A GUIDE FOR IT DEALERS
If you're a PC retailer or IT reseller without an online store - I'm hoping this information will save you a lot of time and possibly some money. In fact even if you have an e-commerce web shop, especially one that's not really paying it's way, the info here should help you too.
If you're reading this I'm going to assume you fall into one of the following categories:
- High Street retail shop - selling PCs, accessories and possibly offering repairs
- IT Reseller - selling IT kit and services to businesses
- IT Consultant - providing advice on all kinds of ICT projects
- Computer repair service - home and office visits
If this sounds like you or you're some other kind of IT Solution Provider or Managed Service Provider (MSP) researching your options for selling online - you're in the right place.
I've recently examined all the solutions I could find and I'd like to share them in some detail here. To make things easier I've split my finding into five sections:
- Building your own e-commercce web store based on an existing ecommerce platform
- Out off the box (shop in a box) web store - provided by channel distribution or buying group
- Online store builder - a hosted, cloud based solution
- Marketplaces like Ebay and Amazon
- Partnering with an existing online retailer
At this point I need to disclose an interest in the 5th option. I help run MoreFrom.Me, a free way for IT dealers to start selling online. I'm going to present the facts for all options, including links to the information I've found during my research - I'll include the facts on MoreFrom.Me at the end.
THE BIG QUESTION
Before we start to look at the individual options, there's one question you need to be asking yourself as you weigh up the pros and cons of each choice. That question is "Will I see a return on my investment?" That includes a return on both financial investment and time invested. I probably don't need to tell you that margin on IT hardware is painfully thin - average margin in the IT industry has been reported to be just 1%.
The online space is also extremely competitive, If you search for an IT product it's not unusual to see some 180 websites listed in Google Shopping. You'll be competing with the huge household names of Amazon, John Lewis, Tesco and all the established specialist online retailers. These guys have big buying power and big marketing budgets. At one time they were poor at online, but now they are very sophisticated and many have the advantage of being able to offer a click and collect service too. To be honest you're unlikely to be able to compete with them on the kind of products they sell.
Your other threat comes from the lower end of the food chain - there are dozens of unscrupulous web shops selling products below cost, cheating the tax man and disappearing as fast as they start up. It really is the wild west and whilst it's not clear exactly how much business these people do, their low price points drive the price down and trash the market for everyone.
But let's try and stay positive - online retail is still growing and even a small slice of the billions being spent online will make a difference to your business. Your biggest opportunity comes from your existing customers, if you can add an online solution, you'll keep them talking to you and remove the need for them to buy from the other online stores.
Marketing channelsHow are you going to reach your audience? The channels you use will probably depend on whether you are going after new customers or targeting existing ones. Going for new customer acquisition means making sure your site works well in the search marketing environment. Sales from Organic Search results are dwindling for online IT retailers as Google puts more emphasis on paid search. It's easy to spend a lot of money on Adwords but very difficult to win sales at a sustainable cost per sale, with margins on IT being so low. Google's free product search feature Google Shopping has been heavily used for IT products, but with the recent change to a paid for model (with the swap to product listing ads) it remains to be seen how cost effective it will be. There are other acquisition methods, but the key is keeping the cost per sale inline with the profit you're making from your online store. Marketing to your existing customers may well be your only sustainable method.
Pricing strategy, margin and profitabilityLowest price is just not an option, the VAT dodgers and the retail giants are already fighting that battle. There's also the companies that have been trading at a loss for years, trying desperately to grab market share and win enough customers to turn a profit. It's quite possible the only profitable sales you can make will come from customers who trust your service, value your advice and will therefore not go chasing a cheap deal. Be sure your margin is high enough to cover all your costs.
Product rangeThe major retailers tend to concentrate on having only the popular lines in their ranges, which lets them negotiate good deals from suppliers. Other e-tailers will either work with one distributor and only sell their range or work with multiple sources, to build the biggest range possible. Another option is to specialise in a group of niche products and offer real expert advice. You need to pick an ecommerce solution that meets your needs. Some solutions have limits on the number of products you can list or price bands depending on the the size of the site.
Stock and drop shippingNearly all IT ecommerce web companies incorporate an element of drop shipping. Even the major household names use third parties to ship goods direct, only holding stock of the most popular items. Your product range may well be determined by what you can source from distributors who will deliver directly to customers. At the point of setting up your site you'll need to consider how you are going to work with your suppliers. You need to ensure the availability of products listed on your site are always up-to-date. If your supplier runs out of stock and you sell an item you can no longer source, you'll let customers down and risk negative feedback. If you are selling your own stock you need to link your site to any stock management process you may have.
