E-commerce 101

You've probably heard the term e-commerce thrown around a lot, but there are various ways of interpreting the term. In this article, I'll give an overview of some of the different aspects of e-commerce.

E-commerce can be defined as using the internet to conduct some form of business transaction. This is a pretty broad term, and there are subcategories, such as b2b (business to business) b2c (business to consumer). If you operate a blog and earn money from advertising, in a way, this could even be considered a form of e-commerce.

Selling physical products

This type of e-commerce bears the closest relationship to setting up a physical shop. For small vendors who only sell one or two products, nothing more elaborate may be necessary than a 'buy now' link on your web site, which provides customers with an order form to submit their details. If you have a large range of products, you will probably need a shopping cart system to list multiple products, allow customers to select various items, and possibly display stock levels. Obviously the more complicated the system, the more it will cost to set up. 

Shopping Carts 

A 'shopping cart' is a piece of web based software that provides a product catalogue and ordering process for online shoppers. It may or may not include live payment processing. If payment processing is not included, then it will simply capture order details and notify you of the orders. It is then your responsibility to arrange payment with your customers. Some shopping carts provide integration with back office accounting systems, and this can be an important issue to consider if you expect to do a lot of sales and want to minimise administration costs.

Receiving Payment

Often you may want to be able to receive payment automatically when people order products on your web site. Credit cards are the most popular method of online payment, but there are other systems such as PayPal. If you are already able to accept credit card payments from customers, then you have a merchant account, so the simplest method to accept payment is to securely record your clients' credit card details and then manually charge their credit cards using your existing system. You should NEVER ask customers to send credit card details by email, as this is insecure, and you would probably be liable if any fraud occured, not to mention that you would probably be in breach of your bank's terms of having a merchant account.

If you don't have an existing merchant account, or if you want a complete end to end automated payment system, a number of companies offer credit card processing services that will securely bill your clients, and pay the money into your bank account. These types of service have varying fees and setup costs, and you will also need a way to submit order data from your web site to the card processing services. Unless you really know what you are doing, you should hire a professional web developer to do this for you, even if you want to build the rest of your web site yourself, since your customers' security is at stake here. 

Non physical Items

Some businesses sell non-physical items such as ring tones, music, e-books, concert bookings or even online auctions. In each case, nothing physical is being exchanged, but an automated system is needed to deliver the purchase to the customer once payment has been received. For example, if you book a flight online, you will automatically receive an email with your e-ticket once your payment has been processed, or if you buy music online, you will be able to download the music once payment has been confirmed. Typically this type of e-commerce involves the greatest level of investment in software systems to drive it, however the system is completely automated, so while you might have a high initial investment to create a robust system, the ongoing operating costs can be quite low.

General Issues

Regardless of what type of e-commerce venture you decide to start, you need to be aware of a variety of issues. You need to comply with local laws, for example if you sell to NZ customers you need to pay GST on your sales, however if a customer is outside of NZ, then the transaction is exempt from GST.

You need to comply with consumer law, but bear in mind if you sell overseas, the laws in the country of purchase may apply, also if fraud occurs, it could be difficult to get your goods back.

It is a good idea to have a explicit policy on your web site stating your terms and conditions of sale, but remember you can't put anything in that would conflict with local consumer law. 

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