Part 3: Implementation
Getting Started
Be a User First
The best preparation for e-commerce is to become an active Internet user.
These days you can get a dial-up "all you can eat" Internet connection for less than $25.00 a month. If your computer is not equipped with a modem, you will need to buy one - ask your computer supplier. If you've recently bought an iMac or iBook, you have everything you need (the "i" stands for "Internet-enabled"). If you use Windows on a PC, you probably have all the software you need, but if not, your Internet Service Provider will supply you with browser software.
For a comprehensive list of Internet Service Providers and other Internet Services look under "Internet" on the www.accessnz.co.nz directory. If you want to compare the various ISPs in terms of the services they offer and the fees they charge, look at the Consumer Online Web site, which provides a comprehensive comparison (www.consumer.org.nz).
Start using the Internet. Take a course (most night-schools offer courses) or buy one of the many recently published Internet books and magazines available (don't rely on old information - it's probably out of date). Ask your suppliers, customers, associates, and friends for their e-mail addresses, and start using e-mail to communicate. Don't forget to check your e-mail frequently (at least every day) - people who communicate by e-mail expect a quick response.
Look for the Web sites of companies in your industry sector or those of your suppliers. While you're there, look for information that is of personal interest to you. It's easy to assess what makes a successful site (or product, or service) when you're on familiar territory. Just as in the real world, you'll quickly learn to be discriminating in cyberspace.
Many people find that when first using the Internet they are overwhelmed by the wealth of material available. Others are less impressed than they expected to be. Persevere. You can be sure that no matter what your business or personal interest, there is something of direct relevance to you - usually the problem is simply finding it.
Searching
Unfortunately the Internet is not like a library where everything is precisely indexed and easy to find. There are, however, search sites (or search engines) that you can use to help you find things. These sites are commonly known as "portals" - which simply describes their function as an entry point into an array of Internet content.
To find out about search engines, how they work, what they cover, and tips for using them, go to Search Engine Watch www.searchenginewatch.com. In the meantime, the following search tools will to get you started:
- For New Zealand information, try:
- For access to New Zealand Government Web sites go to www.govt.nz
- For an international directory of Web sites try www.yahoo.com
- For an index of Web pages try www.altavista.com
Later, when you have a Web site of your own, you will need to list your site with these services, so that other people can find you. See below for more information.
Once you have a basic understanding of e-mail and have found your way round the Web, try buying something on-line - a book, a CD, or other merchandise. See if any of your usual suppliers have implemented Web-based e-commerce, and try ordering some supplies on-line.
Strategy
Once you have a degree of familiarity about how it all works, you are in a position to start thinking about how it can support your business.
As we noted in Part 1, at one level e-commerce is about logistics. But at another level e-commerce is about business strategy. It may sound fancy, but "strategy" is all about where you're going with your business and how you intend to get there.
Asking the Right Questions
Here are some broad questions to get you started. If you can't answer them that indicates you need to do some more work. Strategy is a team effort, so involve your people in the process, and don't forget to talk to key customers and suppliers as well.
- What distinguishes you from your competitors?
- What is your "point of difference", as Simon Barnett of OBO puts it?
- What makes your customers come back to you?
- What's happening in your industry? What are the key drivers?
- What is most important to your customers?
- How do you see your business in the future?
- What drives the creation of value in your business today? Will it be the same tomorrow?
Then think about your business processes:
- How does the supply chain work? Draw it as a diagram.
- Are there any bottlenecks? Where? What are the critical ones?
- Which internal processes could be streamlined?
- Could you do things differently, e.g. on-line, and save time or money?
- What effect would this have on your suppliers and customers? (If you don't know, you should ask.)
- Are there opportunities to collaborate with key suppliers?
- What about export or new market opportunities?
You may have the money to hire a consultant to help you with some of this. One way to find a consultant is to use the Small Business Assistance Directory 2000, published by Industry New Zealand and available from BIZInfo, (0800 424 946, or www.bizinfo.co.nz). Alternatively, consult the Institute of Management Consultants, which also publishes a useful directory.
A good introductory textbook on business strategy will give you the tools to help organise your thinking processes.4 Unfortunately, no textbook can answer the questions for you - but it will tell you what to consider as part of your strategic planning process.