Suppliers and distribution partnersEstablishing a good working relationship with the UK IT channel distributors is essential. You need to decide if you are going to maintain your own product catalogue and translate it into your product range or take feeds from distribution and publish them directly on your e-store. Whichever route you take, good communication is essential. Most distributors offer some kind of automated product and price feed system, showing stock availability. If you can't integrate your store with their systems regular contact will be essential. You may also need to establish a line of credit with your suppliers, a task made more difficult after the recent high profile retail failures.
Site content, product specifications and imagesWhen you have decided on your range, you'll need to populate your site. Some web shop options come pre-populated with full specifications and photographs either included in the price or as an optional extra. With other solutions you'll need to add things manually, which may be fine for a small range. You can also buy in your product descriptions and images as an automatic feed from people like CNET, Etilize, Open Range and Ice-Cat.
Initial site design, set-up costs and on-page SEOIf you decide to code your own webstore this stage will obviously be the most time consuming and potentially the most expensive. There's plenty of best practices to be found online and one advantage of starting now is you can learn from the experience of others. It's worth remembering your site code will need to make provision for mobile and tablet shoppers, a growing segment. If you go for an existing platform or a hosted webstore solution check to see if there are any one off setup costs. It's also worth considering how search engines will see your site, many of the online store builder software packages use the same templates and your site may not look unique and have problems with duplicate content.
SSL certificationYou'll need to make sure your site has that little green padlock in it's Secure Sockets Layer, customers look for it and it can come as an extra cost. When comparing prices of different solutions, check to see if an SSL Certificate is needed. You'll find it's not needed with some of the hosted ready built web shops, but with the more bespoke options, you'll need to provide your own and pay for it. At a cost of several hundred pounds per year.
Monthly usage feesSome solutions come with a monthly fee, instead of, or as well as a set-up fee. What's included in this fee differs depending on the solution you choose and from provider to provider. In my research I've seen fees as high as £150 per month - with the low margins of online IT sales, you'd need to sell a lot of products to pay that monthly bill, let alone make any profit. Monthly fees of £20 to £40 are more common.
HostingIf you're coding your own site, you'll need to arrange your own web site hosting - this usually comes at a monthly cost. Not all hosting is created equal, you'll need to check what's included in the low prices advertised by some hosting companies. It's not unusual for ecommerce features to not be included in entry level hosting. Also don’t forget software licences, back up service and firewall setup.
Transaction, payment gateway and merchant account feesOften an area that gets forgotten, every sale on an e-commerce site comes at a cost. Paypal offers a number of solutions starting at a cost of 3.4% +20p per transaction. Another option is to set up a merchant account with your bank, credit card payments can then be transferred directly to you bank account. Again this comes at a cost per transaction and a monthly/yearly fee. The terms Payment Gateway and Merchant Account have become intertwined in recent years and are often not the same thing. There are also many different providers of this type of service, so you need to check which services integrate with your chosen ecommerce solution and check what fees are involved. Some ecommerce web shop solutions come with an additional fee per transaction, you need to check. It can be around 2% extra and varies depending on the plan you choose.
Processing orders and ordering from suppliersSo you've got your site built and your first orders are coming in, now another set of challenges begins. How efficiently you process orders can have a big impact on your profitability. If you're working with a drop ship distributor you need to send them accurate order information - this is done either by email, on the distributors website or via EDI integration. Some 'out of the box' solutions offered by distributors will process your orders automatically, which saves time and reduces the risk of human error. A major consideration needs to be how you screen for fraudulent orders. Consumer electronics websites are targets for fraudsters and if you ship an order paid for with a compromised credit card - the credit card company may well take that money back from you. A single case of fraud can wipe out the profit on many orders in one go.
Customer delivery, click and collectPossibly the most fragile part of all ecommerce, actually making sure the product ordered from your site arrives with your customer, on time and in one piece. You've done a lot of hard work to win an order and now it's time to hand over to a third party courier company, they're better than they've ever been, but can still be the weakest link. Ideally you need to offer order and delivery tracking on your web store. This will reduce the need for customers to contact you to chase their delivery, therefore cutting down the resource overhead. If you're working with a dropshipper you'll need to obtain the tracking details from them and add those details to your website - this can be automated with some distributors. You could have orders delivered to your own premises and give customers the option to click and collect, an option that is proving increasingly popular.
Customer serviceWhich brings us on to customers service. Outstanding service can be the reason customers choose your store over the many, many others. If you can provide a remarkable level of care, your customers will go on to promote your company to their colleagues, friends and family. Customers have the power to make or break a business, it's important to make time and provision for good customer support.
