How to think about e-commerce

Once upon a time, eBay was the land of the online retailer. Amazon and eBay were essentially the only successful business-to-consumer Web sites in America.

That was 1999.

Amazon and eBay have some competition now. Smaller auction sites have popped up like Bonanzle and eBid to challenge the heavyweight title holders. Computer parts makers can list on Tiger Direct and Newegg.com. Craft makers can use Etsy. Musicians have found iTunes. Bulk manufacturers can dump supply on Overstock.com. Even folks selling services have some options for an online marketplace, such as Ether.com and iFreelance.com. And there are hundreds of other avenues for online sales, depending on your line of business.

You may also want to have a Web site to sell stuff, separate from any other auction or e-commerce site. Setting up an e-commerce Web site isn’t super-cheap – expect to spend a couple of thousand dollars, minimum, on site design, a merchant account and software to be competitive.

And competitive is the word. Auction sites and straight up e-commerce Web sites expose your products to the world, but they also place them right next to every other company offering similar products or services.

Basic business strategy tip: There are four kinds of competitive advantage. You can produce something with less cost than others and can undercut competitors on price. You make something or do something that’s just plain better than the next guy’s stuff. You can make more varieties of stuff than your competitors, so customers are more likely to find what they need from you. Or you know exactly what your customers need and can meet that customer service need best at an acceptable price.

To be successful selling anything – online or offline – you need to be able to do at least one thing better than other merchants. Have a sense of how you intend to compete when you start thinking about opening up an online store.

Right now, eBay may still lead the pack, but small sellers have been feeling a bit squeezed. The auction site has increased fees, changed its feedback system, and made it more difficult for sellers to challenge fraudulent purchases. Paypal has been much maligned of late by merchants for its chargeback policies, with many complaining that eBay can essentially seize money in a Paypal account without recourse.

One advantage to running your own site is that you can set up a merchant account and your own checkout basket, which offers more financial protection than Paypal. But eBay requires its sellers to offer Paypal as a payment option.

Skip McGrath, an e-commerce entrepreneur and the author of The Complete eBay Marketing System, said the eBay message boards have been lighting up with talk of recent changes to the site's seller rating policies and trouble with PayPal. "There’s always been a group that grouses about eBay and PayPal," McGrath said. "They’re trying to reduce fraud. A lot of the new things they’ve done have dramatically reduced fraud. People don’t like change. The bottom line is that eBay is changing, and it’s probably not as good now for small sellers as it used to be."

On the other hand, Amazon is getting a lot easier, he said. "Amazon is going in the opposite direction – they’re trying to attract the small sellers," McGrath said. "When you go on Amazon now, it’s one click. You shop and you buy. Ebay is trying to make the buyer experience that’s more uniform. It’s a little more work today than it used to be. You used to be able to slap anything up and it would sell."

Still, McGrath recommends eBay as an inexpensive way to get the hang of selling stuff on the Internet. "It’s the easiest way for people to get started selling online. It’s the lowest cost, the lowest risk and the easiest way to learn."

The learning curve can be steep, he said. And when starting your own online storefront -- separate from an auction site -- the results can take a while to materialize even if you’re really really good at building a Web site and know how to do search engine optimization and design. Google puts every new Web site in a "sand box" for three to six months, making it harder to find with a simple Web search, McGrath said. "That’s a lot of time and a lot of money to build that skill."

Some advice: Don't try to do everything when you start, with an e-commerce Web site, a blog, social media and the works. Doing one thing at a time will keep you from going crazy all at once.