* Please note, this page is a work in progress, but feel free to browse the points below to give you some initial ideas about the e-commerce space. I intend to keep building the materials on this page as a detailed reference for the process of getting online, and strategies and options available for selling effectively. I’ll work on improving the layout over time, and will add in the sources of alot of my data, but for now I’ll start with building in as much relevant content as possible .
Feel free to contact me with any immediate questions you may have about any of this.
e-Commerce, or electronic commerce, refers to the buying and selling of goods or services electronically via the Internet, telephone and other computer networks. These transactions can be businesses trading with other businesses (B2B) or businesses selling to consumers (B2C).
B2B encompasses trading activities like stock ordering systems, commodity and financial markets, and other exchanges conducted between commercial enterprises.
Our focus will be on B2C electronic commerce, dealing with sales by businesses, or retailers, to interested buyers, usually via the internet.
B2C commerce deals with more than just buying and selling products though. It also includes the entire online process of sourcing, developing, marketing, selling, delivering, servicing and paying for products and services. Each of these aspects must be considered as part of an effective online sales strategy, and often involve different considerations to physical product retail. Some key areas to consider include:
- Supply Chain
- Accessing product is one of the keys to online retail. While this may seem self-evident, the practical reality is often quite complex. Pure online and offshore sellers often have cost advantages over traditional domestic retailers, and so can pass on the lower cost to consumers, putting the physical retailer at a disadvantage. As a result, suppliers will often restrict access to stock, to help protect their traditional distribution chain partners. Therefore, being able to access cost effective stock is the building block of all online selling.
- Inventory Management
- Effective management of stock holdings allows small retailers to challenge the economies of scale enjoyed by larger competitors. Strategies including Just In Time (JIT) purchasing, parallel sourcing, cooperative purchasing and bulk specialisation are just a few of the ways that small online retailers can compete with much larger rivals.
- Online Sales Channels
- There are many ways to sell online, each with pros and cons that need to be managed, including:
- Website and Shopping Cart: The most direct way to reach customers is through your own site. You have full control of the content, product range and pricing, and can customise the site to include customer friendly features like sizing charts, virtual mirrors, in depth reviews and picture galleries, etc. These can be built and maintained for very little cost these days, but the real challenge is getting customers to find and buy from you.
- eBay: The immediate challenge of finding customers is solved by listing on eBay, which has transitioned from a private sales vehicle into a predominantly professional sales channel. Last year it drew 26.5 percent of e-commerce visits in Australia, averaging 6 million visitors per month, and had global sales of over $60 bil, so it’s a great source of immediate revenue. The downsides, though, are eBay’s seller fees, and the focussed competition, which often drives prices and margins down, demanding an effective and well executed eBay selling strategy.
- F-commerce is the buzzword used to categorise sales via social media, particular Facebook, with its 800 million + users. Buyer behaviour doesn’t currently favour Facebook as a direct sales channel, though, with most businesses using it for brand and long-term relationship building. A growing number of retailers are however trending towards full facebook stores, and several 3rd party apps are available to facilitate these, so it’s definitely worth considering as part of a larger online sales mix.
- Other channels include secondary or specialist marketplaces, like etsy, bikeexchange or gumtree, and a host of others including offshoots of physical outlets, like grays online, domain or the trading post online. The value of each of these needs to be determined on a case by case basis and could complement an effective online strategy.
- As with all business, attracting customers is one of the major ongoing challenges when selling online. An effective strategy would cover all or most of the following.
- Offline: Leveraging the physical store, or engaging in other promotions like PR campaigns, letter drops, trade shows, word of mouth, newspaper ads, competitions, etc
- SEO: Search Engine Optimisation involves drawing traffic to your website via the organic listings of search engines, especially google. This is a popular tool, as search engines account for such a large percentage of lead generation (currently 61% of e-commerce traffic) and can be self managed at no cost. As a result of it’s value, though, SEO has become a highly lucrative, competitive and sophisticated space, and usually requires expert assistance to achieve meaningful results. SEO is not an exact science either, meaning results do vary, and campaigns can take considerable time to implement.
- Paid Digital: The most effective way to to drive traffic to your site is to pay for it. Google earned more than $32 bil in the last 12 months, almost entirely from paid search advertising, especially pay per click (PPC). PPC’s value stems from the fact that it draws extremely targeted, qualified traffic to advertisers sites, and campaigns can be run whenever required, at budget levels suiting most businesses. This should be a building block, or at least a consideration, of all online marketing campaigns. A variety of other paid advertising types exist, including banner ads and link exchanges, which may also be suitable for particular business types.
- Social: An effective social media strategy goes beyond simply having a page or channel on sites like Facebook, Twitter, Youtube, etc. It challenges the business to think about what sort of engagement it wants with the broader digital community and the goals and results that can be achieved through long term effective interaction with the hundreds of millions of users of each of these portals.
- eBay: As discussed above, eBay solves the immediate challenge of finding customers, as it has an existing user base of millions of visitors per month. There is a cost for this service though, which can be seen in 3 main areas:
- Subscription and Listing Fees. Monthly fees are charged for listing items and maintaining stores, which can run to hundreds or even thousands of dollars for larger stores, especially if listing enhancements are employed.
