I was thinking about how to start this book. There's definitely going to be a lot to tell, explain, and discuss in the further chapters, but the first one was not that obvious. So what to start it with?
Probably from: Why are you reading this book right now?
According to the U.S. Census Bureau News (dated May 18, 2006):
"The Census Bureau of the Department of Commerce announced today that the estimate of U.S. retail e-commerce sales for the first quarter of 2006…was $25.2 billion, an increase of 7 % from the fourth quarter of 2005."
This of course happens not only in the US, but also in the UK, Europe, Russia, East, Japan, Asia, Australia—literally in every place where access to the Internet has been made easy by the governmental and commercial organizations, and where there are online payment methods in use.
Selling goods and services online is in most of the cases easier and cheaper than running a brick and mortar store or mail catalog business. Of course, this doesn't work for everyone, but most small, medium, and large businesses already benefit from using e-commerce for online sales. Some businesses go 100% online, some use e-commerce supplementary to their main business. And of course a well-thought-of business idea, competitive products or services, and strong organization are the primary keys to success, as with any traditional business.
This book is first of all dedicated to the businesses that use osCommerce or osCommerce-based e-commerce solutions to drive their online sales. It is dedicated to business owners, general managers, and e-commerce and marketing managers. It will be useful to web developers and web designers who create osCommerce solutions. Knowing how to make the most of an osCommerce-based online business is a benefit not only to the business itself, but literally to everybody who's involved as supplier, developer, or consultant.
osCommerce is suitable for small, medium, and large businesses. According to www.oscommerce.com, there are over 11,000 online stores, and these are only the ones registered in the Live Stores directory. For just one of the examples that prove that the e-commerce solution is really great for businesses of any size, look at the Google Store website www.google-store.com, which is based on osCommerce. Self-employed online merchants, family businesses, small businesses, retailers of almost any size, manufacturers and distributors—they power their online businesses with osCommerce.
Having now worked with osCommerce for more than five years, while interacting with many companies and individuals, I have never found a person who wished to switch to another solution once they had an osCommerce-based online business. Instead, I've seen quite a number of people who'd like to move to osCommerce from other, custom made or publicly available online store solutions.
It's very easy to start selling online using osCommerce. Its standard installation already contains all the features and facilities to build an online store and start online sales.
For end customers, it is easy to browse and search for products, use the shopping cart, personal account with previous order history, checkout with several shipping and payment methods, and all this in multiple languages.
For Shop Administrators and online merchants, it has first of all a manageable product catalog with a tree of categories and products, a tool for customer and order management, and sales reports—among other things.
But the real key to the success of osCommerce lies in it being an Open Source solution, and in a community of more than 100,000 members who have developed more than 3,500 useful contributions (add-ons). Taking compatibility issues aside, an osCommerce store owner can add credit modules, features, images add-ons, informational boxes, additional languages, order total modules, payment and shipping modules, reports, templates/themes, and other contributions to an osCommerce-based website. More members join and more contributions get submitted daily.
Besides the standard version of osCommerce developed by its team, there exist alternative versions. Some are free, while some need to be paid for. Alternative versions usually contain a number of contributions already pre-installed, so that the store owner gets an even more featured solution for online business.
Having now worked with osCommerce for more than five years, while interacting with many companies and individuals, I have never found a person who wished to switch to another solution once they had an osCommerce-based online business. Instead, I've seen quite a number of people who'd like to move to osCommerce from other, custom made or publicly available online store solutions.
It's very easy to start selling online using osCommerce. Its standard installation already contains all the features and facilities to build an online store and start online sales.
For end customers, it is easy to browse and search for products, use the shopping cart, personal account with previous order history, checkout with several shipping and payment methods, and all this in multiple languages.
For Shop Administrators and online merchants, it has first of all a manageable product catalog with a tree of categories and products, a tool for customer and order management, and sales reports—among other things.
But the real key to the success of osCommerce lies in it being an Open Source solution, and in a community of more than 100,000 members who have developed more than 3,500 useful contributions (add-ons). Taking compatibility issues aside, an osCommerce store owner can add credit modules, features, images add-ons, informational boxes, additional languages, order total modules, payment and shipping modules, reports, templates/themes, and other contributions to an osCommerce-based website. More members join and more contributions get submitted daily.
Besides the standard version of osCommerce developed by its team, there exist alternative versions. Some are free, while some need to be paid for. Alternative versions usually contain a number of contributions already pre-installed, so that the store owner gets an even more featured solution for online business.
Being familiar with osCommerce and most probably already using it for your business you (business owner, marketing manager, e-commerce manager, web master) would like to learn how to increase online sales, how to increase profits and minimize expenses, how to improve your online business.
This book gives you tips and tricks from which you will gain maximum possible mileage for your osCommerce installation. This book has a plenty of advice and explains approaches based on the real-life experiences of osCommerce store owners and osCommerce developers. Every piece of advice in this book can be applicable or not applicable to a particular business—and the final decision should always be made by the business owner or online store manager.
So, what are the main goals that we try to achieve with every business?
Increase profits.
Which means for online businesses: increasing of online sales, and decreasing all operational, advertising, marketing and sales costs.
OK, now we have come to the point where we want to increase profits. But first before increasing them, it would be useful to know how to calculate profit. Is the online business profitable or not?
Your accountant would probably have an answer to that question, but let us see how it's possible to calculate and monitor profits in an easier way.
