Online Solutions
Selling e-commerce to Mom & PopS

Having an online solution is now an ISO essential
by Bruce Frymire

   John Oakes' Rustic Leather Furniture was one of several dozen businesses exhibiting at last year's New Orleans Jazz and Heritage Festival. When Mr. Oakes was asked how many road events he attended, his answer spoke volumes about one of the most important trends in American commerce.
   "I used to work a crafts fair or art show just about every weekend of the year. Build furniture during the week, sell it on weekends. I was a traveling fool and it was a complete pain in the neck. Since I learned how to do business online, I go to exactly one show per year and this is it. And you know what? I'm home on weekends, I sell stuff seven days a week, and I'm making more money."
   The death of dot.coms has been one of the biggest business stories in recent memory. We've been treated to every agonizing detail about the final days of and Webvan. The point that seems to have eluded most industry observers is that Webvan and all the other four-star failures have nothing to do with the mom and pop businesses streaming into eCommerce in greater numbers every day. Online commerce is alive and well in the post bubble era.

25% Growth Over The Next Five Years

   Forrester Research estimates that U.S. eCommerce will grow at a "still powerful" 25% through 2007. "Barring unforeseen events," Forrester analyst Carrie Johnson says, "eCommerce will grow to $217.8 billion, representing 8% of total retail sales" by that year. Between 1997 and 2002, the number of online shopping households in the U.S. grew from 5.0 million to 36.5 million and online sales rose from $2.4 million to $72.1 billion. What began so recently as a novelty shopping experience has become mainstream. By 2007, Forrester says, two-thirds of all U.S. households will be shopping online.
   Does all this growth apply to mom and pop stores--from which ISOs generate the majority of their sales? Believe it. According to a report issued in October 2002 by the Small Business Administration (SBA), "The smallest firms gain the most by reorganizing as an e-business. For a small business, revenues cover the costs of setting up and operating a web site. The power of the keyword search means that a business can target customers who need niche products without the wasteful expense of mass mailings. Instead, customers find them. Finally, business owners can live in isolated locations and reach customers worldwide."
   This is a big opportunity for every ISO who can effectively serve as a bridge between small business and eCommerce. And it's far from too late to jump in. According to the SBA, only 35% of small businesses currently sell online. Is it working for the ones who do? Absolutely. The report's statistics are overwhelmingly positive. 65% of firms engaging in eCommerce make a profit or at least cover their Web site costs. Among smaller businesses (fewer than 10 employees), 35% gain 10% to 99% of current sales directly or indirectly from their websites. And please note: 32% of firms not yet online expect to use the Internet within the next year. This is the definition of a hot prospect.

Getting Your Share; Be Able To Deliver It All

   The average small business owner wants to get going on eCommerce with a minimal dollar outlay, but many will be willing to put more money on the table if they can just be up and selling quickly with no hassle. Most business owners don't know an eCommerce system consists of a number of components and services (see below). Many small businesses operating an ebiz today entered the online world haphazardly, adding parts and satisfying requirements as friends, co-workers, and family members offered advice. In many cases, it's a miracle their businesses got online at all. As an eCommerce ISO you will be fulfilling a need if you come with the full array of services in your bag of tricks and the array is deliverable quickly and easily. The individual offerings can remain invisible to your customers. First and foremost, you need to understand all the steps toward eCommerce, be able to explain them clearly to newcomers, and be able to make them all happen magically.
   The online array:

  • Domain name and digital security certificates
  • Web site design
  • Catalog and store builder software
  • Web site hosting
  • Payment gateway or software
  • Merchant account

   Your ability to deliver all of these will make you a sought after partner. If you aren't already allied with providers in each of these spaces, do your homework, find the best providers´┐Żwork on compiling a portfolio of goods and services that addresses customers of all the sizes and types of business you intend to serve. In meeting and working with these providers, you'll also be developing contacts that will bring you business.

