No Quick Fix: Internet marketing overheads and rising costs

illustration_2 When it comes to website building and Internet marketing, myths and misconceptions abound. Installers, brick and mortar retail stores and manufacturers still frequently rely on dated information, rumors and false assumptions.

Perhaps the most absurd statement tossed around as fact: “Those who sell on the Internet operate with zero over- head and physical pond stores cannot compete.” This constantly repeated myth has taken on a life of its own in spite of the exact opposite being true. The reality of the situation is that Internet-based sellers are faced with a myriad of costs and procedures that were unheard of a decade go. These costs, along with the changing patterns of retail customers, are once again forcing our industry into a paradigm shift it is woefully unprepared for.

For any pond professional considering starting an e-commerce site, it is critical that he or she fully understands the costs and the amount of time needed to achieve a premier and profitable site. Relying on industry hearsay and misinformation is a sure way to waste considerable time and capital. The list and advice below are in no way complete, but they are good indicators of the procedures, options and expenses used by some of the nation’s top e-commerce experts.

Internet Services

The first steps in e-commerce are pretty simple and not too costly. Finding and registering an online domain (the address visitors type into their browsers to navigate to your website) can be done for as little as $12.99 per year on GoDaddy. com. Many companies will even provide one domain name registration for free if you purchase a hosting package.

Of course, once you have the domain you will need somewhere to host the website, a shopping cart into which you can enter your products and a merchant account through which you can process transactions. There are many choices available. Website hosting can be as cheap as $50 per year for the most basic services or $200 per year with good customer service. The shopping cart, which will allow your customers to purchase goods online, can be obtained for free if you have the technical ability to enter in the products yourself. (Search Google for free shopping carts.) If not, carts can run $200 to $2,000 per year depending upon the amount of services and ease of use they provide.

“Being new to web development, I did not know the best shopping cart to go with,” said Davin Paul, owner of Diywatergardening. com. “I ended up rebuilding my site three different times until I found a program that was the right fit.” Before making your selection, it is important to read reviews and find out how others have fared.

A merchant account, a portal that allows customers to use their credit cards, typically runs $20 to $40 per month plus 2.9 percent per credit card transaction (or 3.5 to 4 percent for American Express).

Can I Build the Site Myself?

The 1989 baseball movie “Field of Dreams” made famous this popular quote: “Build it and they will come.” This quote became an early mantra for Internet marketing. 15 years ago, all one had to do was build a website, load in products and sit back and watch the money roll in.

Unfortunately, that was then and this is now. Today, a successful e-commerce company must be willing to invest both time and money into the business. The way customers shop, the way search engines work and the way websites must be built and updated is constantly in flux. If you possess a great deal of patience, free time and willingness to learn, there is no reason you could not perform the work yourself. However, a top-level online retail store will have an average of about 500 web pages, with some having well over 3,000.

“I have about 4,000 hours in learning, research, testing and implementation work,” Davin Paul said. “That does not include everyday items such as customer service, issues, maintenance, et cetera.”

“When I first built my website I spent eight to 10 hours a day for about a month,” said Jon Loewy, owner of ncpond.com. “Now, eight years later, I have a little better understanding about how to build it … and the site is undergoing what will be about a nine-month renovation.”

Some larger companies assign their associates to the website-building task.

“We do 95% of all website maintenance in-house,” said Steve Blessing, owner of Pondandgardendepot.com. “We use a template-based system, which has limitations but does allow upkeep from our ‘non-webmaster’ staff.” When Steve does pay for outside web work, he says, “it is a cost of about $75 per hour.”

Should you decide to hire someone to build a site for you, there are a wide variety in the rates for services. Freddie Combas of floridawatergardens.com is actively rebuilding an online store and has a unique situation. When faced with an hourly rate of $95 per hour from his site builder, Freddie made a deal in exchange for services. “Barter Barter Barter” is Freddie’s top suggestion.

Website programmers are sometimes available from as little as $20 to $30 per hour, but $60 to $80 does appear to be the norm. Based on a price of $50 per hour, a company should be prepared to make an initial investment in $25,000 to $50,000 for a 500- to 1,000-page website. Ongoing maintenance and changes should run as little as $10,000 per year with $20,000 for larger sites. No matter how high or low the rate may be, it is imperative that you check references for your web builder and ensure that the work they perform meets your vision for how your website should appear.

Advertising and Marketing

Over the last seven to 10 years there have been quite a few changes in the way consumers shop. Over time search engines have evolved to know a great deal more about consumers and have ever more accurate results appear. The consumer today may do the search, “How do I build a backyard koi pond kit?” The results that are returned are factored in ways unheard of just a few years ago. The search engine knows the consumer’s location, the things he has searched for previously and if he is looking to buy products or if he only wants information. The results that are delivered to this specific person are not the same results that would be returned if you or I were to type in the exact same search query.