The Unchanging Fundamentals
Electronic commerce doesn't change the basics of running a good business. If you want to be successful the following are still crucial:
- start with a business plan and a marketing plan
- make yourself known
- make and deliver the product, or perform the service
- be aware of and meet your customers' expectations
- get paid
- fund the business and pay the bills
- run the business efficiently, and
- plan for the future.
What's different? But e-commerce does throw some important new ingredients into the mix. Depending on how you implement your e-commerce strategy, some or all of these may be important:
- the ability to capture customer data, making it easier to market directly to particular segments
- customising products or services for individuals
- the potential for direct connection between maker and end-user (also known as disintermediation, or cutting out the middle-men)
- ease of customer comparisons - on the Internet, the competition is but a click away
- speed and immediacy of customer ordering
- economy of maintaining and delivering product information
- easy 24 hour 7 days a week (24 x 7) availability of catalogues, data, prices, and ordering
- tapping into global communities of interest
- difference in legal r?imes
- lower (and falling) transaction costs, and
- electronic delivery of some products and services (such as publications, software, music, video, translation services, consulting and banking).
Getting Into It
Timing and Scale
As with all business decisions, there will be an optimum time for your business to get into e-commerce based on an analysis of the costs involved and the benefits. Considerations of scale are crucial as well.
The specific use you make of the Internet in your business will depend on the kind of business you have and what you want to achieve. Implementing a sophisticated integrated system may suit your business, but smart use of the Internet as a research, direct marketing, and communications tool can be very effective as well. Recall Talbot Plastics.
Level 1: Using E-Mail
Why use e-mail? At much less than a cent per message, e-mail is quicker and far cheaper than using a fax machine (or post or courier services), and much more flexible. It gives you the facility to communicate and exchange material with suppliers, customers, partners, and colleagues. You can attach text or spreadsheet files such as orders, product specifications, quotes, costings, or promotional information. You can also attach photographs and even short sound and video clips.
Already over 60 per cent of small firms and 80 per cent of medium-sized firms are using e-mail, not to mention over a million individual New Zealanders, so even if you don't want to communicate with others via e-mail, they want to communicate with you.
It is surprising how many people forget to include alternative contact information in their e-mails. Always include a postal address, telephone numbers, and your Web site address (if you have one) so recipients can contact you by other means.
With e-mail you need to protect against viruses. You can't ignore the problem. A straight e-mail message is simply text, and cannot contain a virus. But attachments to e-mails can contain viruses. In particular, if you receive an executable programme as an attachment (a file ending in .exe) don't open it! Talk to your computer advisors about what to watch out for. They will also suggest anti-virus software and protocols to use. As a rule, you should always virus-check attachments to e-mails before opening them.
You should always create a daily back-up copy of crucial business data, just in case.
Level 2: Using the Internet to Research Information
More than half of New Zealand's small and medium-sized businesses already use the Internet for research and information gathering. This might be for market intelligence (checking out what their competitors are doing), keeping up with industry news, doing some background research for a project, sourcing products and services, financial information, or identifying potential customers.
Although there is a huge amount of information on the Internet, don't be fooled into thinking everything is on-line. Most authoritative information is still in paper form, so don't forget about your local library. But you are most likely to find relevant information on-line if it is of recent origin.
As an example of how Internet research can work, a small surveying company wanted to find out about non-destructive testing techniques. A search of the Te Puna Web Directory for "non destructive testing" turned up the New Zealand Non Destructive Testing Association Web page (www.winzurf.co.nz/ndta/index.htm). It turned out that the person who ran the association and the surveying firm were situated less than 30-minutes drive from each other.
Webdrive (www.webdrive.co.nz) is an innovative Web hosting company started by two guys in their early twenties. When asked who they had consulted to find out about their tax obligations, they answered, "Nobody. We just looked up the IRD Web site." (High praise indeed for www.ird.govt.nz)
Level 3: Ordering On-Line and Using On-Line Services
You may not have your own Web site, but you can still be an active user of e-commerce. Over 30 per cent of small and medium-sized businesses are ordering goods and services on-line, and a similar proportion use Internet banking services.
