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Web Business Model: Product Sales

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:

• Selling Products from a Web Site Storefront
• Selling Products on Auction Web Sites
• Gathering Products into an Online Mall

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.