Myth #1: Internet retailers can only compete on price

There are many competitive advantages that internet retailers enjoy other than just lower operating costs. For instance, customers in other states are not subject to sales tax - this in many times more than offsets shipping costs.

Probably the most obvious advantage that an internet retailer has is audience. If you open a retail store in a town of 2 million people you need to have a product line with mass appeal - remember, only a small percentage of those 2 million people are in the market for what you sale. Online the story is different - you can create a niche that appeals to just 1,000 people across the world - with great marketing you can capture the majority of this market and enjoy a very loyal user base. Typically at this point you will not be competing on price.

Another advantage that internet retailers have is the ability to collect and distribute information from other customers. When you go to a local store and ask the cashier question the answer is limited to the experience he or she has personally had with a particular product - online you can aggregate information and create a social environment where customers and helping potential customers.

Myth #2: Starting an internet retail company is cheap (or free)

While there may be some people who start internet retail companies with little or no cash this is increasingly less common and the success rate is much lower. If your model depends on drop-shipping, remember, you are losing control of the supply chain and fulfillment - keeping customers happy under such conditions is much more difficult.

Depending on the industry there is also usually a lot of margin pressure on drop-shippers. Stocking products almost always increases your margins. So while starting an internet retail company may be cheap, if you want to succeed it probably won\”#8217;t be.

Myth #3: As soon as my site is done I will make money

This is probably the most commonly heard myth associated with internet retail - people focus on the process of launching their store, adding products and getting ready to make sales. You need your merchant account, your gateway, some working capital and finally, you have a functional website.

Now you have to get people to your site. I recommend all prospective internet retailers with any capital constraints skimp on their site design - focus on the functionality, not the aesthetics. Invest your money in getting people to your site - then let your profits pay for your site redesign. The goal in any business is to get the business paying for itself - this hedges your risk and guarantees the long-term prosperity of your business.

Preston runs Sewell Direct, an internet retail of computer hardware and accessories, keeps an internet retail blog and owns a Utah internet marketing company.