The human race has witnessed a lot of changes from its beginning stages. Not only way of life has transformed over a period of centuries, but mode of trade has evolved too. About 4000 years ago, man has been known to conduct commerce via metal. But then, ships were used for quite some time in order to move goods from one place to another. After that, trains and vehicles have been utilized in last couple of hundreds of years. The latest form being used is the airplanes for transporting merchandise and commodities.
Ever since the age of internet has arrived, the world has become a global community. The pace of doing things has so much increased that deals are being accomplished in a matter of minutes now. One does not necessarily need to visit his or her local store anymore to buy a thing or two. People now have the facility to use online business websites to avail the latest products or services. This new kind of doing business is known as E-Commerce.
- Basic Components of ECommerce Websites Mechanism
- Pros of Ecommerce Websites
- Cons of Ecommerce Websites
- How Ecommerce Websites Make Money?
- Why Ecommerce Websites Mostly Fail?
Basic Components of ECommerce Websites Mechanism
Every deal whether it is between businesses and their customers or among businesses themselves involves a certain amount of transaction. In contrast to the real world operations, the online business does not involve a physical contact between buyer and the seller. Customers can only see the items present on the ecommerce website. They have the luxury to purchase their desired products with a mere touch of Smartphone. Be that as it may, consumers can only touch them once they are delivered on their doorsteps. These entities also have some problems conducting their business smoothly. First, they have to rely on online modes of transaction. Second, they have to keep their inventory updated as orders can come out of nowhere from customers.
Therefore, ecommerce websites are running on three main components. First, they need to have a fully functional web server that can be used to run the website efficiently. It also requires them to check the credentials of buyers from their bank accounts. Second, they must have a stable database that can be used to monitor the situation of available stock of items. It can then be used for updating the inventory based on customers` demand for their preferred products. Last but not the least, a well worked out dispatch system should be in place to properly deal with orders of the clients. However, only the first component, i.e. web server is mainly utilized by majority of the ecommerce sites throughout the world. Only a simple website is enough for many to let their clients know about their products and services. Then, they manually maintain their inventories on daily basis and make deliveries using traditional distribution channels mostly. Their database is normally their precise calculation or forecasting techniques and their dispatch scheme occasionally is the local postal service.
Following are some of the ways (not strictly used) in which ecommerce websites usually operate:
- When a customer is looking for an online item to purchase, he or she is using a certain web browser. The very same browser is used to communicate with the web server of the online store. After this communiqué, an order can be placed.
- Order is placed via the communication of a web browser and a web server. This order then goes on to the next level where manager assesses the need of the client. A central computer is used to monitor the situation of client order from very first phase of submission to the very last stage of delivery.
- Then, the administrator asks the database officer to check if there is actual availability of the required item.
- If the product is out of stock, database can be used to order fresh supplies from the wholesalers in no time. In real time, the store`s system is used to communicate with manufacturer`s system about the expected supply times.
- The online store`s database is used to confirm to the customer about the likely time of accessibility of the item being ordered.
- If the item is considered to be available in stock then the manager goes on to process the order. Then, the customer`s payment is received via credit or debit card system using the commercial system.
- The business system could take some time in payment receiving because of necessary checks with the client`s bank system.
- The bank computer system has to verify whether the consumer has enough credit balance in his or her account or not.
- The online business mechanism gives a go ahead to the transaction to take place after certain checks are verified. The funds are transferred at once, but take a few days time to completely go through.
- The order processing supervisor confirms about the successful completion of the deal and informs the web server about it.
- Then, the web server displays the webpage to customer to let him or her know about the conclusion of the agreement.
- The manager then informs the storehouse to dispatch the item to purchaser with immediate effect.
- Third party delivery service is engaged to collect the product from the warehouse for delivery purpose.
- After the item is shipped from the store, the administrator then lets the consumer know about the initiation of his or her package.
- The final step is the successful deliverance of the parcel to the concerned customer.
Pros of Ecommerce Websites
There are a variety of advantages of having an online business, some of which are discussed in following detail:
- First of all, there is no need to open a physically located or brick and mortar kind of a business.
- An Ecommerce website is open to unlimited number of clients all over the town, country or even the entire world. In contrast, the physically located shop is only accessible to a few of the people who visit it.
- Profit margins of the online firm are unlimited; unlike traditional store, the ecommerce warehouse is accessed by millions of people. Therefore, the probability of earnings from potential clients become in large number.
- These kinds of stores are open for customers 24 hours a day, 7 days a week, 30 days a month and 365 days a year. On the other hand, brick and mortar types of firms are only available for clients for specific time periods.
- Costs associated with maintaining an online webpage are far less than those of the physical store. They also do not have to pay any kind of rent; neither do they have to give employees their salaries.
- Anyone with small amount of investment can open up an online business. There is no need of huge degree of capital for ecommerce websites. They are highly scalable; one can start off small and go big with the passage of time.
- Inventory costs like carrying costs are very less for these sorts of businesses. Unlike brick and mortar stores, they do not need to keep a pile of stock available with them all the time. They can contact the manufacturer at any time and send the delivery right away right then and there.
Cons of Ecommerce Websites
Just like any other kind of business, the online stores also come up with a few notable hindrances on their way. Some of the disadvantages of ecommerce websites are given below:
- Unlike physically present stores, online firms do not have the luxury to meet with their clients in person. Therefore, it is very hard for them to build, sustain and retain their customers as building long term relationships with clients is the utmost priority. Therefore, major drawback of these types of trades is that they have to rely on indirect relationships through email, via cell phone or live chat.