Processing returnsTechnology is getting more and more reliable, but we all know it still goes wrong, whether it's faulty from the manufacturer or a compatibility problem. Online sales to consumers are covered by the Distance Selling Regulations, goods can be returned for any reason within 7 working days (EU regulations are going to make this 14 days soon) and you need to be prepared for a percentage of your sales to be refunded. Unfortunately it's not good enough to just sell IT kit these days, you need to develop a slick process to avoid returns costs eating into your margin.
Invoicing, chasing paymentIt may be you decide to offer credit to some of your business customers, they may already have credit terms agreed with you. In addition to cash flow considerations there is also a cost to providing credit - invoicing and chasing subsequent payment all takes time. It's worth considering if you will offer credit via your web-store or opt for payment at the time of purchase via credit card, Paypal or Google Wallet - remembering that these methods have cost associated with them too. Any goods you buy to sell on your store will result in a supplier invoice, this will need reconciling and paying. This extra admin all takes time that has further impact on your profitability.
Staffing and person hoursYou can see from the above that opening an online shop will create some new tasks and expand on some existing ones. You need to consider how this will be handled by your team and decide if you'll need to recruit.
SELLING ONLINE - THE OPTIONS
Armed with all the information above, let's take a look at those 5 options:
1. Building your own e-commerce web storeIf you’re a techie the chances are you've built your own website or have helped a colleague to do it. You've probably considered adding e-commerce functionality to your existing site and there are some popular platforms to look at. The coding skills you have (or have access to) will determine which route you take. You'll be looking for a platform that will easily integrate with your existing site and it's content management system.
I looked at some of the most popular platforms - Magento, Zen Cart and Wordpress with eCommerce Plugins. There are many options, some have Free Open Source versions, others charge fees. You're not going to have to start completely from scratch, there are lots of existing web store template you can adapt. Building your own site is easily the most flexible option, you'll have complete control over everything - providing you have the skills, time and money.
The front end web store is only part of the picture, you'll need to consider how you're going to populate the site with product information, spec, photos, price, stock availability etc. - all these things can be automated but will need extra development work. You also need to think about the back end order processing side of things.
You could build a very sophisticated solution from scratch or use one of the common frameworks and do the bare minimum to adapt your existing site. Either way, cost out this option carefully before you set off down this road.
2. Out off the box (shop in a box) web storeFor this option I looked at web store offerings that are very specific to the IT channel, this section is about web shops that come pre-populated with 1000s of IT products ready to sell. The ones I looked at are provided by channel distributors, service providers or buying groups. This solution typically provides a template based website, pre-built on an established e-commerce platform.
Let's look at the distribution offering first. These web shops come populated only with the products sold by the distributor, although there are some that allow you to import other product feeds and add your own products. The details differ from one distie to the next and it's worth noting you may require a credit account with the distie you choose.
EntatechThis example from EntaTech is typical of the offering. With their Shop Front Professional Edition you get a hosted site, populated with around 5,000 in stock products, a selection of templates to choose from. The set up fee is £79 and there's an on going fee of £40 per month. Enta also have also have an Ultimate Edition that lets you import 3rd party feeds at £60 per month. The details state 'full payment gateway integration'. With all these distributor solutions and indeed all ecommerce solutions you need to check what payment gateway/merchant account is needed and SSL certificate. These cost extra.
TargetTarget have two options to choose from. Their ReadyBuiltWebShop has a initial sign-up fee of £100 then £20 per month. There's a 7 day money back guarantee then a minimum 6 month contract. Their other option is called TC-FreeNet that comes with 1300 products and has a quarterly fee of £15.
Ingram MicroThere are three options in Ingram's 'Sell it Online' web store range, but the only prices quoted are £200 set up fee and £79 per month. We can assume this is the entry level option which doesn't seem to have an online stock and price check. All options state they include online ordering via XML and integration with BT's payment solution is included in the start up fee. I can't give you a link to this option as you need to be logged in the Ingrams website to see the page. If you have an ingram account the details are under Services / eSolutions. The service is provided by E-nitiative and this is one of the sample sites.
Ingram Micro also promote an option from Oakley Global Business Solutions called Virtual Reseller. It comes in two flavours; Option 1 £10,000 one-off set up fee, £200 monthly hosting/support fee and £100 per month for IceCat. Option 2 £2,000 one-off set up fee, £850 monthly hosting/support fee and includes IceCat. Both options require a further £750 for SagePay integration and you can add additional suppliers at £1000 each.
