“Online is the future”, “Amazon is going to be the biggest corporation in the world”, “Who goes to shops nowadays anyway”
These and many such statements seemed kind of hyperbolic around five years ago. But all the old economy advocates now stand corrected as even oil giants are trying to get on the bandwagon and get into every small crevice possible of online retail. This means two things. One, that the online world is leading to an expansion and also probable saturation, and two, that you are probably late for the party! Don’t worry, here are the few things you need to take care of before you launch your business online and get into Ecommerce.
The first thing that you need is PRODUCTS. It kind of seems a little obvious, but we can guarantee you that there hasn’t been a single month when we haven’t received a call asking, ‘hey, I want to start selling online and making money. What should I sell?’ In our previous blog, we spoke about two types of online sellers the brands and the traders. And keeping true to that, the survivors of the online movement are more probably going to be brands than the traders themselves. And that’s because e-commerce, and more importantly, platforms like Amazon and Flipkart have essentially changed the way business is being done.
The second thing that you need is MARGINS. Unlike retail Ecommerce is capital intensive and the only difference here is that most of your capital expenditures are actually spread out through individual orders and are not supposed to be paid upfront. There are a couple of factors that you do need to consider before starting your complete Ecommerce operations. For example, in Ecommerce you need to worry about
- Photography
- National delivery
- Payment gateway or marketplace commissions
- Packaging
- Storage
- Customer returns
- Refunds
- Advertising expenses
Thus, if you want to make money online, you need to have a margin somewhere between 40 to 50% for most categories, the more the better.
Thirdly, you need to have decent CAPITAL EXPENDITURE to get yourself going for at least six months while you’re bearing all of the expenses. We know that saying this might shatter a few dreams right there, but the fact remains that starting yourself on ecommerce is not as easy as those ads would like you to think. Rather starting is technically easy. But surviving, thriving, and succeeding consistently is sure as hell not.
The fourth and the last thing that you need is quite intangible, but important nevertheless. And it is VISION AND PATIENCE. This being a very serious business had it been really that easy, almost everyone involved in this would have been extremely successful. The fact is, they are not! 80 to 90% of sellers are bound to fail. We have seen people do extremely great in terms of their top line, but eventually fall off the map just because they treated the platform like a trade and did zero brand building behind it.
We also know that there are a lot of success stories out there talking about guys who made tons of money by bringing unbranded crap from China, but I’ve also seen the same guys struggle with making money and in the end have to resort to putting in wrong product dimensions only so they could save some money on the shipping. But that kind of thing doesn’t fly. In the end, the marketplace ends up charging them, and rightly so. Selling non-branded generic stuff on platforms like Amazon is now a sucker’s bet, in our opinion.
Because of the barrier of entry being so low every quarter. You will obviously have some Tom, Dick and Harry trying to come up and undercut your prices, only to go bust in a couple of months and hurting you permanently in that process. What this tells us is that opening an online store is very similar to opening a physical retail store. You need to build a relationship with the customers that inspires confidence about not just your product, but also your brand within their minds.
The only difference and upside of ecommerce is that once you standardized certain parts of your Capex and you get them in control, you are now not limited to a geographical location for selling your products. You can sell in Delhi by sitting in Bombay, or you can also sell in Chennai. Or if you’re really, really proactive, you can actually sit here and sell in the US, all the while building a brand that actually carries value so that in the future you are not limited to just one single product. So, try to BUILD something. Happy selling.