The range of goods and services that can be bought on-line is increasing daily. A good place to start might be ordering office supplies. Check whether your suppliers have e-commerce enabled Web sites, as it may be possible to start dealing with them electronically.
There is a growing range of other on-line services. Investors can benefit from share market information, news, and discussion on www.sharechat.co.nz or www.stockwatch.co.nz. A number of share brokers also offer on-line share trading - great for doing those day trades during office hours!
Try an on-line recruitment agency such as www.monster.co.nz or www.nzjobs.co.nz to find new staff.
See also B2B Exchanges below.
Level 4.1: A "Brochure Ware" Web Site
Why do you need a Web site? Because many people now expect companies to have one. They want to be able to check out your business and the products and services you offer from their office or home.
More than half of small and medium-sized businesses and around 80 per cent of large business use the Internet for information gathering. If you are not on-line, they won't find you.
A business Web site that just contains information is typically called "brochure ware".
At its simplest it may only be three or four pages containing a company profile, some information about products and services, and contact information, including physical and postal addresses, telephone and fax numbers, and an e-mail address.
Make the contact information easy to find, preferably on the opening page. Many people now look up Web sites to find phone numbers, and it is surprising how many Web sites hide such information away or forget to include it at all.
A brochure ware site such as this can be put up at minimal cost, and is low maintenance. But don't forget to update the site if any of the information changes.
The makers of Zoodoo compost have a great brochure ware site at www.zoodoo.co.nz - simple, but effective.
Level 4.2: Web Site with On-Line Catalogue
You can upgrade your brochure ware site by adding an on-line catalogue, as Servotech has done (www.servotech.co.nz). This is simply an on-line version of a paper-based catalogue. The advantage is that you can keep the on-line catalogue up to date without having the expense of reprinting the whole thing. If the majority of your customers are businesses that purchase on credit using a purchase order number, then an on-line catalogue may be as much as you need.
Level 4.3: A Web Site with On-Line Ordering
You may decide that you want to add a "shopping cart" function to your site. Shopping Cart software allows your customers to compile and submit an order on-line. Products are selected and "placed" in a graphic of a shopping cart. When complete, the whole order is submitted, together with payment details, typically a credit card number.
You can confirm that the order has been received via e-mail, while the order itself - along with payment - is fulfilled through established off-line procedures.
There is a range of shopping cart software available, including some excellent shareware programmes, so shopping cart functionality can be added without spending a fortune. There are Web design companies that can deliver sites for $2000 all up, with small catalogues and on-line ordering facilities which enable credit card details to be taken. However, a large site with high security will of course cost substantially more. Some of the larger Internet Service Providers like Xtra and Clear Net offer turnkey Web sites with this kind of functionality.
Level 4.4: A Transactional Web Site
A transactional Web site covers the whole process, from product or service selection, through ordering and confirmation of delivery arrangements, to real-time on-line credit card payment.
"Real-time credit card payments" mean that when the customer submits their credit card details, the transaction is passed through to the bank and authorised (or declined) immediately, just like an EFTPOS transaction. In effect you are integrating your Web site into the banking system. (See Getting Paid for important information about on-line credit card transactions.)
Examples of such products are BNZ's Buyline (bnz.co.nz - look for the e-commerce link), and ASB Bank's Access On-line (www.asb.co.nz - again, look for the e-commerce link).
These products can be bought directly, or may be available through your Internet Service Provider. They are relatively expensive solutions, though, and you will have to decide whether the orders you expect justify the cost.
Mp3.net.nz is an example of a site with on-line real-time credit card payments. Mp3.net.nz sells New Zealand music in MP3 format, which can be downloaded and played on your computer or on an MP3 player. With this kind of digital product that is both bought and delivered via the Internet, real-time credit card payment is essential, because the customer expects to be able to download the goods immediately on submitting the order.
Level 4.5: A Web Site with Customised Information
While providing information about products and having on-line ordering is important, receiving orders is one of the less complicated and time-consuming business processes.
A more time-consuming task is customer service, particularly dealing with customer queries. Information about order status and providing invoices and other data on-line via a password protected section of the Web site has been shown to cut down telephone and written queries dramatically. Customers appreciate the ability to be able to check such information any time they want.
In researching this guide we have heard of companies implementing this facility on their Web site first in preference to having on-line ordering, because of the convenience for their customers and the cost-savings involved.