- Final Value Fees: levied as a percentage of each item sale, as high as 9.9% in certain categories.
- The closed competitive bidding system inevitably pushes down prices compared to what could be achieved in a direct market. There is no firm rule for this, but estimates range from 10% – 30% price depreciation.
- Consider this illustration drawn from an actual eBay business. Annual turnover: $100,000. Costs: Store & listing fees $220 per month ($2640) + 7% Final Value Fees ($7000) + 10% eBay competitive discount ($10,000) = $19,640. These numbers are approximate, especially the discount margin, but are a good illustration of the true cost of selling on eBay and can be especially instructive in developing a marketing budget for selling directly from your own site.
- Online tools for accessing and communicating with customers are now highly sophisticated and affordable, so it’s critical to invest in the systems and strategies needed to effectively manage customer relationships.
- The network effect of online communication, and the positive or negative effects these can have on your business, makes it especially important to strive for high levels of customer satisfaction, and openly address problems when they inevitably arise.
- A common problem that faces online merchants is the problem of delivery. Australia is a large and scarcely populated country, making post and freight quite costly relative to other developed nations. A recent study into book delivery costs found it was 4 times as expensive to deliver an equivalent package from Australia to London as it was for the reverse journey.
- An effective delivery strategy, combining Australia Post, local couriers, and online fulfilment tools is therefore critical to the online sales mix.
WHO CAN SELL ONLINE?
As discussed above online selling isn’t restricted to traditional retailers. Anyone that can access stock which they can legally sell online at a profit can become an e-tailer, including but not limited to:
Physical stores looking to expand their traditional sales base by selling online (known as multi-channelling)
- Pure Online Retailers: businesses or individuals with no physical retail presence. Goods are often warehoused, or bought to order, and shipped directly to the customer once purchased online.
- Manufacturers: large or small producers of goods selling direct to the public. Often this includes very small or niche manufacturers or artists who can access a large market for their specialised products, art or crafts.
- Offshore retailers: many items can be purchased from overseas and shipped to the consumer for lower prices than can be found in-store locally. Combining the very strong Australian dollar with the wider range of goods available internationally and the surge in uptake of payment protection systems like PayPal makes this the largest threat to local retailers. See…for more
- Licenced professionals with access to trade supply. Often healthcare, beauty, construction etc professionals have access to goods that the general public can’t buy, or wholesale prices which can be on-sold at retail markup. This can be a great side business, earning passive income all year round.
- Business as Usual: No change in business activities
- Reference Only:
- Dip Your Toe in the Water:
- Strategic Follower:
- Online Leader:
- Leave the Business
- Existing Marketplace
- Offline Promotion
- Online Advertising
WHO SHOPS ONLINE?
- 10 million Australians are now using the internet to shop.
- 23% of Australian adults only shop online with domestic websites.
- 97 percent of Australian internet users are shopping online
- According to a report for AMP Capital Shopping Centres (AMPCSC) 85 percent of Australians, who are connected to the Internet, are using online access to research, compare and seek advice about their shopping.
- Australians rely on six different online tools to complete their shopping: most of them use Internet search engines (61 percent), while 50 percent check the retailer websites. Other common tools are newsletters (37 percent), manufacturers’ websites (36 percent) and Facebook (23 percent).
According to research by The Leading Edge for PayPal Australia:
Online shoppers in Australia
Online shoppers are no longer a niche of the Australian
population and it is near impossible to classify them into
particular segments of the market. An Australian online
shopper is just as likely to be a teenage boy purchasing a
new computer game as a middle aged woman purchasing
her preferred perfume.
However, whilst there is a sweeping online demographic,
the research shows more than a third (35%) of online
shoppers living in rural areas. This is somewhat surprising
as rural Australian’s often have poorer connections and
access to the Internet than their city counterparts.
Drivers to on line shoppin g
The main drivers to shopping online from domestic
websites reflect the desire for ‘Convenience’, stated as
the most important factor by 39% of domestic online
shoppers; ‘Availability 24/7’ (22%) and; ‘ Easier than
Visiting a Store’ (17%).
Unsurprisingly, the next most important set of reasons for
shopping online reflect consumers seeking ‘Value; Access
to Offers Not in Store’ (18%) and ‘Less Expensive’ (15%).
“When looking at overseas drivers, we found that these
differ dramatically from domestic drivers. Firstly, it’s not
about ease it’s about wider choice and selection of goods.”
Almost one third of all those shopping from overseas
websites state that ‘Access to Goods’ and ‘Services Not
Available in Australia’ (32%) is an important driver to
overseas purchases. This is a somewhat surprising finding
for those who considered price to be the key overseas
driver and a call to action for Australian retailers to
increase the selection of goods that they offer online.
Combining this with those who state there is ‘Greater
Choice’ overseas (18%, it is clear that wider availability
overseas than in the Australian market is the key driver
to international websites.
Value is also incredibly important to Australian
consumers. ‘Less Expensive goods and services’ (19%) are
at a similar level in terms of importance to ‘Greater Choice’
According to the report, Australians rely on six different online tools to complete their shopping: most of them use Internet search engines (61 percent), while 50 percent check the retailer websites. Other common tools are newsletters (37 percent), manufacturers’ websites (36 percent) and Facebook (23 percent).