Most of the online revenue generated at the moment comes through selling services and soft goods, like premium memberships and e-books. E-commerce is combining new technology with traditional business, making it possible for an online store to sell even physical goods without relying on the use of a brick and mortar location.
E-commerce is not that hard to understand but being successful with an e-commerce business is difficult. We see businesses from all around the world using e-commerce from huge companies like NetBet to small neighborhood shops. What factors determine failure or success? Those below are the main ones to consider.
Conversion Rates
Conversion rate can be defined as being how many of the visitors complete a financial transaction after visiting the e-commerce site. It is expressed in percentages. Conversion rates are normally really low in online shopping, with the average being no higher than 3%. Knowing the conversion rate is very important for creating an e-commerce site that generates profit.
Acquisition Costs
Before you think about conversion rates you have to be sure that you get visitors to actually see the products you sell. Direct traffic is only possible for the larger, well-known brands. It is really important that you consider how much money is necessary to drive traffic to the site in the first place. When this factor is not considered it is possible that costs end up being way too high. Profit is thus not generated and businesses end up losing money. Generally speaking, investing in SEO for the long term is a very good idea to deal with acquisition costs.
Shipping Costs
Some time ago it was the buyer that paid shipping costs. These days there are many large e-commerce stores that introduced really cheap or free shipping in order to attract the customer. Because of this, shipping costs can easily make or break the success of any site that sells something. Free shipping is very common so it has to be seriously considered or at least a cheap alternative to the regular shipping fee has to be offered. When offering free or cheap shipping the profit the store generates drastically goes down and it can even disappear.
Brand Loyalty
It is usually hard to attract customers to an e-commerce website and to convince them to make a purchase. That is why you do want to develop brand loyalty, so that repeat business can appear. A shopper that has the best possible experience with the e-commerce site is going to keep coming back for more transactions. This is really important for the brand as it lowers running and acquisition costs while increasing overall profits.
Conclusions
A really important thing with online stores is to perfectly manage cash flow. The owners have to calculate everything and reduce the acquisition costs while increasing conversion rates. At first glance, this looks simple. However, when you start to do the work that is needed everything becomes complicated. It is very important to treat the business with the same seriousness as the regular stores and not assume it is easier online.