A twist on this facility is the Kiwi Dairies site www.fencepost.com. Dairy farmers of course are suppliers to Kiwi Dairies. To help their suppliers Kiwi Dairies have made daily quality and production information for each farm available on-line via Fencepost.com.
Level 5: The Fully Integrated E-Commerce Solution
Ultimately, IT can be integrated into all your business activities. This will have a significant impact on the efficiency of your business and its ability to compete. The following is a description of what an integrated e-commerce solution might mean.
The Internet is a communication tool that enables you to get your products to a wider range of customers, even globally.
To make trading over the Internet and linking into the world of e-commerce easier you need to have a good core business system.
An ordering process is essential for B2B trading. This assumes that you have a product file with an up to date inventory on product that is available. Trading partners will want to be able to go to your product file to make enquiries (not unlike telephone banking, but using the Internet). You need to be able to generate an invoice and collect payment electronically. Purchasers of physical products will also want to know about shipping times.
The order is often considered to be the heart of a business. Company activities that support the ordering process should be linked or integrated. Back-end processes need to be integrated with the front processes and then to the accounting systems. In an e-tailing situation, if the sales order system is linked to the inventory control system, an automated ordering system can be used to order new supplies - that is, when you run low on something, a new order is generated and despatched automatically.
The inventory control needs to be integrated to the product file. This is the area to which trading partners will want to make enquiries. When these systems are in place the next move is to integrate the payment and the shipping information.
B2B Exchanges
B2B exchanges are on-line trading "spaces" provided by a neutral party where many businesses can trade goods and services electronically with each other at a dynamic price.5 New Zealand's biggest B2B Exchange is the wholesale electricity market, run by m-co.co.nz and worth a billion dollars annually.
For a detailed description of a B2B exchange see the LIGNUS case study.
Decisions, Decisions
The scale of e-commerce you choose will depend on the size of your business and what you are trying to achieve. Let's look at four examples.
Renaissance was already a mature business and as a computer products distributor was operating in the B2B market. They went into e-commerce to reduce the cost of transactions. The aim was not so much to attract new customers, but to service existing customers more effectively and to eliminate costs. E-commerce has also enabled them to more effectively manage in a dynamic pricing environment. Renaissance went into e-commerce without fanfare, yet due to an excellent system and implementation they are now turning over a million dollars a week electronically.
Talbot Plastics, on the other hand, has used the Internet to actively seek new customers and develop a thriving export market. The Internet has enabled them to overcome the barrier of distance and build up trust and working relationships with customers on the other side of the world.
International Cars Direct have used the Internet to add new value to their business by allowing their customers to specify the kind of car they want and the price, and then buying the car at auction in Japan. In effect, the Internet has enabled them to provide a customised service in second-hand Japanese import cars.
Cranium.co.nz operates a B2C site. Their success is in servicing a global niche consumer market for a particular genre of music. They also add value by using their Web site to provide up to date news and information, thus making them the centre of a global community of interest.
Building Your Web Site
Getting Your Web Site Hosted
You don't need to register your own domain name in order to have an email address and Web site. Most Internet Service Providers (ISPs) offer their clients "free Web page hosting". (This means that your Web page can be kept on one of their computers for free.) In that case your address would use the domain name of the ISP, and be along these lines:
www.yourisp.co.nz/yourcompanyname
However, if you want a Web site address like this:
www.yourcompanyname.com or
www.yourcompanyname.co.nz
(we'll explain the difference in a minute) you will have to register your company name as a domain name.
Registering Your Domain Name
A domain name is the name that is used in the address of a Web site (and also in an e-mail address). It's a good idea to register your own domain name, based on your company name, for your business. All the companies we've mentioned in this guide have their own domain names (such as cranium.co.nz or servotech.co.nz).
Your Web designer will be able to tell you how to register your domain name, or your Internet Service Provider will do it for you. If you want to do it yourself, we explain how below. But first, you need to think about where your target markets are located.
If the purpose of your Web site is to target international markets, particularly the United States, you should consider getting a generic domain name. This does not use a country code such as .nz, and would be in the form www.companyname.com. Although Talbot Plastics has a pretty low-key Web site, they do have a generic domain name (www.talbotplastics.com ), and as a consequence most of their customers don't regard them as "foreign" or "distant", which is good for business.
