchandise to go down as a result of the shopping group size.

Online businesses need some customer service expertise too. As with any business, there will be confusing shipping issues, questions about products, and problems with payments and returns. Make sure that you oversee customer service processes in order to give your customers the best support possible.

Costs. Building an auction Web site will cost you the fees of Web hosting and the price of e-commerce software or a turnkey solution, the fees of a payment processing service, and the price of security software to protect bidder information such as names, addresses, and credit card numbers.

If you decide to acquire content from outside sources instead of creating it yourself, that costs money too. Check out iSyndicate for an example of how content is bought and sold.

Profits. If you're one of the merchants in the gathering, you can, of course, make a profit from the sale of your products.

You can also charge the companies a fee for giving them an outlet to sell their products. It will also be wise to consider joining an affiliate (or associate) program and creating your own affiliate program. That way, you can also pick up commissions for the sales that you deliver for your affiliates. If you decide to do all of the order processing and fulfillment yourself, you might charge the merchants a transaction or service fee for it.

And you can make money from your site if you sell advertising space for banner ads, or if you sell and manage e-zine advertising space.

Copyright © 1995-2000 Pinnacle WebWorkz Inc. All rights reserved. Do notduplicate or redistribute in any form.