The Sale of Handmade Crafts Online - Term Paper Example

Online Selling of Handmade Crafts School Table of Contents Table of Contents 2 Introduction 2 2.Revenue Model 3 2 Transaction Fee Model 3 2.2.Advertising Model 4 3.Payment Models 5 3.1.Credit Cards 5 3.2.PayPal Service 5 4.Marketing 6 5.Technology Considerations 8 6.Security and Privacy Concerns 9 6.1.Security Concerns 9 6.2.Privacy issues 10 6.3.Building trust 10 7.Legal and Ethical Concerns 11 7.1.Ethical Issues 11 7.2.Legal Issues 12 8.Conclusion 12 References 14 Online Selling of Handmade Crafts 1. Introduction The proposed business has to do with the sale of handmade crafts online. Some of these crafts include crafted gifts, handmade tools, widgets, and baskets. Currently, there are entrepreneurs engaging in the sale of these products both online and offline. Sites such as Ebay, Etsy, and DaWanda provide platform for sellers and buyers to exchange such products with ease. This is the competition. Notably, these sites currently do not make provisions for clientele to design their own products. The proposed intends to stay unique by providing a platform for buyers to design their own products. This will be facilitated by having clients draw sketches or upload pictures of their preferred designs, alongside providing brief descriptions of the merchandise. The sole source of revenue for the business will be from the sale of crafts to the clients. Additionally, the business will generate income by allowing for direct advertising on the website. Traders using the site will exchange cash via credit cards or using online money transfer channels such as PayPal. The following proposal offers an in-depth look into each of these aspects. 2. Revenue Model The site will act as an online auction market place for handmade crafts. The products sold on the site are will not necessarily belong to the site but to other people, particularly those using the site to sell their products. 2.1. Transaction Fee Model The primary revenue model to be applied in this case is the transaction fee revenue model. Under this model, the site’s income will be earned by receipt of commissions from transactions executed on the site (Weedmark, 2014). Handmade artisans will register with the site free of charge. Potential clients will also be allowed to register with the site and post their orders without any charges. The sellers can then bid on projects as they are posted. As they win bids on the project there will be an upfront fee paid to the site before the bid winner can deliver on the requirements. The rest of the money is paid to the seller upon satisfying the customer’s requirements. The site will earn a commission on each of the transactions. The percentage commission is summarized as follow in table 1. Table 1: Transaction Fee Revenue Based on Commission Value of Transaction Commission Rate Less than $50 5% $50- $99 10% $100- $499 12% $500- $999 15% $1000 and above 17% 2.2. Advertising Model The secondary model for revenue generation on the site is the advertising revenue model. Entities that would like to advertise can use the site as a forum for advertisement (Weedmark, 2014). Figure 1 is a diagrammatic representation of the trends in online advertising over the past decade. While Chaffey (2011) argues that online advertising has not yet reached its full potential, the prospects for growth in this field remain endless. The proposed site intends to capture this potential, earning revenue from allowing other businesses and events to advertise on the site. the opportunities for generating revenue using this means are endless. Figure 1: Trends in Online Advertising Source: Weedmark (2014) The advertising revenue model is secondary to the transactions model because this avenue for generating income will not be explored immediately. In six months following the launch of the website, there will be an evaluation of traffic on the website. Once there are 1000 users viewing the website per day we will look into employing this model. 3. Payment Models The business will utilize two major payment models. 3.1. Credit Cards The first, credit cards, was picked because it is an option that is at this point most readily available to adults (Montague, 2010). Apart from this, the cost per transaction is affordable to clients. This option is safe because the credit card number is transferred in encrypted form from the user. There is also a verification service that substantiates the validity of the information on the card. With the introduction of the Secure Electronic Transactions, a new standard from credit card companies, the safety of card-owner details is enhanced (Montague, 2010) by adding a digital signature to credit cards. This is a most affordable, safe, and accessible option of payment. 