Domain Name Administration
The Internet Society of New Zealand (www.isocnz.org.nz) administers the .nz Register through its subsidiary, the New Zealand Internet Registry Ltd. This company trades under the name of Domainz, and Domainz therefore has delegated responsibility for management of the New Zealand (.nz) domain name space (www.domainz.net.nz).
Registering your domain name will cost under NZ$100 for a year (if it is a .nz name), and less than US$100 if it is a generic (e.g. .com) name. You can also choose to register the name for periods longer than one year.
The listing of names within any domain in the .nz domain space is carried out on a "first come, first served" basis. This means that Domainz does not determine whether an applicant has a legitimate right to the name, nor does it play any role in resolving disputes that may arise over registration issues.
You can use the Domainz site to check whether the domain name you are thinking of using is still available. It may already have been taken. But if you are planning to use a generic (.com) name, you will find it more convenient to check its availability on www.register.com, the US equivalent of Domainz. (You can also register a .nz name on register.com, and they will forward the information to Domainz.)
It can be quite hard to find an appropriate .com name, since so many names have been taken, so you will probably have to exercise some ingenuity. It's much easier to find a .nz name.
Developing Your Web Site
You can create your Web site yourself, but you should only contemplate it if you are computer literate, have some graphic design skills, and are willing to spend the time required to do it properly. Remember that your business image is at stake. The day of the amateur business Web site has passed with the twentieth century.
In most cases you will have to hire someone to do it for you. Fortunately Web page development and design is a maturing business, so prices are coming down, and skill levels are going up. But beware - there are still cowboys out there. Write a clear brief and get several quotes before choosing a Web designer. Make sure you see examples of their work.
If you are planning anything more than a simple brochure-type Web site, you should almost certainly get someone else to do it for you.
If your business model requires a fully-enabled e-commerce site, you will certainly need expert help.
Web Site Design
Web site design can trip up the unwary. The Web is a new and unique medium. Many of the established practices in the design of print-based publications do not apply.
Legibility is still important, but legibility on screen relies on different factors. A good graphic designer won't have all the skills needed for Web design unless they have done some additional training.
The medium of the Web makes it possible to use a lot of cool features, such as animation, but there are traps. Such things may make your site look great, but make it much slower to load or harder to use, which will turn people away (and result in you losing customers). The old design maxim, "less is more", still applies.
Usability
The more usable your Web site is, the more value it will add to your business. Great usability maximises your sales.
As Web design expert Jacob Neilson says, "Users spend most of their time on other sites. This means that users prefer your site to work the same way as all the other sites they already know." (see www.useit.com/alertbox/20000723.html)
Like all designers, Web designers like to show off their skills. But the latest Web gizmo probably won't enhance your business. Don't be talked into some radical new feature unless it serves a purpose. If you are selling music, for instance, incorporating music clips makes sense. Otherwise, keep it simple. Yahoo. com is the most visited Web site in the world, and has one of the simplest and most consistent designs.
Testing
Ensure that your Web designer carries out testing using a range of platforms and browsers.
Most people use either Microsoft Internet Explorer or Netscape as their Web browser. It is important that your Web site works well with both, and also with the less well-known browsers that are around.
As well, get some actual people to do user testing as a reality check. Or as Jacob Neilson says: "people do things in odd and unexpected ways, so even the most carefully planned project will learn from usability testing." (See www.useit.com/alertbox/991003.html)
For the best tips on Web design we strongly recommend that you read Jacob Neilson's article Ten Good Deeds in Web Design available at www.useit.com/alertbox/991003.html. This article also contains links to Neilson's original 1996 article Top Ten Mistakes in Web Design, which is still relevant today.
Writing for the Web
Like designing for the Web, writing for the Web also requires a new set of skills. The world authority on writing for the Web is (of course) a New Zealander - Rachel McAlpine. We recommend that you read her book Web Word Wizardry.
A word of caution. Writing, like design, is a specialist skill. It's a good idea to hire a professional writer to write the text for your site. If you want to attempt it yourself, make sure you hire an editor (or get your Web designer to do so) to get it just right.
