The secrets to successful e-commerce: Structuring an online business

Friday, February 22, 2013

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The world of e-commerce has spread like wildfire with the global ease of access to the Internet. Businesses are started on-line daily either as a new venture or as a virtual component of a "brick and mortar" business. When we consider that sites like sells available website domains for prices ranging from US$25.00-US$100.00, it is easy to see why entrepreneurs have flocked to the Internet for its low capital input and high profit potential. However, just as a traditional business will ensure that certain basic elements such as security, accounting procedures, and customer records are in place, so too must an on-line business. The simplicity of conducting on-line transactions disguises the many processes occurring in the background which the business owner is responsible for utilizing and maintaining.

The most significant risk factor with on-line transactions is the lack of face-to-face communication between the consumer and the vendor. Both parties are unsure of the integrity of the transaction until the funds are transferred and the good or service is delivered. Consumer confidence, and subsequent profit margins, will increase with these basic elements:

Customer transaction records

There are generally two options for managing online payments/contractual arrangements:

* Single transactions without the creation of user accounts: With this system in place, there is no need for large on-line storage space and security provisions for numerous customer profiles and transaction histories. Also, some customers may wish to conduct just one transaction without signing up for a user profile. Even without a user profile, information required of each customer must still be submitted along with payment. However, from a marketing perspective there will be a loss of opportunity to encourage customer retention due to the lack of data which could have been helpful to promote new items and services as well as receive customer reviews.

* User accounts allowing for multiple transactions with stored user information: This allows for complete databases of customers as well as facilitates easy purchasing by a customer who would not need to re-enter payment information for each purchase. This decreases the margin of error with the customer's entry of information. Through this system it is easier to have notices and advertisements sent to customers, while also allowing them to keep on-line wish lists (which will save their potential purchases while supplies last or until expiration) for quick checkout at a later date.

Automatically generated e-confirmation

The online acceptance of a client's order for a good or service binds the on-line business to an enforceable contract. Once the contract is effected, the customer has legal rights of redress if the good or service is not provided to them as agree. The most popular method of confirming transactions on-line is by an automatically generated e-mail to the customer with the relevant purchase information. However, auto-generated electronic confirmations expose a business to the dangers of undetected errors as well as possible material changes made during the automatic process of generating the receipts.

Liability for an erroneous electronic confirmation can be avoided if upon noticing the error(s), the business immediately notifies the customer and takes steps through communications with that customer to either effect the corrections necessary to honour the contract or provide a refund. It is highly recommended that the automatic confirmation contains a clearly visible link to the website where a customer can make contact for queries or cancellations.

A secure business environment

Under the Electronic Transactions Act 2006, the processes used to transfer and store data for each on-line transaction must fully secure that information by, amongst other requirements, ensuring that the records are stored using a "reliable means of assuring the maintenance of the integrity of the information that was so generated". This must be accomplished while still offering ease of accessibility to the vendor and customer to view and download the data when necessary.

The use of Security Socket Layers (SSL) is useful in protecting the integrity of the transaction process and preventing hacking and security breaches which can cause major loss of confidential customer information. It is also necessary to redirect the customer to a Secure HTTP (S-HTTP, appearing as https://) once a customer has clicked to enter a page on which they are about to enter or access confidential information.

The ease of starting an on-line business certainly creates an incorrect notion that running that business is just as simple. However, enforceable rights and obligations arise each time an on-line transaction occurs whether or not one or the other party recognizes this to be the case. It is for this reason that an on-line business owner must ensure that these basic elements not only exist, but are properly functioning to create a reliable and secure virtual environment for doing business.

Marissa Longsworth is an Attorney-at-Law at the Kingston-based business law firm Cheeks & Co. She is a commercial lawyer with particular expertise in matters of e commerce. To contact Marissa please do so via email to




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