Cozahost Newsletter Archive

Newsletter Archive

Today we feature an introduction to the term "ecommerce" - an often overused (misused) term for conducting business on the internet. We explain what it actually means, how it works and how it affects you: both as a consumer and as a business.

You are welcome to forward this newsletter to anyone you think may benefit.

We received a lot of feedback from readers like you during the last two weeks, and not just a few compliments on the articles and info we carry. Thank you very much! Hearing that you actually like reading this newsletter and that you are asking your friends to subscribe makes it all worth while. I feel like reaching out and giving you all a big hug to say thank you! :-)

Ok, sorry, my Cleenex moment is over - we'd better get on to business:

We had quite an eventful two weeks at Cozahost:

The jol started when a cracker (scumbag) decided that he did not like one of the sites we host and launched an attack on our servers. At one stage it was so bad that MTN (one of our network providers) measured that more than 100Mb of international bandwidth was being wasted by our "fan". We traced him to Israel and smoked his bacon.

Then we were inundated by calls about people who were worried about protecting their cell phones from the "new cell phone worm" - as the hysterical press called it. Fortunately we could explain that the "worm" could only affect cell phones running the Symbian operating system, that the "worm" does no damage at all and that it cannot spread without human intervention. This means that you have to install the worm on your cell phone yourself. If you are bright enough to do this, then you should not have a cell phone - you might hurt yourself.

At the same time we are also putting the finishing touches to two new products we are launching next month: the first is a brand new software program that runs on our servers which enables anyone (with zero technical knowledge) to build a web site from scratch in less than an hour. The second is a new web hosting reseller program we are launching for web designers. Both very cool, but extremely time consuming...we'll tell you more about these next time.

On to the menu for today. We receive many questions about "ecommerce", and whether or not it is safe to use your credit card on the internet. For some strange reason it did not occur to us to write an article on the subject until a newsletter reader suggested it! Go figure.

So, without further ado or cleenex moments, below follows an introduction to "ecommerce". As always it is non-technical and will give you a good understanding on the subject. Enjoy!

“Ecommerce”. Another wonderfully vague term and excellent conversation starter at the braai – especially after all the participants are a bit more “clever” than usual. :-)

The term is so vague and misused, it is bound to start a lively and entertaining conversation, so – to help you win the inevitable arguments, wagers, debates, and fist fights lets have a look at what this “ecommerce” thing is and how it works. Just an introduction mind you, this newsletter has a reputation to uphold! :-)

In the old days

To understand “ecommerce”, we have to go way back in time. (About two hundred internet years - that’s about ten human years):

The term “e-commerce” was first coined in approximately 1996, shortly after the internet opened for public use. In the pre-historic days (pre 1996), the internet was mainly used by universities and other non-profit organizations to share research and information. (Note: “information” is the stuff that can be so difficult to find on the internet. :-)

The internet had a different character back then. Most web sites were about hobbies or academic research – any web site that purposely tried to sell something on the internet was scorned and deemed greedy, exploitative, anti-Christ, a-social and was avoided like the plague.

The very fact that one would dare to do business on the internet offended the sensibilities of the hackers.

The internet was there for the benefit of all mankind to exchange knowledge. Trading on the internet was just, well, vulgar. (By the way; hackers are the good guys, not the bad guys as is often thought. A hacker is a person that uses his programming skills to figure out how a program or system works – purely for the sake of gaining the knowledge. The bad guys: worm and virus writers and so on are called crakers – or just scumbags for short)

Show me the money

Anyway, it was not long before 20 year old pizza loving, long haired hackers were outnumbered and replaced by 20 year old crew-cut, salad chomping MBAs, who quickly figured out that the internet is a tool that will profoundly change the way business is done. Compared to the internet, the industrial revolution was like the discovery of fire versus the moon landing!

Before you could shout “SHOW ME THE MONEY!” companies started building web sites to sell products and to service their clients but the process of selling online was very cumbersome way back then - and that is putting it politely.

“State of the art” web sites allowed you to download an order form which you then: printed out, completed and faxed back - with a copy of a bank deposit slip to prove that you paid for the order.

On the vendor side, an administrative person checked your order, waited for the money to appear on their bank statement and then eventually shipped your order a few days or weeks later.

Not exactly high-tech.

A standard vision

Selling your products online is very nice, but automating and entire supply chain is even better! Imagine you are a large corporate dealing with thousands of sub contractors or suppliers. Your computer systems can automatically place orders, pay invoices, replenish stocks, etc - saving tens of millions on administrative and stock management costs.

