02 Jul The Risks and Rewards of E-Commerce
Paul Graham, founder of Y COMBINATOR has said, “You can’t wait for customers to come to you. You have to figure out where they are, go there, and bring them back to your store.” Graham’s company provides seed funding for startups, so determining what catapults small businesses from “just starting out” to wildly successful is their bread and butter. Part of that secret strategy for success? Adapting to the market. And in the current market, e-commerce is growing like crazy.
In the U.S. alone, e-commerce sales jumped 15% in 2018. It’s likely that this isn’t just a trend, but a permanent state of affairs. In February of this year, the total market share of online U.S retail sales outpaced brick and mortar retail sales for the first time in history. E-commerce is a lucrative frontier for both aspiring entrepreneurs and businesses with existing brick and mortar locations. But that doesn’t mean e-commerce is the right solution for every business. As with all technology, e-commerce is a mixed bag of risks and rewards. Here’s what you should know:
Reward: Reduced costs
Starting a business is expensive. In 2009, the Ewing Marion Kauffman Foundation found that the average cost to start a new business was about $31,150. With such a hefty price tag, it’s not hard to understand the appeal of the e-commerce model, which typically has a much lower startup cost.
It’s possible to start and manage an e-commerce business without hiring employees, leasing or purchasing a space, or buying a large amount of inventory. Even for well-established e-commerce stores, the online model has a myriad of benefits. Ready for a new look? Updating your website is MUCH cheaper than remodeling an entire brick and mortar space.
Risk: Third Parties Are Unavoidable
Starting an e-commerce business inevitably means that you’re relying on 3rd parties in a way that can potentially be disruptive. At a minimum (unless you own a shipping company and happen to be a whiz at web development), you’ll be relying on shipping companies to deliver your products, and a web hosting service to keep your site accessible.
If your site goes down, you won’t be receiving any sales until your web host gets it back up and running. And since you’re not hand-delivering your product to the customer, there’s the possibility of a chargeback if a package is stolen or delivered to the wrong address.
Reward: Sell to Anyone, Anywhere, 24/7
With e-commerce, the entire world is your storefront. This is especially advantageous for businesses offering a niche product. For example, there might not be a huge demand for handmade driftwood furniture in your immediate area, but when the entire world has access to your website, it’s much easier to find consumers that are already looking for a product like yours.
And with a business that makes its home online, potential customers will have access to your product from anywhere in the world, whenever it’s most convenient for them. This is a huge bonus. In 2018, an NPR/Marist poll found that for 64% of online shoppers, the ability to shop day or night is a major factor when deciding where to make a purchase.
Risk: Increased competition
One downside of the e-commerce model is that you’re not just competing with businesses in your immediate area. You’re competing with every online business in the world. 217.1 million Americans do at least some of their shopping online, but how can you convince them to shop with you?
Without a face-to-face connection, it can be difficult to stand out. This is where your website needs to shine. 94% of users report abandoning a website because of poor design. Make sure your site is easy to navigate, with a painless checkout process. Finally, consider branding your e-commerce site in a way that differentiates you from the competition. The goal isn’t to just have a website, but to have a website that your customers look forward to visiting again.
Reward: Easy to retarget customers
Small businesses that only have brick and mortar locations often watch customers walking out the door, with no way of knowing whether or not they’ll return in the future. The online experience makes it much easier to reach out to previous customers in a bid to win their business again and again.
The more sales you make, the more emails you’ll collect. This allows you to send customers tailored offers encouraging repeat purchases. Notice a customer abandoned their cart? Email them a discount code to encourage them to move forward with the purchase. 54% of shoppers will purchase products left in shopping carts if those products are subsequently offered at a lower price.
Just because you don’t get to meet your customers face-to-face doesn’t mean you can’t forge a connection and offer a great customer experience.
Risk: Credit Card Fraud is More Prominent Online
Due to the increased security of EMV chip cards, fraudsters have shifted their focus to online transactions. With e-commerce, you can’t physically verify the identity of your customers, and that means more risk. In 2016, 15.4 million consumers were the victims of identity theft or fraud, and that number is only getting bigger.
This isn’t to say that it’s impossible to safely accept payments online, but effective cybersecurity and fraud prevention measures will require more effort and investment. Address Verification Service (AVS), CAPTCHA, and velocity filters are just a few options to help protect your business. However, when opening and operating an e-commerce site, incorporating fraud prevention should be considered less an “option” and more a necessity.
Whether you’re just starting an e-commerce business or looking to add an online storefront to your existing brick and mortar location, there’s no doubt that e-commerce can be a lucrative and worthwhile business endeavor.
Building a successful online operation takes time, patience, savvy, and a lot of hard work. But as long as you are aware of the risks, and find the right 3rd parties to support you, adopting an e-commerce business model will be more than worthwhile.
BASYS Processing as a business partner
Does your current processor understand the unique struggles of your industry? Do they provide great rates and personal customer service? Are they offering solutions to grow your business and being proactive about helping you reduce risk and increase your savings?
BASYS Processing features:
• A friendly, live voice will answer the phone when you call; no automated phone systems
• In-house PCI Compliance team to walk you through the process step-by-step, improving security and reducing costs
• A knowledgeable Account Manager assigned to your business to support your needs
• Accept payments in person, over the phone or online
• Next-day funding options
About BASYS Processing
BASYS Processing provides credit card and debit card processing services, plus solutions that include terminals, virtual terminals, e-commerce, mobile, and point-of-sale, customized to fit any need. Banks, associations, and software partners depend on us to strengthen their reputations and relationships with their customers by providing remarkable service paired with ultimate flexibility and pricing. Merchants depend on us to make accepting credit cards and debit cards convenient, safe & affordable. BASYS was founded in 2002 on one philosophy: to take care of our merchants, partners, and employees so they never want to leave. We are dedicated to working one-on-one with our customers to design the perfect solution. BASYS is Personal Payment Processing.
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