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Average Cost for Ecommerce
by Mike Banks Valentine

In helping small business online I'm often asked for "Average"
prices for establishing an ecommerce enabled presence online.

There really is not an *average* cost for ecommerce because
there are far too many factors to consider in establishing
a secure and effective shopping environment and securing
ordering information. The number of products and their
pricing, sales volume and profit margin affects the type of
shopping cart software dramatically. The number of customers
you expect and whether you're maintaining a permanent customer
database for future marketing reference determines many expenses.

I have set up shopping carts for online businesses selling a
high-profit item with low volume of sales through a *free*
service that only takes a 10% cut of the sale price with NO
monthly fees or ongoing bank or merchant account fees. On the
other hand, if you have high volume sales with low margins
and more than 10 or 15 products to sell, it varies from a very
basic $20 to $50 monthly fee for the secure ordering environment,
(*without* database needs for customer retention or product
inventory, shipping and no updating of merchandise prices, etc.)
to a fully automated system with all of the above and additional
software requirements. It could be thousands of dollars monthly
because of complex customized solutions required.

The variables are too great to define an average price. What you
sell, how many sales you make, what your profit margin is and the
extent of your database and custom software required, all combine
to determine a price for YOUR needs.

Security of customer information is critical and should always be
of paramount importance. Most online shopping cart hosting services
can be trusted overall with the security of your data if you choose
a well known and respected company. That should always be well
researched before you commit to using any particular service.

If you pay the additional expense of hosting your own secure server
and maintain sensitive and private customer information yourself,
then you must simply follow sensible security recommendations that
have become internet industry standards. Once again, rely on a well
respected professional team to set up a secure environment for you.
Sometimes this is offered as a benefit of your hosting company,
or you might have your own server with an IT staff to maintain and
protect information. As stated before, the sales volume, profit
margin, number of products and complexity of your database needs
will determine how far you need to go. Starting with the simplest
hosted third party service and minimal record keeping done by hand
up through a fully automated complex system with built-in security

There is no quotable average because your needs are not the same
as that of other online businesses. If you operated an online
business with a sales figure, profit margin, overhead expenses
and operating costs that were the same as a similar business,
*then* you might determine an average for that sales volume,
within that industry and with that particular business model.

Return on investment should be a standard starting point for
determining your needs in the planning stages, so you absolutely
must assesss those needs before you launch your online sales.

All of these variables are a part of establishing a customized
solution for your business.

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July 26, 2001