3.2. PayPal Service The second payment option is the use of the PayPal service. This option benefits mainly clients that do not own credit cards or those that are reluctant to use theirs. Statistics show that this service is accessed worldwide, with usage spread out over more than 200 countries (PayPal FAQ, 200). The service has gained momentum since its inception because it is fast, secure, and easy to use. By providing clients with this payment option, we open access to goods to clients that may be underage and thus cannot legally be in possession of credit cards. Apart from this, it attracts clients that shy away from giving their credit card information on online forums. This payment option has been exploited successfully by other e-commerce sites such as StarbucksStore.com. The following table details the transaction fees for PayPal service. Table 2: PayPal Transaction Fee Purchase payments received (monthly) Fee per transaction $0.00 USD - $3,000.00 USD 3.4% + $0.30 USD $3,000.01 USD - $10,000.00 USD 2.9% + $0.30 USD $10,000.01 USD - $100,000.00 USD 2.7% + $0.30 USD > $100,000.00 USD 2.4% + $0.30 USD Both payment options will be utilized on the site. However, the most preferred payment option of the two is the PayPal service. First, it is accessible to a larger client base. The nature of handmade crafts to be sold does not restrict any age group. Those under the age of 21 cannot legally hold credit cards. Secondly, many adults feel it is unsafe to divulge their credit card information on online forums (Montague, 2010).The use of PayPal carters to this group of people. 4. Marketing There website will be promoted through advertisement and marketing. This will be done on several platforms if it is to grow. The first step towards successful marketing will be to optimize the site. This will be done by ensuring that the page is able to load as fast as possible when clicked. In addition to this, there will be efforts towards ensuring that there are key words woven into the content in order for internet browsers to locate the page easily. In order to have the content done professionally and effectively, it will cost the company between $1,500 and $2,000 (Fillis, 2012). This is the charge for between five and seven webpages. Secondly, there is need to ensure that the existing e-ecommerce sites work to the advantage of the proposed site. The company could post links on sites such as Ebay, directing potential clients to view the contents of this new site. This is a cost effect method when, for example, the links are posed as comments on other pages such that other readers decide to click on them to view. Alternatively, it may cost about $500 for the company to post actual advertisements on other frequented web pages such as popular blogs or other websites that do not necessarily have anything to do with the product. This mode of advertising has been proven especially successful for e-commerce startups with attractive advertisements. Another strategy that has been deemed successful is the Pay Per Click option. As the name suggests, the company will pay only for the number of times that an internet user clicks on the link. In order to use this method to advertise, it is recommended that the company use Google Adwords. The investment by the company determines the success. For example, the daily budget could be $100. If Google Adwords charge the company 40 cents per click, it means that daily they will allow 250 clicks on the link posted. One of the advantages of using Google Adwords to advertise is that the company will only be paying if the advertisement works and not just for posting it. The main disadvantage of using this forum however is that it is expensive as an advertisement venue. The company is allowed to pay as little as possible for each click. However, it is recommended that for the best results, there should be a sizeable investment in the venture. Shapero (2012) reported that one of the most expensive keywords on Google Adwords is the word ‘trading’, costing each advertiser about $33.20. This is indicative of how far the competition is willing to go as far as advertising is concerned. If the website is expected to weather the competition, there has to be using Google Adwords for advertisement, coupled with investing heavily towards the venture will be an appropriate move for the website. Another platform that the website could benefit from includes advertising on social media. Statistics indicate that LinkedIn and Facebook act as effective sites for marketers, with 52% of surveyed marketers claiming that at least one of their clients found them through Facebook. Apart from this, there were more clicks on webpages and emails that had buttons to facilitate social sharing; up to 158% more clicks than webpages and emails without such buttons (Fillies, 2012). Those in charge of designing the site should look into ensuring that such buttons are provided throughout. 