Ten questions to consider before setting up an e-commerce store
There is a lot to consider when setting up an e-commerce fulfillment business or taking an existing business online, but these are some of the initial areas to consider once you have a basic idea of what you are selling. You may be unable to answer all of these questions, but we hope the extra information will help you as well as some of our other articles.
Do you have a competitive advantage or unique selling point? This could be something like an exclusive product, a product not sold online, products available to you cheaper than your competitors? You need to have some reason why people will buy from you and there are a number of ways you can do this; it can even be a mixture of advantages not available elsewhere such as being the only site to offer a particular product to offer next day delivery and to offer gift wrapping. It could also be something very simple such as having a quicker and easier site to use than your competitors
Is there demand for the products you are going to offer, or more importantly sufficient demand at the price you can offer to break even? New products can be particularly difficult as can your own products to predict without carrying out research. A lack of competition can be good but can also indicate a lack of demand. Another potential pitfall is to research and find that there is demand for a product but not check what people are willing to pay and find your unable to make sales at a profitable price.
How will you promote yourself? Will you depend purely on online promotion? Bricks and Mortar stores with an online store as well will have an advantage against purely online stores because of the reassurance this will give customers but offline promotion can help purely online stores seem more reputable. Also, offline promotion will help you reach a slightly different audience. Your decision should depend partly on your target market and of course your budget, online promotion can be very good value if you use it effectively and much of it is purely effort driven.
Will you hold stock or depend on a fulfillment company where you have inventory management and they will send products directly to your customers? (at a cost). Most suppliers don't offer Direct Dispatch and issues of Direct Dispatch include the charges which can be expensive, you have to rely on suppliers keeping you up to date on low stock and product discontinuation, you may be unable to send out products on next day delivery, you will need to rely on your suppliers to send products out quickly and be easy to contact. However, there are of course many costs in holding stock especially if you only have an e-commerce site, the main costs being space and having money tied up in stock there will inevitably be an opportunity cost to this and a risk that your stock may not sell or will lose value.
Will you offer a high level of customer service for at least 9 to 5 Monday to Friday or try to get away with shorter hours or relying on e-mail? Having a customer service number gives security to shoppers online and you may lose sales where customer have questions they want answered quickly.
Will you sell to your country only or sell continent or worldwide? Of course, many e-commerce stores start aiming at one country and then expand often starting with big markets such as the United States or countries with the same language. In the UK, many e-commerce stores will also send to Ireland where the proximity means that postage costs don't make products uncompetitively expensive.
Will you use an off the shelf website or have one designed to your needs? The most obvious difference is the price, bespoke websites can be very expensive but some level of bespoke design can be bought for less than you might think from designers who reuse some of their code but can add to it. A bespoke site can give you some uniqueness and be designed to suit your target market, for example if you are aiming at a group who are likely to be less experienced web users you may want a very simple website. Off the shelf sites do often have the advantage of free upgrades to the software and generally follow accepted web design concepts meaning the site will work in a way that customers are used to from other sites, for most customers this is a good thing of course and usability should be top of your priorities in almost any case.
Which payment provider will you use? PayPal is simple, a well-recognized and trusted brand but also fairly expensive plus transfers to your bank account are slow and you are likely to have to keep a reserve in your PayPal account. Your Bank is unlikely to provide you with web payment services unless you have some history of trade with them. WorldPay is another option as is Google Checkouts which is similar to PayPal.
Who are your competitors? Some of your competitors may be very obvious, people with the same or similar products. However, these competitors may not be as important as you think if they are aiming at a different market, for example you may be aiming products at the gift market where a competitor may be aiming at the homewares market, they are a competitor but then so is a site selling different products but also aimed at the gift market especially if they are at the same price, using similar promotion or suitable products for the same end user.
Are your products suitable for sale online? This breaks down into three main questions, firstly will it be practical to post them? They may be fragile, heavy or large making postage very expensive, though from experience some products surprise you, consider the potential postage cost as a percentage of the retail price, products that are cheap but expensive to post are the biggest problem. Secondly consider whether they are products where there is likely to be a large number of returns such as clothes, especially shoes, you may have to refund costs including postage costs and you may end up with excess stock especially after Christmas when items have been returned. Thirdly how easy is it to view the product online; some impressive products may not appear as impressive online and some products may have more of the value in tactile rather than visual qualities. Using multiple pictures, videos and interactive 3D images can help here. Descriptions can help but often if the main image doesn't impress: people will not consider the product any further.
Also make sure you are aware of the Distance Selling Regulations in the UK or the equivalent for your country or area and understand what they require of you. Your duty to accept returns for example may affect your potential costs.
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