Why Small To Mid-Sized Retail Stores Don’t Need E-commerce Sites
Most web agencies and online marketing strategists advise brick-and-mortar retailers to have their own online store. Why? Because, they claim, online marketplaces charge high fees. Is it really true? Let’s see together.
Have you ever considered the financial cost
and time of running your own e-commerce website?
In our experience, creating an online store only makes sense for large retail operations and manufacturers. Product inventory, conversion rate, traffic, and all aspects to be considered when building an e-commerce site, plus why selling on marketplaces might be a better choice.
1. The steep financial cost of setting up an e-commerce site
A professionally built e-commerce site will cost anywhere between $5,000 and $20,000, unless you do it yourself because you have graphic design skills and use a modern and efficient platform like Shopify (which integrates with third-party services like Nembol, Shippo, Langify, etc.)
2. Your personal energy and time to create inventory
Once your e-commerce website has been built, you will spend lots of time selecting products, describing and measuring them, taking photos and deciding on an online price. Essentially the same effort required to sell on a third-party channel such as Amazon, eBay, Storenvy, or Jet.com.
3. Driving traffic to your site
Once the platform has been built and filled with products you still need to attract visitors and potential buyers to your new website. You can buy clicks from Google or Facebook or other content sites, or you can become an SEO (Search Engine Optimisation) expert, but in all cases, you must budget approximately $0.40 per visit (click).
4. Sales Conversion
If you have a decent online website, your products are priced and presented comparable to your competition, and you have reasonable online credibility, you can expect a conversion rate of approximately 1%. This means that 1% of customer visits will convert to an order. In other words, each order you receive requires an average of 100 visits to your website.
5. High Amortization
Since you are, in one way or another, paying $0.40 per visit, each order will initially cost you $0.40*100 = $40.00. Your average ticket and/or margins must be pretty high to pay such a variable cost, leave something to repay a slice of the initial investment and hopefully sooner rather than later… some profit for you.
6. Sufficient Growth
High amortization holds true until your online operation is big enough, your experience deep enough, and your prices, pictures, product range, descriptions, and promotions are good enough, that your conversion rate goes up to 1.5% then 2% then 2.5%. This is very challenging and for many will take years, for most… forever.
It’s clear that small to mid-size retailers, who build their own online stores, will receive little traffic and very few orders, unless they are willing to budget enough cash and buy enough click throughs which convert to orders.
A competitor’s e-commerce site probably exists because of bad-planning, or because it is considered a ‘must-have’ and is not there to turn a profit.
Statistically e-commerce is growing 30% per year in most strong economies. So how can a small to mid-size retailer successfully ride this lucrative wave?
They can sell on one or more marketplaces (multichannel publishing), such as eBay, Amazon, Etsy, Storenvy etc., until their sales are large enough that they can afford a structured operation with functional online marketing.
If a seller wants to take full advantage of selling on multiple platforms (Etsy, Pinterest, Twitter, Ebay) and is starting from scratch selling products, the best way is to use a tool like Nembol, an iPhone app that allows you to seamlessly publish products to numerous platforms in as little as 90 seconds.
Currently, eBay charges 8.7% per sale + 2.9% PayPal transaction fee, while Amazon charges 15% on most categories. This is a heavy fee for a retailer, but it is partially or completely dependent on a sale and so easy to finance and control.
By selling on multi marketplaces, a savvy retailer will be able to grow an audience and gain online credibility and experience. Combined these assets will boost sales on any subsequent, larger, own e-commerce site.
Originally published at nembol.com