5. Technology Considerations The most basic requirement for starting the business is computers. The e-commerce business should be home to six employees at the onset. For convenience purposes, each of these employees will have a computer. The computer best suited to the company needs now is the Hewlett-Packard Touchsmart 15t Core i7-4700MQ Quad 15in 1080p Touch Laptop. The market price for this is $754.99. Therefore, in total, it will cost $4529.94. The other option is the Dell Inspiron 17 Non-touch, which would cost the company about $4210. A database is another important technology requirement. The proposed website is intended to have a database that captures client information only once. From the database, important characteristics of website users will be derived, such as the number of times the website was visited in a day. For this purpose, it was thought best to obtain sophisticated software, ORACLE, in particular. This should cost the company at least $1,400. Clients are expected to pay using electronic payment systems. As such, there is need to get software that will facilitate this transaction. Protecting client information, for example their credit card information, remains a top priority for the company. The website will use only secure electronic payment software to accept credit card payments. Two of these is the MasterCard Secure Code and the verified by Visa (VBV) Visa 3-D Secure. These are dependent on the secure sockets layer (SSL) to carry out encryption of information sent over the internet. Under SSL, clients of the website will be able to retain their anonymity while only the website administration holds a public key certificate that enables the company to access the credit card information of the payer. This software will be obtained from MasterCard and Visa. After a long period of research, there are currently two domain registration companies being considered for registration of the domain name. They are NameCheap and GoDaddy. These two companies were considered because of their reliability and their aptitude for conducting discreet and prompt investigations into issues of fraud, spam, and copyright violations (Rollins, 2014). These two companies can be trusted to have the site running continuously and quickly resolve issues in case the site crashes. 6. Security and Privacy Concerns Just like with other businesses, an e-commerce business is faced with numerous challenges. The unique challenges facing e-commerce have to do with privacy and security. 6.1. Security Concerns Examples of problems that one may encounter include viruses and unauthorized access to the physical computer or the network. Some of the ways in which viruses can enter the computer is through downloading ‘infected’ information from the internet or opening emails that contain viruses. Viruses can damage computer files that are relevant to the working of the business. As such, it is important to take measures against them. The most effective means is through installing anti-virus software and keeping it up-to-date. An example of anti-virus software is Kaspersky anti-virus. Another measure that can shield the business against loss of data in this way is through backing up the data just in case a virus or other factors like fires erase it. Another security issue is unauthorized access to the network or the physical computer this gives hackers and unauthorized individuals access to confidential information on the business and clients. While this may seem harmless, it could create a background for identity theft. It is therefore imperative that the website install a firewall, blocking unauthorized access to the computer. The website will be protected using the screened subnet firewall This software also as to be updated regularly to remain efficient. 6.2. Privacy issues Privacy issues have to do with keeping client information secure and cultivating trust between the business and clients. Westin (2011) reports that it is possible for websites to collect and use data on clients without their knowledge. This is achieved through means like Cookies, which may be transferred onto the computer by certain websites. Some examples of personal information that users on the proposed website may be required to give are their postal, physical, and email address, their ages, and gender. This information is expected to stay confidential among those in charge of sorting data within the company. 6.3. Building trust Real world trade is characterized by trust between merchants and buyers. This emanates from centuries of experience (Dhillon and Moores, 2010). With virtual trade, there have not been major strides in the field. As such, it is important for the proposed website to incorporate deliberate measures towards earning the trust of clientele. Some of the steps towards this include putting identification measures in place using the internet protocol number and authenticating users, buyers and sellers, prior to authorization. E-service sites such as Freelancer allow sellers and clients to view profiles of other entities with information on whether they are verified and hence safe to work with. There is need to use encryption technology like PGP that protects the authenticity, confidentiality and security of the client. Once security measures are trusted to be reliable throughout the site, protecting sellers from defaulting clients and buyers from fraudulent buyers, there will be a rise in traffic on the site. Some of the privacy initiatives that the proposed website will employ include: Secure Sockets Layer: designed to lower the chances of interception of information sent via the internet. Open Profiling Standard for Authorization and Single Sign-On (OPS): averts the necessity for customers to reenter identifying information multiple times on the website. Clients will only have to provide such personal information once. 7. Legal and Ethical Concerns 7.1. Ethical Issues As a growing field, e-commerce, and therefore the proposed