McAlpine's book contains information about Web writing and Web design, including tips on how to get the best results out of search engines so that potential customers can find you.
McAlpine's Web site www.writing.co.nz also contains some very useful free resources. While you are there, notice the clean and simple design.
Marketing Your Web Site
"The Web is a great marketing tool," so the hype goes. "Build it and they will come." Unfortunately, it is not nearly so simple.
Your Web site can be used to market your business, by providing a shop window on the Web that can be accessed by everyone else connected in the world. But in order for anyone to access your site, they have to know about it. How do you tell your potential customers that your site exists, among the millions of other sites available?
Marketing. In order for your Web site to market your business, you have to make it your business to market your Web site.
Whatever the purpose of your Web site, it is essential to include your Web site address on every piece of literature associated with your business - business cards, letterhead, ads, brochures, catalogues, t-shirts, business vehicles, sandwich boards, personal tattoos. Don't forget to include your Web site address with every e-mail you send.
But Do You Need to Market Your Web Site?
Yes. Your Web site is both a business communication and transaction tool, and a marketing tool.
If its primary purpose is to facilitate electronic dealings with established customers, then the marketing can be minimal. All you have to do is let your customers know about it and encourage them to use it. Two of the largest e-commerce Web sites in New Zealand by value of transactions (www.renaissance.co.nz and m-co.co.nz) have a low profile for this very reason.
On the other hand, a business operating a B2C (or e-tailing) Web site must do substantial marketing to let as many people as possible know of the existence of their Web site. As always, identify whether you are aiming at a mass or niche market, and tailor your efforts accordingly. For instance monster.co.nz is clearly aiming at a mass market, hence the television advertising. But cranium.co.nz is aiming at a niche market, so their approach is along the lines of viral marketing (see below).
- What kind of visitor do you want to attract?
- What are the characteristics of your target market? (List them.)
- If you have already collected data on your customers, you can make reference to that here as well. (If you aren't sure, take another look at the Talbot Plastics case study. Notice the description of Talbot's customers. Though they operate in a range of industries and they are spread around the world, they have some characteristics in common. )
- What characteristics do your customers share?
The characteristics of your target market will determine your marketing approach. For instance, Talbot Plastics doesn't wait for its customers to come knocking, but actively seeks them out and approaches likely prospects directly.
List on the Search Engines
Whatever the purpose of your Web site, you should ensure it is listed on the major Internet search engines.
Search engine traffic obeys the 80:20 rule. Most search queries are made on the most popular search engines. At time of writing these are:
Focus on getting highly ranked with these, and you can safely ignore the others. Rachel McAlpine's book, Web Word Wizardry, is a useful resource for learning about the tricks of listing with the search engines.
You should also list on the New Zealand search sites such as Access New Zealand www.accessnz.co.nz and Search NZ www.searchnz.co.nz
A full list of these New Zealand sites is available at: tepuna.natlib.govt.nz/web_directory/NZ/internetdirs.htm
Low-Cost Web Marketing Techniques (Viral Marketing)
The Web works through the ability of Web pages to contain links to other Web pages. The best way to increase your visibility on the Web is to utilise the potential of linking. This is known as "viral marketing". Viral marketing includes such techniques as reciprocal linking, Web rings, and utilising Internet-based communities of interest.
Getting Paid
If you are dealing mainly with familiar customers or suppliers, then you will probably continue to supply and accept purchase order numbers in the usual way, and arrange for payment at the end of the month. The only difference is that you might send or receive the order electronically. This section is aimed at those who will be dealing in smaller credit card transactions.
The hype surrounding e-commerce suggests that all you have to do is set up a Web site, install shopping cart software and credit card processing software, and the money rolls in. But taking money on the Internet is not as simple as that. Many new or small e-commerce ventures have had problems.
At the time of writing the credit-card payment systems for Web sites offered by New Zealand banks can only accept payment in New Zealand dollars. That is, they do not offer multi-currency billing. In fact, in most countries in the world, including Australia, credit card companies only accept payment in the currency of the country where the merchant is located. That means that if I buy goods from a US Web site I pay the US dollar price, if I buy from Australia, I pay in Australian dollars, if I buy in the UK I pay in pounds sterling, and if an American buys from a New Zealand Web site, they must pay in New Zealand dollars.
