We considered a large number of pros and cons of running an e-commerce business in the first article in this series. We noted that running an e-commerce business comes with many challenges and possible potholes that may harm your business.
In WebScripto’s experience we have noted that there are many important factors that people may not have considered.
In this, the second article in the series, we deal with the various very important factors to keep in mind prior to setting up your e-commerce business.
1. Finding the e-commerce platform that suits your needs.
This will in WebScripto’s view be one of the most important factors to consider. In one of the future articles in this series on e-commerce we will consider the specific available platforms. For now, it will however be necessary for us to consider what to look at when considering an e-commerce platform.
There are currently many platforms vying for a place in the e-commerce industry and it is therefore necessary to cut our search down to three or four of the most viable platforms by asking very basic questions such as:
• Can you or your web developer purchase hosting and install software yourself? If yes, you can consider self-hosted platforms; if not, keep on looking for hosted options. Please however note that Serve Hosting has been bought by another Hosting Company.
• How much does your budget allow you to invest in a platform? There are a number of free platforms, whilst others (hosted) charge monthly or annual fees which will be dependent on factors such as how many products you have available or how much traffic you generate.
• Do you have a web developer, or do you need to go elsewhere for help? If you are on your own, you should focus on solutions with thriving communities or highly rated support teams.
• Is being able to modify your store’s code, of importance to you? Most of the out-of-the-box products tend to look the same. If you need to give your store a unique look it will be necessary to tinker with the core code. This is possible with open-source platforms.
When considering the above criteria in finding the correct e-commerce platform also think about what may matter the most to you at the most basic level. Is it the price, is it the hosting or a combination of both? Whatever it may be, this criterion will help you to narrow down your lists of must-haves until you have a few strong contenders to decide upon.
2. Business Registration.
In terms of South African Mercantile Law, and to be more specific The Companies Act 71 of 2008, you must register a company with CIPC. Although we will not consider the prerequisites it is however important to note that you have to register a company if you wish to do legal business in South Africa. There are companies that can assist you with the registration of your business, however it will always be beneficial to have an understanding of the Law regulating businesses.
It is important to note that our business will have to comply with several requirements of the Companies Act and some documents must be made available to the Registrar on an annual basis. We can however move on for now as this article is aimed at us considering some factors and it is not meant to be a lecture on the legalities.
3. Sales Tax.
Yep, another bit of legislation to consider. Countries have different Tax Laws and if you intend to sell your products to an international audience it is very important to study the tax laws of those countries you intend to sell products or services to.
Keeping to South Africa, where Webscripto is registered to develop and design websites, it is important to know that companies must register for income tax. It is also important to know that you must register for Sales Tax, referred to as Value Added Tax (VAT) if your company is likely to earn an income exceeding R1 million in any consecutive twelve-month period.
It is advisable to study the tax requirements that may be applicable to your e-commerce business.
4. Payment options.
As we will not receive cash payments as is the case in physical stores we need to consider the payment options available to us. This may include, credit cards, debit cards, online payments such as the well-known PayPal. Banking Laws can sometimes be complicated but we need to study them or obtain legal assistance/advice on choosing the type of payments to use. We will look a bit deeper into the various online payment systems available in South Africa in a further article in this series.
In the previous article we briefly referred to return strategies that may need to be employed. When we sell products through e–commerce, we must always include clear notices about our returns policy. We need to set a clear standard for how long we will accept returns. Some companies require of customers to obtain a return authorization before they will accept a return. We may need to also, set conditions for returns. You may accept a return under any condition, or you may limit returns only to items that are damaged or defective. We may also have to include our responsibilities with regard to delivery charges: Will we pay for the cost of delivering a return back to us, or will the customer? We need to set clear expectations by means of a clear Return Strategy Policy and take time to think about – and cover – as many potential scenarios as possible.
6. Electronic Contracts.
We all know what contracts are and we all understand the term electronic contract. It is an agreement between the seller and the buyer created without a pen and paper.
In e–commerce terms, having the user click on a “Click to Agree to Terms and Conditions” button creates an enforceable legal contract. The ’Click to Agree” button can also be used to ensure customers have a chance to review and agree to your terms and conditions of sale. We will normally have the customer click on this agreement prior to the sale actually being made.
Consumers are protected from fraudulent or misleading advertisements. Our slogans or advertising messages should therefore never be in violation of consumer protection laws – even if we did not intend to mislead them.
South Africa has a well-developed employment legislation framework which will be applicable to registered businesses, depending on the number of employees in our company. It is therefore advisable to study the duties imposed on us as employers. Just as a quick example it is important to register your employees with the Unemployment Insurance Fund (UIF) in South Africa and make the necessary contributions ourselves and deductions from our employees’ salaries.
The extent and nature of our responsibilities and potential liability should be clearly defined on our website, especially regarding the accuracy of information, any warranties offered or implied, and our responsibilities in the event of errors or product defects. Failure to do so could open our business up to potential lawsuits or liability.
Protecting the confidentiality of customer data and financial transactions is one of our extremely and possibly most important responsibilities. Ensuring the security of financial transactions is critical – so is being aware of your rights and responsibilities if that security is in some way breached or compromised. Because of the extreme importance of the security measures in place on an e-commerce website we will have an article on this specific issue in one of the further articles in this series. For now, it just important to take note of this consideration.
In this article we looked at various issues other than the actual e-commerce website that we may have in mind. These are the boring but extremely important matters we need to consider before we even look at a layout or design of your website or even consider the functionalities to be developed. In our experience we have seen clients having to stop their plans on having an e-commerce website developed in order to deal with and finalise some of the above discussed factors.
We will however consider our e-commerce website in our upcoming articles in this series and more specifically at the website specific aspects which we at WebScripto find extremely enjoyable.
Written by Eitel Bock, CEO of WebScripto, your Pretoria based Web Development & Design Company.