business, are faced with ethical issues that are worth considering for the success of the business. The first ethical issue to be considered is privacy. This affects the employees of the company, the buyers, and the sellers. Privacy of the website users has been discussed in preceding sections. It was pointed out that the website would take measures to ensure that the personal information of users will not be diverged to third parties upon dissemination. In compliance with ethical requirements, the website will, in instances where it cannot be avoided, inform users that there personal information is in use by other parties (Westin 2011). Privacy rights also extend to the employees of the company. As such, the employees will not be monitored without their consent while at work, except in cases where particular entities are suspected to be engaging in activities that fall outside the parameters of operation (Harold and Krause, 2012). Employees will be permitted to use company computers for personal correspondence as long as this does not interfere with their work. Though the business will be accessible to people across all demographic groups, there will be an age limit of at least 16 years old for buyers and sellers. This is because of the nature of some of the goods for sale. For example, jewels could be choking hazards for young children (Dhillon and Mores, 2010). The company will not knowingly conduct business with persons less than 16 years of age. 7.2. Legal Issues The first legal issue that the prospects of starting an e-commerce site present the company with is e-contracts. Being forum for trade, it is necessary that the site administration make provisions to ensure that trade contracts between any two parties are comprehensive and signed by entities that are at least 16 years old. The contracts must detail the necessary steps in case of lack of response from either party prior to the bidding process and what sellers should do in the instance that the client adjusts their requirements after the bidding process is done (Westin, 2011). Secondly, the website will work towards protecting intellectual property. There are instances during which disputes arise between website owners and the third parties that created them. To prevent this, there will be written down agreements between the company and any other participating third parties on the transfer and ownership of property right (Dhillon and Krause, 2012). Towards this, we intend to obtain copyright documents and patents in order to protect the content of the website. Trademarks will also be used extensively, especially in the case of the internet protocol and the domain name, to ensure that the company can identify content that is acquired from the website. 8. Conclusion The proposal outlines the key requirements for the e-commerce business that is intended to start operating soon. Within the body, one will find a discussion on the hardware and software requirements of the business. Some of these include computers and domain registration. Apart from this, the paper identified the transaction fee and advertising revenue models as best suited to the needs of the e-commerce business. The modes of payment to be used are credit cards and the PayPal service, picked due to their widespread use and reliability. One of the key issues within the proposal was the protection of privacy of those that will use the website. In addition to this, the proposal outlines the company’s ethical obligations towards clients and employees of the website. Finally is a discussion on the legal issues underpinning the e-commerce business and the measures intended towards meeting these legal obligations. References Chaffey, D., (2011, January 10). 8 Online revenue model options for Internet businesses. Smart Insights. Retrieved from http://www.smartinsights.com/digital-marketing-strategy/online-business-revenue-models/online-revenue-model-options-internet-business/ Dhillon, S., and Moores, T., (2010). Internet Privacy: Interpreting Key Issues. Information Resources Management Journal, 14 (4), 33-37. Fillis, I., (2012). E-business Development: An Exploratory Investigation of the Small Firm. International Small Business Journal, 23(6), 604-634 Harold, T., and Krause, M., (2012). Information Security Management Handbook. New York: CRC Press. Montague, D., (2010). Essentials of Online payment Security and Fraud Prevention. New York:John Wiley and Sons. PayPal FAQ (2000). PayPal as an Additional Payment Option: Technical Overview. PayPal. Retrieved from https://cms.paypal.com/c2/cgi-bin/?cmd=_render-content&content_ID=pages_c2/additional_payment_integration Rollins, K., (2014). Domain Hosting Services Review. Florida: 2014Best Shapero, D., (2012, January 20). How To Succeed With Google Adwords: 10 Tips for Managed Service Providers. CRN. Retrieved from http://www.crn.com/blogs-op-ed/channel-voices/232301476/how-to-succeed-with-google-adwords-10-tips-for-managed-service-providers.htm Weedmark, D., (2014). How to Write a Business Revenue Model. Houston Chronicle. Retrieved from http://smallbusiness.chron.com/write-business-revenue-model-48816.html Westin, F. 2011. Harris-Equifax Consumer Privacy Survey 2011. Atlanta: Equifax, Inc Read More