The lure of ecommerce is undeniable. Media outlets regularly report on the latest ecommerce craze—Amazon, Apple, Fab, Groupon. Stores that didn’t exist a year ago are now ringing up millions in sales.
The advantages of eCommerce over traditional retail are obvious, but it’s worth digging a little deeper.
Opening a physical store, brick-and-mortar in industry parlance, can be a very expensive endeavor. Lease deposits, build outs, fixtures and initial inventory account for most of the upfront or sunk costs in opening a store. Ongoing costs such as rent, taxes, insurance, utilities, staff, marketing and inventory require additional capital, which jeopardizes your profitability.
Starting an eCommerce operation, on the other hand, is much less expensive with few of the upfront and ongoing costs associated with brick and mortar stores. URL registration, web hosting, web design and developer fees aside, you can save and invest your startup funds in product development and marketing.
If you’re already in business ecommerce can provide another channel of sales which means more revenue. Ecommerce isn’t just for books, cameras, and gadgets. Even professional service firms like lawyers and accountants, can benefit from selling services online. Retainer billing can be handled completely on the web. No more paper invoices and snail mail. Advisory services can be sold and purchased online. White papers, research and other types of intellectual property can be sold online as well.
What types of products can be sold online?
- Physical goods: goods you make and sell either wholesale (B2B) or retail (B2C), goods you buy wholesale and resell wholesale (B2B) or retail (B2C). Special considerations: physical goods require storage space, personnel to pack and ship individual orders everyday. Perishable goods require additional resources and processes to reduce spoilage. They are less profitable if you are producing them in small quantities at the beginning. Returns and unsold inventory can also hurt your profitability.
- Services: website hosting, IT, financial services, advice. Selling services doesn’t require a warehouse or shipping, necessarily. But they do require tons of clear communication of features, value and benefits of the service. Prospects will have questions because they won’t be able to touch, feel or experience your service so you will have to consider decent customer service.
- Information: data sets, ebooks, whitepapers, news, opinions, reviews. Critical to the value of information is its timeliness. So if you’re honking about launching the next Huffington Post, prepare yourself to invest in writers and editors.
What are the risks?
Failure certainly a possibility, but the advantage of ecommerce is failure is less expensive.
Do you have any advice?
Have a laser-like focus.
Don’t rely solely on online marketing.
Sure it can be less expensive for you to acquire a customer and for the customer to find you (google delivers search results in fractions of seconds, even while you type), but it’s also easier for a customer to click and leave your site and find your competitor selling nearly the exact same product or service. Incorporate offline marketing tactics to your marketing mix—live events, product placements and sampling, speaking opportunities. Do things your competitors can’t do because if geographic and resource limitations. Consider even retail distribution. Wait but you thought this is all about how easy it is to sell online. Seeing your product next to complimentary products on in the context of a brick and mortar retail environment can drive people to your website to learn more about your product and eventually make a purchase. Perhaps when they see it on the shelf, they never knew they needed your product. They may go home or better yet whip out their smartphones in the store and do research, read reviews or get a coupon. The power of retail exposure can not be understated. Getting your products in retail will be the topic of a future post.
Don’t spend valuable resources on unnecessary tech.
Tech can be a black hole of spending. A consultant will try and sell you the Ferrari of ecommerce technology, but you may not need all the functionality starting out. Don’t be afraid to say no or not right now. It’s possible to set up an online store for less than $1000 in upfront costs (excluding inventory) and less than $200 a month in recurring fees. If someone is selling you a $100K ecommerce site, politely show them the door. The best thing to do is experiment, testing your capacity to maintain and market your site and fulfill orders. It’s best to plan in phases, implementing new technologies as your business needs mature or change. A good idea is to plan for different thresholds, whether sales per month, units shipped per month or number of customers. For example when you reach 2000 customers decide to spend X on ABC technology. When you reach 5000 customers, decide to spend Y on DEF technology. Yes, you may run into problems with data migration and your tech consultant will tell you should have implemented the second system first. But he may not realize your strategy has changed.