Computer 2000Computer 2000 offer a solution called C2K Nettailer from their ecommerce partner Netset. It includes integration to Computer 2000's EDI system, CNET datasource content, hosting and integrated shopping carts. Most places I looked said 'call for prices' but the only information I could find said prices 'start at as little as £349 a month'.
IT channel service providers and buying groups
Moving on to what's on offer from the IT channel service providers and buying groups. These solutions give you access to more than one distribution source and will pull in your pricing from the distributors you have an account with. You can configure your web shop to display products from these multiple sources and some have back-end ordering functions too, sometimes at an extra cost.
Stock in the ChannelStock in the Channel offer a turnkey webstore selling over 50,000 products, it's based on the popular Magento platform and costs £150 per month. The website clearly states you will need an internet merchant account (for card payment processing) and a payment gateway both of which will cost. It's less clear about hosting, but it doesn't look like it's included - they have a link to a hosting partner 1and1 who (for a site with 20,000 products) appear to charge £39.99 per month. Stock in the Channel have other options and Magento plugins worth exploring if you are building your own site. You can also add an automated order management service, this makes the cost £750 per month.
SynaxonBuying group Synaxon have an off the shelf e-commerce platform designed specifically for IT resellers called Clic2IT. It links into your distributor accounts and will populate with the products you require. There is lots of functionality and cost options, as Synaxon is a membership based buying group the costs differ depending on the level of membership you go for. Set up is £500 then £249 per month as a £25 per month member or £199 per month as a £99 per month premier member. Like Stock in the Channel, Synaxon offer other services to IT resellers that are worth looking into.
3. Online store builder - hosted, cloud based solution
In this section I'm looking at some of the non IT specific e-commerce solutions that are available. These are the kind of solutions any business can use to create an online shop. The thing to remember with this option is that you will need to populate and maintain these stores manually, some have bulk upload options, but for most tasks you need to access your store admin via a browser.
ShopifyShopify is typical of this type of hosted web store, you are guided through a number of steps to set up your store on Shopify's website. You pick a template, customise it by adding your logo, then start to add your products. It's relatively quick to get a store up and running and there's no set up fee. You choose from 4 monthly plans £19, £38, £64 or £115. The more you pay the more products you can list. They also charge a fee for every transaction. 2% of the sale price on the lowest plan and 1% on the middle two plans. Only the top £115 per month plan has no transaction fees and you can also list an unlimited amount of products for sale. It's worth noting you will still need a merchant account if you want to accept credit card payments or you can use Paypal - both add another percentage fee per transaction and can mean another monthly fee.
Big CommerceBig Commerce is similar to Shopify but they don't charge a fee per transaction. There are a number of monthly payment plans starting at $24.95 for 100 products going up to $299.95 for unlimited products and unlimited storage. The plans offered on this type of ecommerce solution often have various megabyte storage allowances in the same way they have various product listing allowances. The more images and videos you upload the more storage you will use, if you go over your storage limit you will be charged extra. Big Commerce recommends you buy your own SSL certificate (they sell them), however they do provide a shared SSL certificate. Again you'll need a merchant account or Paypal to accept payments.
VolusionI was looking for a UK based provider when I found Volusion, but on closer inspection it looks like they only have an office in the UK. Their headline price on their pricing page is low at £9+VAT per month, you need to buy an SSL certificate and pay extra for a payment gateway. Plus the £9 option only lets you list 25 products. Another charge to be aware of with this kind of hosted solution is often referred to as 'bandwidth overage'. You can incur a charge if your site has a sudden burst in traffic and you haven't purchased extra burst capacity in advance. So a sudden increase in popularity say from a mention online or hitting the top spot in Google could cost extra.
BT eCommerce websitesBT's offering is different to the others in this section. You pay an initial set up fee and then a monthly amount. The set up fee is to cover the bespoke design they are promising. Depending on which of their three plans you choose you get a number of hours consultation and design time. The eShop Starter 100 products plan is £599 plus £15 per month +VAT and integrates with Paypal payments only, so there will be transaction fees to pay. BT's eShop and eShop Premier are £1299 plus £25 per month then £1800 plus £45 per month +VAT respectively. The step up in price gets you more features including a mobile version of your site, choice of payment gateway (cost will apply) and more products (10,000 on the top plan). All plans include an SSL certificate.
4. Marketplaces like Ebay and Amazon
So this is not strictly setting up your own ecommerce website but it's an option that can't be ignored. You should consider opening and Ebay or Amazon shop (or both), it could be the right choice for you and a complete alternative to running your own web store. Or you could open them in addition to your web store - many web store solutions include options to export products to marketplaces. The fact is Ebay and Amazon get the most ecommerce traffic in the UK, for many people they are the first place they look and for some the only place.
