Get Started with E-Commerce - EMusician

Get Started with E-Commerce

By now you certainly have heard enough hype about the Web. Supposedly, any musician with a computer can make a fortune off the millions of people surfing
Author:
Publish date:

By now you certainly have heard enough hype about the Web. Supposedly, any musician with a computer can make a fortune off the millions of people surfing the Internet. So is it true? Can you get rich on the Web? Considering that only about 5 percent of all Internet-based companies are even profitable, perhaps we should ask a simpler question: can the Web at least help you make a living doing what you love to do? To that we can answer a resounding "yes."

Most musicians who use the Web do so to market themselves, their bands, and their projects, but the Internet also holds great potential for selling products such as CDs, T-shirts, posters, and all the other things you offer at your gigs. Sound designers, in addition to doing work for hire, can sell their sounds over the Web.

There are a few ways to go about putting your merchandise up for sale on the Internet. One approach is toshop your wares to an existing Web site that markets and sells products. (Be sure to check out "Working Musician" in next month's EM for more information on using third-party Internet distributors.) If you'd like to have complete control over your product marketing and keep a higher percentage of sales dollars, there's another option: market and sell your products from your own Web site. For approximately $2,000 and a few months' time, you can set up electronic commerce on your site and start taking orders. Let's lookat the basic workings of e-commerce and how you can get started with it on your own Web site.

SHIPPING AND HANDLINGOnce you get your site set up and your merchandise together, you need to consider whether you want to actually ship products or just offer downloadable files. Obviously, if you're selling physical items such as CDs, posters, and T-shirts, you must ship them. However, downloading is an option if you are selling songs or sounds. My Web site (www.sonicimplants.com) sells sound sets to musicians, and all the files are under 20 MB in size. If you run a download-only site, you avoid the hassles of shipping.

If you do intend to ship products, you must decide whether to do so yourself or hire a fulfillment house. A fulfillment house can take phone orders; store, package, and ship products; and carry out a host of other services. Many also take orders by e-mail, which can be sent to them automatically after a sale is processed on your site. A fulfillment house can perform any number of these services, and the fees will vary accordingly.

TAKE IT TO THE BANKAll businesses that accept credit cards must have a merchant account, so you'll need one too. Your merchant account must be set up through a bank. The bank, in turn, is associated with a credit card processing company, which handles the actual credit card orders (sales, returns, disputes, and so forth). When choosing a bank, you should be aware of several things. First of all, many banks don't really like Internet sales. Even though at the processing level there is no difference between an online sale and a phone sale, many banks view Internet sales as fraught with potential fraud and tend to shy away from those accounts. Banks are also wary of giving merchant accounts to folks who run small businesses out of their bedrooms or who haven't been in business long. Most banks will send a representative to your place of business, so it's best to present a professional look by putting on some nice clothes and cleaning up your place. You will also have to pay an application fee for your merchant account. These fees vary widely from about $200 to $600, so be sure to shop around.

When you fill out an application for a merchant account, you will be asked how much sales revenue you intend to generate. The bank uses this figure to determine the percentage rate paid to Visa, MasterCard, and other credit cards you want to accept. (All businesses that accept cards pay a fee for each credit card sale, usually 2 to 3 percent of the sale.) Be careful, though, because the bank also uses your sales revenue estimate to determine whether to give you a merchant account at all. When talking to my first bank, I optimistically stated that my sales would be rather high, only to find out that the bank wanted a letter of credit (basically an account with a lot of money in it as collateral) because a company of such small size might not be able to pay such large credit percentage fees. So it's best to estimate your sales as rather small initially, even if it means that the fee percentage you pay is a bit higher. After six months, the bank will review your sales and can adjust your percentage if necessary.

Also be forewarned that the process of applying for and receiving a merchant account can take several months and many phone calls. Daunting as this process may be, don't be tempted to believe the promises made by fly-by-night companies that claim they'll get you quickly approved for a merchant account. Most of these operations are scams.

SHOPPING FOR E-COMMERCESo how does e-commerce work? When someone makes a purchase, a computer server processes the order and sends the sales and credit card information to your bank. Unless you're proficient at computer programming, you'll want to employ the services of an e-commerce provider, such as ShopBuilder (www.shopbuilder.com) or Eagle Software (www.eaglecorp.com), to take over this part of the process for you. Many e-commerce providers also handle credit card encryption, database management, and other important functions. After a buyer provides the relevant information (name, street address, e-mail address, credit card number, and so on), the server accesses a credit card verification service. Once the card is verified, an authorization number is generated and the sale is complete. All authorized sales from a given day then travel in a batch to a processing company that first pays the credit card companies their percentage of the sales. The balance is then deposited into your bank account, typically within three days.

Following are several things you should consider when shopping for an e-commerce provider.

Which encryption method does the provider use for credit cards? The bank at which you have a merchant account will require you to use an approved encryption method. Make sure that the method your e-commerce provider uses is one that your bank has approved.

Does the provider keep accurate records of the number of sales, buyer information, products sold, and the like? For marketing, tax, and user-support purposes, you'll need good records to accurately track what you're selling. Make sure that your e-commerce provider keeps fastidious database records of all information about a sale and gives you easy (preferably online) access to that data when you need it.

Can the provider automatically forward your sales to a fulfillment house if you're using one, or directly to you if you're not? If you hit the big time and sales start pouring in, you won't be able to monitor each transaction individually; therefore, the automation of key features becomes very important. Make sure your e-commerce provider automates tasks such as generating sales reports, sending broadcast e-mail, counting hits to your site, accommodating online credits, and so on.

How often does the provider monitor its server? In e-commerce, the server is your lifeline, so be sure your provider is on top of all computer problems and maintenance. Also, you'll need access to your e-commerce provider from time to time to deal with various issues, including server crashes. Your provider should keep regular business hours and be responsive to your business needs.

What backup methods does the provider employ? I can't say enough about how important regular (preferably nightly) backups are. If you find an e-commerce provider that doesn't think frequent backups are important, move on to another provider.

And finally, how much does the provider charge for its services? Fees for e-commerce services vary widely depending on how much you intend to sell, the margin you make from your products, and whether you use the provider's other services, such as Web design. Charges can be based on a percentage of each product sold (10 to 15 percent is common) or, if there isn't that much margin in what you're selling, a monthly fee ranging from $50 to $300.

CACHE INAfter you've set up your accounts and found an e-commerce provider, plan on a few months to make changes to your Web site, debug the sales flow, get your products together, and so on. The nice part is that after you have it all operating smoothly, it will pretty much run itself-pretty much. You will still have to check your sales each day and deal with any download problems, unhappy customers, and other unexpected but inevitable events.

Don't forget that your products won't sell unless people visit your Web site, so you'll have to spend some time on marketing. (See "Working Musician" in the September and October 1999 issues of EM for more on mounting an affordable and successful marketing campaign.) E-mail lists, online newsletters, links from other sites, and search engines will all assist in this effort. Your e-commerce provider can help you with some of this, but dedicating an hour or two every day to marketing will go the furthest in increasing your sales and helping you promote yourself and your music.

Jennifer Hruska is owner of Hruska Audio Productions, home of Sonic Implants, sound libraries, and MIDI files sold online at www.sonicimplants.com.