Such a level of automation would require that common standards are used for order placing, stock checking, payments and so on. Without standards, confusion would reign that would make the tower of Babel incident look like a Zimbabwean parliament opening. (To clarify: In our friendly neighboring country there are two ways to do things: Bob's way and the wrong way. No confusion at all. At Babel however, an engineering project turned ugly when everybody started talking their own language. Confusion spelled with a capital "F". By the way, there is no truth in the rumor that computer people were involved in that unfortunate project)

From the vision of creating a standard electronic message mechanism for companies to conduct business with each other (B2B) - a new standard was born.

EDI (Electronic Document Interchange) entered the stage.

EDI promised to make it possible for two companies who have never done business before to electronically trade with one another. It would not matter whether the products were as diverse as baby diapers, paper clips or rounds of ammunition: stock-standard computer software running the EDI standard would make it all possible. Automatically.

A silver bullet of such magnitude that would have Mr Dracula wetting his pants.

Unfortunately this promise of standard simplicity never realized. The problem with EDI was that a) it was very complicated to implement and b) although it was a standard, "standards" emerged within the standard…resulting in a non-standard.

Pretty soon it became clear that EDI was not the solution everyone thought it would be, and after a few spectacular and very expensive failures, IT consultants stopped using the term "EDI" and opted for a safer, more technology neutral term: “Ecommerce”.

At this point I have to note that IT consultants are a very careful bunch of people. If you thought that a politician can use a lot of words to say absolutely nothing – you’d be right, but did you know that these politicians went to IT consultant school to study “consultant-speak”? (I am kidding a little bit about IT consultants as I was one myself. I know they have a great sense of humor. Notice the grin when they bill you 27 hours - for one day’s work. :-))

And the term "eCommerce" is coined, but not trademarked...

Back to the point: EDI was thrown into the “never-happened-next-big-thing” box, and “ecommerce” is now taken to mean ANY form of electronic (computerized) transaction involving the buying and selling of goods – a definition and term that is so vague that it is almost useless. It is not a standard. It is not a product. It’s not even a real word. :-)

On our level (average small and medium sized business and private individuals), “ecommerce” is understood to mean a web site you can do business with, or, if you insist “B2C” – which is business to consumer and not “B2B” – which is business to business.

Ecommerce on the most basic level assumes that:

• a web site has an online listing of products/services

• the customer has a credit card and

• the customer can place orders online and pay for them.

For a practical example, lets use Amazon. You can browse their selection of books and CDs on sale, their site will tell you whether or not an item is in stock, you can place one or more products in your online “shopping basket” and you can proceed to the ”check-out” where you can pay for your order with your credit card.

Amazon will now verify your credit card, transfer money from your Visa or MasterCard to their bank account, and, if all went well, automatically ship your order to you…all within a few seconds.

That web site can be said as “ecommerce enabled”. A money printing machine!

Assuming you have products people want at a reasonable price (and profit), assuming that you advertise your service so that people know about it and assuming you have the technology on your web site to facilitate orders and credit card payments – then gentle reader, you will make money while you are sipping a tequila sunrise on a topless Clifton beach!

Not a bad way to make a living – wouldn’t you agree?

Ok, I know, that’s an awful lot of assumptions to concur before you grab your beach towel, but at least it is good to know that it is no pipe dream – it is possible to do for your own business! The technology and mechanisms needed to build your own “money-printer” is available and ready for use.

You do not have to be a multi million dollar company or a quantum physicist to benefit from it. All you need is some good, old fashioned hard work, common sense and guts – no computer mumbo-jumbo involved.

So, exactly how would you go about setting up or building your own ecommerce enabled web site as a stepping stone to the “nothing but a beach towel” life style?

How to get one

Let’s start at the beginning:

First you need a web site
This might be a pretty obvious point, but if you are going to do business online you need a well designed web site, hosted by a reputable and responsible ISP. The guys that register your domain name for free and host your web site for 12c per month is not a clever choice if you are serious about your online business.

Then you need quality content
Your web site must contain plenty of quality information. Forget about just sticking a “click here to buy” button on a page. That approach has never worked and never will. Without quality content geared for search engine placement and to earn the trust of potential customers you will get nowhere.

Then software on your web site to take orders
After you built your content, you need a way for your customer to place an order. If you have 50 or more products, or if you are not comfortable building web pages, then ask your ISP to install a shopping cart system on your web site. This software will help you to place products (with pictures) in a searchable directory where clients can browse your offerings and place one or more item in their virtual shopping basket.

Then a payment gateway
Once your customer placed an order, you need a way for him to pay you. The only way to automate this process is to use a “credit card payment gateway”. It works like this: once your customer is ready to pay, he clicks on a link you provided. The customer is now transported to the secure server of your payment gateway provider with invisible information you attached to indicate the amount that must be paid, the currency, your reference number and so on. The gateway provider now asks the customer for credit card details and sends that information on to their bank for processing.