A constant stream of customers is the main advantage Ebay and Amazon have over running your own webshop. They are easy to set up, you don't need any specialist skills and there's no need for hosting, payment gateways and merchant accounts. Shoppers are confident to buy on Amazon and Ebay as it's an environment they're familiar with.
Selling on marketplaces is not without it's challenges, the ease of set up means lots have people are on there already, so competition is fierce. To sell products on Amazon or Ebay you don't need to provide any company details other than a credit card (so they can take their fees). This attracts lots of ‘rogue traders’, although not the kind who let shoppers down, the review and rating systems prevent this to some degree. I'm talking about unscrupulous individuals who are able to sell products at incredibly low prices. for the simple reason - they have no intention passing on any VAT or paying income tax, corporation tax or NI. Another problem you'll come up against is non UK product being sold under the same listing as the UK version.
As it's the seller with the cheapest price who tends to win the sale, you can be at a major disadvantage for being a legitimate business.
Listing items for sale need not be a completely manual process, both marketplaces have tools that let you bulk upload, a necessity if you want to sell a wide range. There are also companies who sell automation services to merchants, take a look at Channel Advisor and eSellerPro.
Ebay differs from Amazon, they don't have any of their own stock to sell, so they are never a competitor. Amazon on the other hand will always sell their own stock before yours and you tend to only sell products in the short windows between their stock deliveries.
When you've got your products listed correctly and you've won your first sale you'll need to pay your fees. Fees on marketplaces can be complicated, for a basic store Ebay charge a monthly subscription fee of £14.99, an insertion fee and a final value fee on sales. Plus you have to pay PayPal their percentage. Amazon has two pricing plans, if you sell fewer than 35 items a month there's a closing fee and a sales commission. More than 35 and there's a monthly fee and sales commission. The closing fee is £0.75 per item sold and the monthly fee is £25. The sales commission or ‘referral fee’ varies depending on the Amazon category. IT products are between 7% and 15% - with Kindle accessories being 35%.
Amazon and Ebay offer buyers a high level of protection in disputes with sellers. They are the middlemen who take the buyers payment and pass it on to the seller. it's worth knowing that if there is a dispute, they will take the payment back from a seller and only return it when the dispute is settled to their liking. If you can't prove you are not in the wrong, you can loose your payment and maybe the product as well. Also bear in mind their is a delay between selling an item and receiving your payment.
5. Partnering with an existing online retailer
With all the previous options you will need to process your own online orders, order stock from suppliers, track customer deliveries and handle customer returns on top of running your web store. If you team up with an established etailer you won't need to do any of those things. As I said earlier the margins are low and the profit is easily eroded running an online tech store. Whilst a commission based affiliate scheme may not look that appealing on the surface, it could be what you need to offer an online shopping service to your customers, whilst removing the risk and expense. It would also allow you to focus your time on providing other more profitable services.
Many online retailers such as Amazon offer affiliate schemes. You promote their companies website and are paid a commission on any sales you send their way. Commission is low and not all categories pay the same amount. You are potentially sending your customers to a competitor and it doesn't look as professional as your own store. The Amazon aStore lets you create dedicated shopping pages by selecting products from Amazon, you can link to those pages or embed them in your existing website.
Online retailer MoreComputers.com has another solution, it's MoreFrom.Me e-commerce solution for IT dealers allows you to rebrand the entire MoreComputers site. You swap their logo for yours, change the colours to match yours and change the domain name to yours. You get a full feature web store populated with 160,000 products from 21 distributors, all maintained by More. A mobile/tablet site version is included along with various marketing tools to help you promote your store.
A commission of 1% is guaranteed on every sale and there's the option to increase the prices to earn unto 13.5%. Commission is paid as credit with an option to transfer it as cash to your bank account. It's also free, there's not setup or monthly fees and you don't need to pay any of the other additional fees that come with the other options we've looked at.
Hopefully that's given you plenty of information to work with and will help you decide on the right solution for your business. I'd like to say I enjoyed putting it together, but to be honest it was so difficult to wade through the marketing fluff of some companies, it was a nightmare. There's lots of people telling IT retailers and resellers that they need to start selling online. I found very little specific advice on how to actually do it or where to start. I'd like to think this will help you add a successful online element to your business.
Please give your feedback here in the comments or to me on Twitter @BrianTrevaskiss or on Google+ +Brian Trevaskiss