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Even with the dot com bust of the late 90s, the number of entrepreneurs who have successfully leveraged this powerful medium to sell products, services or information and become millionaires in the process is phenomenal.

Setting up an Internet business is easy. Running it successfully is slightly more challenging. Which is why countless new Internet businesses emerge every day, only to fold up immediately or wind up slowly in a few months' time.

The truth is that most of these failures are due to inadequate planning and preparation; the Internet still provides one of the easiest means to realize one's dream of running a successful, low-cost and highly profitable business.

Based on my own experience with running several online businesses, mainly niche Internet retail stores, I am confident that some due diligence before embarking on the Internet retail business will go a long way in ensuring its success.

At a very broad level, an aspiring online retailer needs to follow three key steps to get the business running successfully:

' Market research and planning

' Setting up the online store and streamlining the operations

' Marketing: Attracting visitors to the store and converting them to buyers.

In this article, I will briefly cover the first aspect, ie. research and planning.

Research & Planning: Laying a strong foundation to your online business

This is one of the most neglected aspects, simply because aspiring entrepreneurs often get carried away by the overall simplicity of getting their online business up and running.

However, identifying the right niche is absolutely critical. Get this wrong and your Internet business will flounder.

Here's how I recommend going about identifying a niche market (http://www.internet-retailer.com/product_map.htm) (we've used this process quite effectively). Consider the factors below, address some of the questions listed and you are well on your way towards e-commerce riches:

' Market and market size: Determine if there a market for the product you are trying to sell online. It is important to know whether the targeted buyers of your product purchase online! Once you have estimated the size of a market, it will be prudent to see if the market can be further broken down into more narrow niches with lower competition and potentially better returns.

' Search potential and competition: Analyze the volume of search traffic (both free and paid, preferably the former) that you will be able to generate, as search traffic is among the lowest-cost means of getting visitors to your website. There are several tools available to do this, the most common being the Overture (Yahoo! Search Marketing) search term suggestion tool.

' Competition: Are there big players in the market you are targeting that you need to be wary of? There is certainly no shame in locking horns with the big players but you need to be aware of them and find out means to be better than them. In fact, being a small company/ business might even work to your benefit!

' Profit margins: Does the product offer sufficient margins to make it a viable, sustainable business? Take into account all the costs that you can readily identify and add a certain percentage to it to estimate your profit margin. Remember you can only be better off when you've planned and prepared for a worst case scenario.

' Product supply: Can you ensure regular supply of the product? Which suppliers would you like to source your products from?

' Logistics and fulfillment: Does the product you intend to supply involve high shipping and handling costs? Does it require significant level of customer support and other specialist resources? What is the likelihood of product returns and how much should you factor in your estimations?

Once you have addressed all these questions to base your decision on the choice of the product(s) to sell, you would have laid a reasonably strong foundation for your online store. Moreover, this research will enable you to formulate strategies in building your website and its marketing. The next step is to build on that strong foundation and begin executing on the strategies you've drawn up, which I will cover in a subsequent article.