New Zealand businesses wishing to sell via the Internet are at a disadvantage, as they are forced to charge in New Zealand dollars, even when the target market is the United States. An approximate US-dollar price can be stated on the Web site, but currency fluctuations can cause the cost appearing on the buyer's credit card statement to be different from that quoted on the Web site. If the currency fluctuates in the wrong direction the customer will feel misled. The result is extra work for New Zealand businesses and the risk of tarnished reputations.
To make matters worse, many Americans are wary of unfamiliar currencies, and take their business elsewhere. On the Internet, the competition is but a click away. Not many people outside New Zealand are familiar with the value of the New Zealand dollar - in other words, they may not know what good value they are getting!
This problem is not insurmountable.
A partial solution is to link to an automatic currency converter - of which there are a number on the Web. In this way the buyer can convert the NZ dollar price in their own currency. In addition, it is important to warn your prospective customers of the possible impact of currency fluctuations.
A better solution for large e-commerce sites whose main market is the US is to base the site in the US. Hosting in the US can be arranged, though it has its problems. This is probably not an option for most small New Zealand businesses.
Look at other New Zealand Web sites to see how they have handled the problem. The reason that banks do not yet offer multi-currency credit card billing facilities is that there simply wasn't a demand for them until recently. It is likely that the banks will offer such facilities in the near future so it is worth asking your bank about their plans.
In the meantime, WebFarm, a New Plymouth company, is filling the gap by reselling services from Worldpay, a UK company that offers a multi-currency credit card billing product. See www.webfarm.co.nz for details.
Credit Card Charge-Backs
The second big credit card problem for companies getting into e-commerce is charge-backs. When a person buys something on the Web using a credit card, it is classed as a "card not present" transaction. Different rules apply to such transactions because of the higher risk of fraud. When the credit card number is submitted for authorisation, all the credit card company actually does is check whether there are available funds, and check whether there is a block on the card (for instance, has it been reported as lost or stolen?). If the card passes both these tests, the transaction is authorised, and the money paid into your account in the usual way.
But with a "card not present" transaction, the money is not truly yours yet, even though it is sitting in your account. There is a period of time (in some cases as long as 90 days) following completion of the transaction during which the transaction can be challenged. For instance, when the owner of the credit card receives the bill, they may deny having made the purchase. If the credit card company accepts the challenge, then they reimburse the customer, and get the money back off you, in which case you have lost both the goods and the money. There are three lessons here.
- First of all, make sure you ask your bank about the rules that apply to credit card charge-backs.
- Secondly, don't regard the money as yours until it really is yours.
- Lastly, if you receive an unusually large order, make every effort to check the legitimacy of the person ordering. The bank may be able to do extra checks on the validity of the credit card for you. Be extra careful if you get a large order from a country with which you don't usually do business.
For more information on this and other credit card issues, go to www.merchantworkz.com
A final issue about getting paid is that many customers are still hesitant to give their credit card details on-line. There are a number of ways you can reassure them (see the sections on Web Site Privacy Statements and Security). Offer a range of payment options. Some people may be content to fax their credit card numbers, give them over the phone, or send them in two separate e-mails. Others may wish to send a cheque or pay cash at the time of delivery.
Tour Time NZ Ltd
www.tourtime.co.nz
Tour Time NZ Ltd arranges travel and holidays. They don't take payment over the Internet because they lose so much in credit card commissions - for large parties, 5 per cent commission on each member of the party amounts to a healthy sum. Instead, they ask for an international bank transfer. The funds are moved from the customers' accounts to the business account and cleared within a couple of days. Payment details are set up via e-mail, by Tour Time providing their bank account number. This way Tour Time's customers do not need to supply their bank account number over the Internet, which offers them complete security.
Building Trust
Security
One of the most common concerns people have about using the Internet for electronic commerce is security. As part of your planning for electronic commerce you should seek advice from your Web developer or computer consultant about security issues. Some of the issues are discussed here.
You can carry out e-commerce without funds transfer on the Internet. In this case, a banking system is set up to act as an intermediary, and the bank works in conjunction with the buyer and seller to notify them of funds transfers resulting from transactions. During this process the bank ensures the security of the information.
