From the outside, being able to sell to a near-endless online audience would be a dream come true for most businesses. Not to mention that eCommerce continues to grow at record speed and is expected to be a whopping $6 trillion industry by 2024.
But like any business venture, it comes with its own share of unique challenges, hurdles, and competition. In this article, we’ll cover:
Let’s dive in!
At a basic level, eCommerce is all about buying and selling products and services online. It can involve DTC (direct-to-consumer) or even B2B (business-to-business) transactions.
With the global Covid-19 pandemic, the growth of eCommerce was rapidly accelerated as traditionally brick-and-mortar shops transitioned to also selling online. Corporations with well-established eCommerce stores also invested heavily in their online operations to accommodate demand.
By the end of 2022, eCommerce sales are expected to be 20.4% of all global retail sales, meaning roughly every 1 in 5 sales across the globe will be through eCommerce.
Starting out, let’s go over the many pros of eCommerce to get an idea of how well you can leverage them to your advantage. In essence, many of the limitations of running a physical store are lifted when operating an eCommerce shop.
And while there are plenty of obvious advantages to list, there are some not-so-apparent ones that are key to what makes eCommerce such a lucrative business.
Setting up a domain, hosting, and an eCommerce subscription like Shopify all come at a fraction of the cost of opening a physical retail store. When starting out, everything from running costs, store design, delivery, and marketing can be effectively done remotely by one person.
In the case of dropshipping, for example, startup costs are some of the lowest across all business types. It doesn’t involve capital to buy inventory as the products are kept and stored with the primary supplier. The dropshipping seller simply creates an online storefront that accepts orders and subsequently passes them on to the supplier.
While it doesn’t cross the mind of most sellers thinking about opening an eCommerce store, having an online presence allows you to gather the new oil of the modern age, customer data.
It may sound rather sinister, but knowing things like:
And so much more will give you invaluable insights that you could not gather otherwise. As a result, you can refine your eCommerce shop based on non-invasive data and test strategies to see what leads to the best conversions.
Attempting anything remotely similar in a physical store would require eye and foot-tracking surveillance that not only risks losing customers due to its invasive nature but is also a slippery slope when it comes to consumer privacy laws.
In contrast, several aspects of running an eCommerce store can be automated from day one. From lead generation to personalized cart abandonment reminders, many tasks can be initiated with the click of a button, scheduled, or set to run on autopilot.
As a result of these tools, eCommerce shops can scale a lot faster and enjoy compounding growth as opposed to the typical linear growth seen in brick-and-mortar shops.
McDonald’s famous phrase “Would you like fries with that?” is a common example of in-store upselling. Likewise, eCommerce shops have a range of selling strategies that can easily be implemented to drive more revenue and increase the average order value (AOV).
Strategies such as:
All these can be done with free and paid tools that allow eCommerce shop owners to maximize their customer base, leverage shopping behavior like impulse buys, and drive revenue in a variety of ways.
Both in eCommerce and traditional retail, personalization is a growing trend that businesses are striving to adopt.
It’s reported that 80% of customers are more likely to make a purchase when brands offer personalized experiences. Conversely, 66% of customers say that encountering content that isn’t personalized would stop them from making a purchase.
Whether you’re broadcasting email promotions or interacting with customers through WhatsApp, there are all kinds of ways to add personalization to enhance your customer experience.
Prime examples are:
Sellers can use all kinds of available free and paid tools to implement personalization and in the process grow a loyal customer base with a higher lifetime value.
One of the biggest advantages of eCommerce is that your selling potential is not limited to a geographical location. You can sell nationally, internationally, or both, virtually removing any cap on your revenue potential.
Thanks in part to the new global economy, being able to sell to customers worldwide is an incredible advantage for eCommerce sellers but is not without its fair share of challenges.
Since your products are displayed digitally, the only space they take up is a drop of bandwidth in a vast sea of electronic server space. Even with thousands of products on your site, the cost of hosting them is negligible, especially when compared to the cost of the shelf space they would occupy in a traditional store.
Likewise, eCommerce orders can be processed en masse with synced shipment tracking updates and notifications. The only limitation is the time it takes to process orders in your fulfillment center (which could very well be your living room or garage).
