Setting up shop on the internet

Setting up a shop on the internet is now a cheap proposition. Start-up prices have plummeted in the past two months from the prohibitive u500,000 to a very reasonable u3,000 making it an option to most successful traders.

The problem is that online investment at this level means you don't get much - basic web page and the ability to handle secure credit card transactions.

With the small number of people prepared to buy via the internet - despite the growing numbers of people out there equipped with PCs, modems and the right software - the retailer can choose to go along the route of small investment for the small market, or spend a lot more and gamble on a bigger return.

Another option is to not bother. If, having set up online, nothing sells, you only lose u3,000. But why lose it at all?

Richard Gandy, owner of independent store Computer Cavern and purchasing director of buying group Network, crystallises this thought. "I think it's a complete waste of time. No one's made any money on it and I don't think they ever will." Gandy argues that if your product is not unique there's no point in doing it because consumers won't put up with the laborious method of buying. Then there's the hidden expenses on top of that. Even though the Uunet Pipex off-the-shelf internet shop product Dial Store costs u500, adding on a bit of professional web design and connection to a bank to handle secure credit card transactions puts the bill up to u3,000.

Those taking the large investment approach to the internet include direct seller Software Warehouse and start-up virtual retailer Fortune City.

Software Warehouse has elected to become an internet service provider to get its adverts in front of computer users on a daily basis. MD Steve Bennett intends to flash special offers onto the screens of the users of his service.

Fortune City is using a regularly updated murder mystery plot to get internet surfers to return to its web site. Fifty thousand known internet users have been mailshotted and the company reckons its research has shown that the average salary of these users is u34,000; they want to interact with their internet shop; and they are happy to buy via this channel.

Whether Fortune City succeeds or not it has unearthed a definite interest from publishers in this kind of selling. Each supplier is paying u350 per title for the privilege of being stocked, providing the business a nice u35,000 in promotion funds.

Suppliers are already seen as a threat to retail in the internet sales market because they no longer need a physical shop to sell their goods, so Fortune City could either be postponing a number of publisher's experiments in direct selling or acting as a test operation for them.

So whatever a retailer's response is to the opportunity of internet selling, their business is going to be affected by competition from somewhere.