The payment gateway provider’s bank then contacts MasterCard, Visa, Diners, etc for authorization to transfer the amount of funds necessary. If the credit card company authorizes the transaction, the payment gateway provider executes a transaction that will take the amount away from the customer’s credit card account and place it in your bank account. A few seconds later when the process has completed, the gateway provider will let a program on your web site know that the payment was successful. It is now your responsibility to dispatch the goods to the customer.

The details of how the payment gateway works is not your problem – you simply follow your gateway provider's basic instructions and voila!

Requirements

There are a few requirements before you can use a payment gateway provider:

You must be a credit card vendor, in other words, you must be registered with MasterCard, Visa, Diners, etc to accept credit card payments. Your bank or the payment gateway provider will help you with this.

Part of this registration process will be a strict vetting process (by the credit card companies) to make sure that you are bone-fide and credit worthy. When you are accepted, you will have to sign a contract with the credit card companies that specify:

• Payment repudiation is the vendor's problem: in other words, when a credit card customer reverses payment (within 6 months after the transaction), the onus is on you to prove that it was a valid and legal transaction – not on the customer to prove that it was not.

• You may not discriminate against a credit card customer by charging more than you would for a cash transaction.

• Your bank, the credit card company and the payment gateway provider will each take a cut of the transaction – typically about 5% in total.

• A fixed monthly fee to the payment gateway provider.

• You will take all precautions necessary to detect fraud and prevent your customer’s credit card number from falling in the wrong hands.

Sign this contract - it’s pretty standard and there are no Latin bits designed to nail you later - and you are in business!

You might think that these costs are a bit high - but compare it to renting space in a shopping center? Peanuts by comparison.

What about being a consumer - using your credit card on the internet?

So what about being on the other side of the fence – i.e., the buyer?

Consumers are sometimes reluctant to use their credit cards on the internet.

Much of this has to do with press hysteria about stolen credit card numbers and such. The real truth is that the vendor takes almost all the risk in a credit card transaction – remember that the vendor must prove that a transaction was legal and valid - the burden does not lie on the customer to prove that it was not.

Of course it would be real dumb to give your credit card number to a vendor unless you are SURE that they are above-board. This common sense applies on the internet and on a street corner. By the time you try to reverse a fraudulent transaction with a shady vendor, he has long since moved on and is living happily on a Mexican beach toasting the gullibility of naïve credit card owners with a propensity to pay voluntary stupid tax. :-)

Contrary to popular belief and urban legends, using your credit card on the internet is mostly safer than using it in the real world. This is thanks to the fact that banks scrutinize virtual (internet) vendors more carefully than physical vendors and thanks to a technology known as SET (Secure Electronic Transactions).

By selecting a payment gateway provider that supports the SET standard, a vendor (and consumer) has added protection because neither the payment gateway provider nor the vendor ever sees the customer credit card details. As soon as the customer enters the information, it is encrypted until it reaches the bank – no system or person in between can decipher the information.

At Cozahost we use SET provided by Setcom. We never see, process or store credit card information for online payments. The possibility that someone can accuse us of fraudulent credit card transactions is significantly reduced because we can prove that we never had access to the information in the first place.

The customer is happy because his credit card information is 100% secure from the beginning of the transaction right through to the end, and the honest vendor is happy because he is not exposed to all kinds of security risks and fraud.

Now you know

And there we go: a brief introduction on “ecommerce”. With this information you will probably win the argument at the braai and collect on the wager, but we can’t guarantee you will win the fist fight - other than to give you the advice: "Float like a butterfly and sting like a bee"! :-)

You will also understand that ISPs that sell “ecommerce ready” web sites are, how shall I put this delicately, “duplicitous”. They are not exactly lying, but they are not exactly telling the truth either – that’s the beauty of the “ecommerce” word: it means what you say it means.

But now you know. :-)

Hotkeyz
I hate moving my hand away from the keyboard to drive the mouse. This nifty utility helps you to assign functions to the keyboard function keys so that you can start your email program or web browser (or anything else for that matter) by moving your fingers 3 cm up and tickling a function key. It save wear and tear on your mouse (fewer oil changes required) and it automates the little repetitive tasks that steal a second here and a second there and before you know it you spent a 100 years wrestling that rodent... :-)

DialupMon
Ever forget to disconnect your modem while browsing the internet? Ever had a huge Telkom bill because you got carried away and spent 7 peak hours online? This little gem will show you all your pertinent dialup info and it has a cool feature that enables you to preset the amount of time you spend online...almost like a budget.

Here are some quick links to CozaHost services and products:

(From www.gutterville.co.za)

Thanks for reading this newsletter and we hope you enjoyed it! Please contact us if you have comments, suggestions or questions - we would love to hear from you!

Wishing you happy, safe and productive computing - till next time.