Running successful marketing campaigns, collaborating with popular influencers, or creating content that goes viral are all ways an eCommerce brand can rapidly scale at a pace not commonly seen in traditional stores.
But with great exposure comes great responsibility. If you’re actively aiming to rapidly grow your brand, be sure you’re ready to fulfill orders and address customer concerns when that lightning strikes.
We’ve gone over seven of the unique advantages of having an eCommerce shop for your business, and you might already be sold on the idea.
But before fully committing, it helps to have an idea of the not-so-fun aspects of breaking into eCommerce. For many, the following cons of eCommerce could make it a deal-breaker.
When displaying your products, your customers only have a few factors to help them make a decision, mainly your product images, descriptions, and customer reviews.
Inside a physical shop, customers can see exactly what they’re getting for their money. When selling clothing items online, for example, customers are unable to feel the material and take a risk when choosing the right size.
Major eCommerce corporations like Amazon offer same-day or next-day delivery. However, for most eCommerce stores starting out, it can be difficult to process orders quickly enough. According to Raydient, 44.4% of consumers still prefer shopping in person when possible.
Depending on your estimated delivery times, it’s possible consumers will choose a seller with quicker delivery if available or look to save time and buy the product in person.
Rising delivery costs are also an added challenge eCommerce shops are facing and an area of competition among online stores.
Depending on your niche, eCommerce can be an incredibly competitive industry. Unless you have a high marketing budget, it can be difficult competing with well-established brands in your space.
Unlike the old days, millennials and Gen Z’ers are akin to internet sleuths, able to instantly compare prices and find better deals.
It’s important to note that high competition alone should not discourage you from trying. The journey of a thousand miles starts with one step, not to mention that one viral video could make demand for your product skyrocket.
However, you will be competing in all major channels and areas such as:
This will take a good chunk of time and money to do effectively, which leads us to our next disadvantage on this list.
You don’t need to be incredibly tech-savvy to create an eCommerce store, especially in this day and age. But you or a team member will need to be tech-literate to some degree to run a successful one.
Installing add-ons, integrating apps and CRMs (Customer Relationship Management), dealing with SEO, email marketing, etc. are all things you will have to work with at some stage in your eCommerce business for it to be truly successful.
Of course, you can outsource or get guidance for all of the above, but it will come at a cost in both time and money. Like running a physical store, running an eCommerce shop comes with its own set of unique technical challenges.
Any form of online transaction requires a high level of IT security. Luckily, well-known platforms like Shopify and others keep their platforms under tight security. Similarly, you can integrate payment options like PayPal, Stripe, and others to ensure secure online transactions.
However, going the solo ground-up route will put the responsibility of customer data and site security on your shoulders. Depending on the payment collection methods you employ, it’s an added responsibility and a crucially important one to ensure your brand and reputation stay intact.
Customer service is a natural part of any DTC and B2B business. When servicing a global customer base, it’s vital to have a clear return policy and customer service protocols in place.
Who will bear the cost of returns? How long after arrival can customers return a product? What modes of communication are available to address customer concerns?
These and many more questions need to be answered with a clear return policy and customer service framework. A core factor in growing a successful eCommerce store is customer service.
It’s even estimated that today over two-thirds of companies compete primarily on the basis of customer service alone.
This one is pretty obvious, but without internet access, you can’t sell from an eCommerce store. If there’s a blackout in your target area or your host servers are down, it will naturally affect revenue.
While none of these issues are ever permanent in nature (hopefully), if you rely solely on your eCommerce website, it can be similar to having all your eggs in one basket.
Downtimes, on-site technical issues, host server hiccups, and even natural disasters which are all largely out of your control can put a wedge in your sales and lead to a bad customer experience.
Now that you have an idea of the pros and cons of running an eCommerce store, the question stands: is it the right business for you?
Current trends show that eCommerce is only going to continue to grow, and with today’s tools and technology, there has never been a better time to get started.
No doubt, it can seem like a daunting task to begin from zero. But consider Ollie Forsyth, a dyslexic and often-bullied entrepreneur that was able to build a successful eCommerce business from the comfort of his home.
The bottom line is, if you have a drive to succeed, a thirst to learn, and the discipline to persevere through your failures, then you have everything you need to get started and thrive.