So what does profit consist of? First of all, we will need to determine a period of time for which we will calculate the profit. It can be a month, a quarter, a year, or maybe a week or even a day. Then, we will need to find out the total turnover generated by the website during this period. A little trick here is that some of your offline (phone, shop) sales will be actually generated by the website. In order to properly track the online business's profits, you will need to have a referral tracking system in place. It will be enough to ask the customer before taking a phone order, where they heard about you. If the answer is "your website"—here we have another sale generated online. And so, we write down the turnover for that period of time.
Now the less pleasant part—expenses. Here we need to firstly determine the cost of products sold for the given period of time. If you buy products and your suppliers change price as time goes by, it will make perfect sense to store the product costs from the suppliers in each order placed by your customers, so that you can see the actual profit level for any period in the past.
Then come the taxes. You may have taxable and non-taxable goods in the product catalog. Also, not all your customers pay tax, so the calculations here have to be very accurate to find out proper figures.
Then comes delivery and handling charges, which actually depend on the goods you sell; but many online businesses tend to consider the handling fee to be equal for every product or order.
Note
We should clearly understand the difference between the Actual Shipping Charges (i.e. the expenses paid to deliver the goods to the customers) and Customer's Shipping Charges (i.e. the amount charged to the customer in addition to the order amount to cover the delivery charges). We will deduct Actual Shipping and Handling Charges to find the profits.
One more very important line in the calculations is the advertising expenses. While sometimes it's not possible to know the exact amount spent on a certain advertising campaign per given period, it's always possible to find out an approximate amount. For example, finding an approximate daily expenditure for a certain advertising campaign and multiplying it by the number of days in the period you're calculating the profits for. Of course, we should be aware if multiple advertising campaigns were running at that time, and calculate all advertising expenses.
We should continue with deducting operational costs like service and labor expenses, which would consist of the costs of updating the website, running the office, the warehouse, the call center, paying the employees, etc. It makes sense to take an average service and labor cost of running the business for the same period and split it into two parts correspondingly to how much turnover has been generated by online and offline parts of the business.
Online Turnover
+ Offline Turnover (referred from the website)
- Product Costs
- Taxes
- Shipping Fees
- Handling Fees
- Advertising Expenses
- Service Expenses
- Labor Expenses
= Online Profits
So for each given period of time, approximate actual profits generated by your online store would consist of Online Turnover plus a Part of the Offline Turnover generated through the websites less Product Costs, less Taxes, less Actual Shipping and Handling Fees, less Advertising Expenses, and less Service and Labor expenses.
OK, we have all those nice figures, we know how to find approximate online profits—what should we do next? We will learn how to monitor profitability of the business on daily/weekly bases. Its very important to be able to see the dynamics of how the profit level changes daily or weekly, as this is the only way to make business decisions based on facts rather than on "gut feeling".
We will play with an electronic spreadsheet and draw up a table there. MS Excel or Open Office Calc will do well. Let's put in the following columns:
Date (or number of the week)
Number of new customer registrations
Number of orders placed
Online Turnover plus the part of the Offline Turnover generated through the website
Product Costs
Taxes
Actual Shipping and Handling Fees
Advertising Expenses
Service and Labor Expenses
Profit
Profit versus Online Turnover (in %)
Comments
By filling in the table daily or weekly, we will not only see the profits changing as time goes by we will also see, for example, how the turnover changes—and most importantly—how the relation between Profit and Turnover changes with time. Obviously, the higher the profit percentage of the Turnover, the better optimized the business model is.
Sometimes you will find that even though the turnover has increased, the profit has stayed the same—which means you're doing more work for actually the same amount of money.
Sometimes you will find that even though both the turnover and profits have increased, the figures in the last column (relation between Profit and Turnover) have worsened—this means that the business model needs optimizing as operational costs have grown too fast (and too much!) as compared to the profit.
This table, if filled in regularly, will also give a good idea of how the advertising expenses affect profits. And, assuming all major website updates and improvements are put into the Comments field, they will give an idea of how this or that feature, change, upgrade may have affected the online turnover and profit.
Now we know how to calculate turnover, calculate profit, and see the dynamics of profit change with time. We can now concentrate on what this book is about—reviewing various possible ways to increase profit.
There are several strategies applicable to an online business, and we will cover them all in further chapters. They are:
Increasing the number of visitors to your website
Increasing the conversion rate of visitors to customers
Increasing the amount of average orders
Increasing the number of repeat customers
Decreasing operational costs (advertising, handling and processing, service fees, etc.)
In this chapter, we have seen a brief introduction to osCommerce, and learned how to calculate and monitor profits. We have reviewed at least one simple and straightforward method to see profit figures changing with time, and have briefly touched several business strategies that become possible with osCommerce. We will review them in more detail in further chapters of this book.
We didn't talk about how to select products for online sales, why osCommerce is the e-commerce solution of our choice, and what to do with a pet dog when it misbehaves—because this book is dedicated to those merchants who already trade online or are planning to start online trading in the nearest time, and have already chosen osCommerce as the online store solution; also, we have no idea about the latter!
This book is based on over five years of the author's continuous experience building online businesses with osCommerce. All approaches and techniques described here and further are proven to have worked well for over 600 successful osCommerce-based online businesses all around the Globe in development or improvement of which the author took active part as osCommerce developer, but mostly as project manager or online business consultant.