Don't neglect the basics because you rushed into transacting from your Web site. An insecure site, unreliable ordering software, and poorly thought-out order fulfilment will seriously undermine your business credibility.
People are often concerned about sending credit card information across the Internet. The problem is not so much information being intercepted as the security of the database on the site that holds the information. There is no record of any credit card information ever having been intercepted in transit. Nevertheless, if you are taking orders via your site or processing customer data you will want to consider encryption. This is a method of encoding data for secrecy, so that it can only be read by the recipient for whom it is intended. There are currently several solutions businesses can use to protect and authenticate electronic information. The encrypted message is scrambled so that its contents are kept secret. Only the recipient with the proper "key" can decrypt the message.
Digital signatures can be used not only to identify the sender of information, but also to verify that the content of a message is accurate and authentic. A digital signature is therefore more than the electronic equivalent of a written signature. With the right software, placing a signature on a document or form can be as easy as clicking and typing in a password.
System Security
As the use of the Internet becomes more widespread, we keep hearing horror stories in the media about virus attacks on computer systems, and computer hackers accessing sensitive company data or maliciously changing the information on web sites. While these stories sound frightening, the risk of such attacks can be minimised if you implement some common-sense security measures.
Such measures need to be developed in tandem with the implementation of e-commerce systems, so that the integrity of your business's information and its systems are protected. This is especially so if your business has a permanent "always on" connection to the Internet. Your security policy should ensure that your systems are carefully implemented to reduce the possibility of security loopholes. In addition, your internal systems may need to be protected by a "firewall". A firewall is a combination of hardware and software that protects computer networks from unwanted intrusions. Your computer supplier will be able to advise.
A second strand is to ensure that you and your staff are security conscious. This means ensuring that passwords are kept private and that staff members' access to the system is appropriate to their needs. Most often your Internet Service Provider will host your Web site, rather than it being hosted in-house, and this is certainly one way to reduce the risk to your own business systems. But make sure you ask about the security measures your ISP has implemented to ensure that your data is protected.
Web Site Privacy Statements
It is likely that privacy will be one of the main concerns of visitors to your Web site. If you want to gather information, you'll need to show integrity about the way you collect and use it. To this end, all Web sites should contain a Web site privacy statement.
Our Privacy Act provides best practice in dealing with consumer and business information, and provides a competitive advantage to New Zealand businesses operating internationally, especially businesses selling on-line, where privacy considerations are particularly important. New Zealand businesses should highlight this fact on their Web sites.
To find out more about our Privacy law, check out the Privacy Commissioner's Web site at www.privacy.org.nz
Consumer Protection
New Zealand's consumer protection laws and self-regulatory frameworks are technology-neutral. Provided they are dealing with a New Zealand based trader, New Zealand consumers have the same rights irrespective of whether the transaction is carried out electronically or by traditional means. Equally, New Zealand-based traders have the same obligations, whether on-line or off-line.
To help create greater trust in on-line shopping among consumers, the Ministry of Consumer Affairs has proposed a Model Code for Consumer Protection in Electronic Commerce. The code shows how consumers, businesses, and Government can work together to ensure consumers' interests are met.
The code is designed to adapt to the New Zealand context the OECD Guidelines for Consumer Protection in the Context of Electronic Commerce, agreed to by the OECD in December 1999. The model code is available at www.consumer-ministry.govt.nz/dp_ecommerce_statusreport.htm and the OECD guidelines are available at www.oecd.org/dsti/sti/it/consumer/
Legal Issues
Laws governing trade differ from country to country. The legal framework around e-commerce and the Internet is still evolving. Many national governments and broader bodies such as the EU, OECD, and the UN are in the process of developing policies to support, manage, and control electronic trading.
A number of jurisdictions have passed legislation to enable paper-based legal requirements to be carried out electronically. New Zealand is also set to pass similar legislation in the form of the Electronic Transactions Bill.
For a quick guide to New Zealand law and e-commerce, see www.bakerinfo.com/apec/nzapec.htm
For a quick guide to the law and e-commerce in the 21 APEC economies (including the US, Canada, Australia and most of Asia), see www.bakerinfo.com/apec/
For information about electronic commerce and taxation, contact the Inland Revenue Department, or visit www.ird.govt.nz
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