Be Able to Deliver Parts

   Your customers are going to come to you in varying states of preparedness. Some will be nine tenths of the way to online effectiveness and merely want advice about last steps. You need to be prepared to deliver that even if it's not the big money opportunity. Other customers will not even know how to begin. ISOs need to be flexible and proactive. As you bring your customers to the successful online business experience, they will be your references for more and more profitable work in the future.

Make Contact Early, Often

   When you can serve as a comprehensive consultant, you'll be bringing the greatest value to your customers and you'll also stand to earn the most revenue. This is most likely to happen when you come in at the beginning of the process. Newcomers need the most help. They typically are not going to fight over every penny. They want good value and they'll put real worth behind a strong and complete relationship with you. All of this will combat the market tendency toward commoditization. If you're bringing real results and inspiring real confidence in eCommerce, your value will not be given up for a cent or so on the dollar. This greater return can come at a price, of course. People new to the business will require higher levels of support and maintenance and you need to be prepared for that.
   There is no magic formula for reaching this vast group of newbies. If there were, you'd be staring at one giant listing in your local Yellow Pages for "On-line services" instead of the hundreds that are there. But there are plenty of steps the active and ambitious ISO can and should take.

  • Get to know and begin working with a good hosting company.
  • Ditto with your acquirer. Acquirers and hosting companies are often the first stops for people exploring eCommerce potential for their businesses. By establishing a solid relationships here, you can be the referred party.
  • Not a website designer yourself? Great if you are, but if not, partner with some of your local talents. Go meet them, tell them your plan. Explain how you'll be bringing them business.
  • Get close to local business groups. You'd be surprised how many groups like the Jaycees and Chambers of Commerce have never seen eCommerce in action, have never even ordered anything online. Show off a good, working site to a luncheon group and you'll get cards and referrals that very day.
  • Pick a Payment Gateway provider that has been around for awhile, has proven security and reliability and is on firm financial ground. The last thing you want is your name in the news because of a break-in at one of your merchants.
Stand Apart From Your Competition With Security And Fraud Protection

   Until recently, Mom and Pop shops paid little attention to the need for fraud protection. But as the Internet has proliferated, so has the danger from fraud. A survey undertaken last October by CyberSource Corporation shows that online credit card fraud will siphon off 3% of online revenue overall this year, even though fully 2/3 of the survey group of 341 merchants had stepped up online fraud protections. Results from the year before showed a similar 3% estimate. In other words, over the last two years companies have worked harder to fight fraud and have made no real progress against the bad guys.
   Not even the smallest online businesses are exempt from the problem. Moonstone Handcrafted Fountains of Ashland, Oregon, is the quintessential entrepreneurial outfit. Owners Mindy and Cory Wilk designed their own fountains, built their own business model, and basically figured out their own path to eCommerce. Fraudsters took little time to work their magic. After only a few months on the Web, the Wilks woke to find 629 credits, all for $1, charged against their merchant account. Their acquirer did ultimately get the money back for them, but only after a lot of time and hassle.
   Of course, when problems do occur, the first person they call is you, the ISO. So how do you avoid fraud in the systems you sell? Pick your recommended payment system carefully.
   The Handcrafted Fountains problem wouldn't have occurred with a fraud protection system, such as that provided by CyberSource, which requires manual settlement so merchants know what's happening with their account. The system features strong (8+ digit) passwords, rendering it 4.3 billion times harder to hack than the leading competitor, secure socket layer transmissions and digital certificates that ensure safe and verifiable online commerce. By picking your package components carefully, you'll end up with a quiet and happy group of customers. Fraud is a great area for you to specialize in and stand apart from your competitor ISOs.
   The mom and pop online opportunity continues to grow at a rate matched by few other businesses today. Properly prepared ISOs should waste no time entering the fray. By eliminating the complexity and by streamlining small businesses' entry into eCommerce, ISOs will find themselves truly serving a grateful marketplace and making good money in the process. And don't forget the fraud/reliability issue. This is an issue you'll be hearing more about every day. For more information on fraud in today's ecommerce environment, go to and click on "2002 Fraud Report."