- Competition among the online businesses is fierce. For one product, there are more than 10 players in the market. Therefore, ecommerce websites owners will have to work a lot harder than the brick and mortar businesses to face off their competition.
- Being solely online, these kinds of businesses have to come across a large number of technical issues. If the server goes down, payments could be delayed, and worse condition could be shutting down the webpage for some time. This could cause serious problems for the consumers as they will become agitated if they do not get response on time. Hence, these technical faults can lead to loss of potential and even existing customers in the long run.
How Ecommerce Websites Make Money ?
Ecommerce has become a buzzword in this day and age. That is why with each passing day, the number of online commerce is increasing.
Most the entrepreneurs are in favor of using this business model in comparison with the brick and mortar ventures. One of the biggest reasons for choosing this stream of trade is because of the high proportion of revenue inve
stments. Their earnings are more than physically located firms and require lesser cost of capital than them as well.
Following is the account of potential ways in which ecommerce websites make money:
Charging Commission on Online Sales
One of the most common revenue generating models of online businesses involves commissions. When the buyer and the seller meet for electronic transaction, you can charge them a particular rate. The percentage of fee can vary from product to product based on their varying prices.
Setting Subscription fees
This is also considered to be one of the primary sources of earning online money. These websites charge their clients (either seller or a buyer) a specific amount of subscription fee. When the seller and the buyer make their deals, you are provided with predetermined membership bill.
Displaying third party Advertisements on your Webpage
Major portion of ecommerce revenue comes from ads that are displayed on one`s webpage. These third party advertisers have to pay you certain amount when a user clicks on them. Online business owner can either serve these classified ads on their own ad servers or they can also utilize Google Adwords. The income from such source can depend on the nature of commercial, either CPM (Cost per Thousand) or CPC (Cost per Click).
Providing the facility of Featured Listings
Because of fierce competition in the market, sellers are ready to pay over the top so that their offering could be displayed on priority. This case is applicable in the marketplace of P2P in which buyer and seller meet with each other through you acting as a connector. Thus, you take advantage of the rivalry of other players in the industry. That is why you can earn extra bucks by providing the facility of featured listings on your webpage.
Serving as Affiliate Partners
One of other sources of earning money in the world ecommerce is by partnering with third party web-pages and serving as their affiliate partners. With that, you can get additional amount of cash by redirecting your own page visitors to third party website. Money is earned when those visitors actually make a purchase from that moderating venture. This is considered to be one of the most effortless methods of earning as you do not have to worry about carrying cost or shipping costs etc.
Sending Sponsored Emails to Potential Clients
Sending sponsored emails to people is sometimes considered to be negative method of marketing as they become too awkward at times. But looking at the brighter side, if individuals have filled forms with due consent then you can always send them these funded newsletters. Therefore, you can either send emails on behalf of your sponsor or even add some ads in emails themselves. But care should be taken that the advertisement being sent is related to one`s own business. Thus, one should always choose the right advertiser for this kind of marketing as clients interested in sports newsletter would only like to see ads on sports.
Entering in Strategic Partnerships
Monetary revenue is not everything for some online businesses. Goodwill, positive word of mouth, value, brand identity etc. are far more important for them than money. This is a strategic (long term) way of thinking which will of course increase one`s monetary gains in the long run. Companies often come across such situations where they are just happy to make strategic alliances with other giant firms. One of the examples of such tactical decision could be between a cellular company and a worldwide online retailer.
Why Ecommerce Websites Mostly Fail ?
Ecommerce web-pages have a larger number of advantages in comparison with the traditional modes of trade. But, like any other line of business, there are always chances of a failure if the execution is not right. Now, we will discuss some of the reasons why ecommerce websites fail to make mark in the market:
Using Poor Images and Product Descriptions
Since, customers cannot actually touch the product being shown online; the least you could is provide them with high quality image of the item. But, if you fail to do so, and on top of that do not give appropriate description of the manufactured goods, then you are only going to lose sales. Experts have emphasized on displaying images from different angles, and providing enough detail about the item being shown to customers.
Not adding Contact Information
Online customers want you to win their trust and confidence more than anything. That is why first of all, they look for the contact information like address and phone number. In this way, they can be certain of reaching you in case of some query. But if you fail to provide your contact info on your website, then it is a big loss on part of building trust with your potential clients.
Targeting the Wrong Audience
You could be running paid campaigns on your web-page. But, if you are not targeting the right viewers, then all of your social media management could go in waste. Therefore, every offering should be tailored made for specific potential clients. One has to avoid using generic ads as not all of the audience is interested in seeing all kinds of ads.
Not engaging your Customers
Most of the people surfing online are looking for something interesting for most part of their stay. Therefore, you cannot afford to ignore them at any cost. Try to engage them in discussions about your products or services whenever possible.
Offering very Complicated Checkout
Online business runs on the concept of “Add to Cart” and moving on to “Checkout” for completion of the deal. Most of the ecommerce websites fail to comply with the basic need of their customers, i.e. providing simple checkout. This leads to frustration among most of the clients who do not want to return to such online store in future. You can overcome this problem by providing short checkout window by discarding the registration process.
Incorporating Hidden Charges
At checkout, you have to provide your clients with right amount of money they have to pay. Some of the online businesses incorporate hidden fees like shipping costs in their deal which leads to negative perception among consumers. Therefore, you have to keep in mind to include each and every cost in transaction so that your clients will know the exact payable amount.
So, these are some of the possible causes of losing money when it comes to ecommerce websites. Therefore, one has to make sure that they do not neglect the significance of using these factors with precise execution.