This type of search customization has made more work for a web retailer. Instead of loading a few keyword phrases into each page of a website, a merchant must now consider a more overall advertising and marketing plan. This plan may still include some on-page optimization but will most likely want to consider a whole host of “social media” aspects. Advertising platforms such as Google AdWords, regular and online magazine ads, Google Shopping, Bing Ads (formerly Microsoft adCenter), Groupon and more will put your site in front of millions of people — but at a charge. Blogs, press releases, industry-specific forums, Facebook, YouTube, Twitter, Pinterest, LinkedIn and other sharing sites will give your website expo- sure at no upfront cost — but a consider- able amount of time and effort are needed to achieve results.

Shopping networks like Amazon, eBay, Sears and Rakuten will allow you to offer your goods to their extensive customer bases, but they will charge a varying percentage for doing so. Amazon charges a flat 15 percent of every purchase amount (even shipping) and eBay runs 8 to 12 percent depending upon your item cost and your discount level with them.

Advertising and marketing costs will vary from site to site depending upon what you decide to pursue. Although the initial cash outlay may be lower for new sites, the percentage to sales is probably going to be a lot higher. For example, a brand new shop- ping site may spend as much as $150 to $200 on advertising to yield their first $300 in sales. On the other hand, an established website like relaxingdecor.com, owned by Pedro Gonzalez, may spend higher amounts but have a lower percentage of cost.

“In 2013 I will end up with just over $15,000 in advertising,” Gonzalez said. With sales on that site hitting about $200,000, the expense is a far more favorable percentage.

Other sites’ advertising and marketing costs will vary greatly. Eric Triplett, owner of Theponddigger.com, is currently rein- venting his company’s website business.

“I have paid up to $2,000 per month for pay-per-click advertising,” Triplett said. “$1,500 for the online store and $500 for my construction business.” Knowing how quickly the market is changing, Eric has just hired a marketing coordinator to help out in all the new social sharing and marketing decisions. This associate will cost his company $30,000 per year but has the potential to create infinitely more in sales. Eric has also heavily invested in placing videos on YouTube and his efforts have resulted in tens of thousands of people learning about his company. Graystonecreations.com, owned by this author, had total advertising costs across all mediums of $154,514.86 in 2012 and expects 2013 to end with a slightly higher number.

Advertising and marketing, like most of the topics discussed here, have a wide variety of costs. Companies with deep pockets often invest heavily in advertising and marketing to gain the most market share possible. Website retailers just start- ing out may find success in the free — but time-consuming — world of content creation and social media sharing.

Shipping

Shipping products to your customers can run from 13 to 20 percent of your total sales. With most consumers used to free shipping on their online purchases, this amount can add up fast. A random survey of six popular online companies found that their shipping costs can be anywhere from $83,000 to over $250,000 annually. Additionally, many manufacturers offer a drop shipping feature, but most of them charge Internet operators a higher price and often a fee of $5 to $10 per order. On the other hand, those who choose to buy and stock the products themselves are faced with rents that may run $1,000 to $3,500 per month. Finding the right balance between stocking items and having a distributor or manufacturer ship for you is important.

To Build or Not to Build?

As someone who operates Internet sites and local stores and supplies dealers and contractors across the country, I know firsthand that it is difficult to keep on top of the ever-changing online medium. The costs have certainly increased exponentially over the last decade and it is easy to be discouraged by the extra amount of time and effort needed to achieve a successful online business. Quite a few online retailers now find themselves in the same quandary that brick and mortar stores did when web-based shopping became popular. If a company were to believe the industry myth that online sellers have no overhead and attempt to “throw together” a website, they will be gravely disappointed with the results. To be clear, my own company, Graystone Industries, could open seven different physical locations that are fully staffed and fully stocked and have less overhead per year!

Company owners who wish to expand their customer base and are willing to commit to properly building, advertising and marketing their online stores can still achieve much success. Like any other business decision, owners must gather information to fully understand the processes and costs involved. They must create business plans and they must work daily to achieve their goals.

Final Thoughts

In the course of interviewing merchants for this article, it was surprising to learn that several companies felt that if they were starting out today they would choose not to open an online store. Some felt that it takes too much work, too much learning and too much money — and there is too much competition today compared to when they started.

However, Steve Blessing of Pondandgardendepot.com had a much different outlook.

“We are barely past the ‘Model T years’ for e-commerce in my opinion,” Steve said. “The potential for growth is huge and largely untapped. It will take more knowledge to be competitive but that is the nature of any growing field or industry.”

From purchasing your domain to perfecting an advertising or marketing program, there are countless tasks involved in building a retail website. Today, the world operates at breakneck speed with new technologies emerging weekly. Consumer purchasing continues to evolve just as rapidly, and what worked six years ago — or sometimes just six months ago — is no longer relevant.

Social media and information sharing are shaping the minds and the buying decisions of our customers. To launch an effective website, one must be ready to continually change and adapt as the market does. Those who fail to adapt will one day soon find themselves out of business. Those owners who keep pace with the changing market will see their businesses continue to grow and prosper.

No comments yet.

Leave a Reply