How the cost of e-commerce has changed

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For many would-be retailers there is obvious appeal in establishing an online store. Compared with the overheads attached to running a bricks-and-mortar shopfront, opening an e-store can be a relatively inexpensive way to set up and sell goods – rent and associated costs are lower, there’s no expensive fit-outs and staffing costs are minimal.

But opting to go online is not a no-cost endeavour; there are still operational expenses and, as the landscape becomes crowded, it takes additional investment to stand out to prospective customers.

Operations versus marketing

There is no doubt operational costs were higher in the early days of online retail. For starters, you needed a decent website with e-store capability and that didn’t come cheap. It usually entailed a custom site that was simple to use, incorporated comprehensive search functionality and guaranteed secure payment transactions – at a time when buyers were wary of sharing credit card details online.

There was no such thing as a retail management platform either, so administration of customer accounts, orders, inventory and shipping was difficult – even more so if you were trying to juggle both physical and online stores and were managing eBay listings. Scaling efficiently was a difficult proposition. Buyers were probably more forgiving when it came to operational hitches, like delivery or returns issues, but those days are over.

Customer expectations have shifted significantly and it’s no longer an either/or situation when it comes to online versus physical. Consumers now participate in multiple interactions with a brand – online, in-store, on marketplaces like eBay or Amazon, on social media and, increasingly, using a mobile device.

Early forays into online sales required less marketing outlay, which no doubt contributed heavily to the channel’s initial appeal.

Trialling different keywords and adequately managing eBay listings could often result in enough organic traffic to keep an online store sustained, given the relative lack of competition. But this is no longer the case.

Younger demographic driving change

In 2018, the market is different, with many more players and infinitely more noise. This is apparent in Australia Post’s annual study, Inside Australian Online Shopping, which tracks behavioural trends and highlights new challenges for online retailers.

According to the 2018 report, retailers now “need to have a consistent offering on one integrated ecosystem across online and in-store in order to effectively compete and grow”. The national postal service says this is being driven by a new generation of shoppers – the 18-36 age group now represents 26 per cent of the population – which favours instant gratification, values flexibility, and embraces new technology and services.

Drivers for change

The consumer trends that are influencing online include the growth of marketplaces, a rise in buy-now-pay-later transactions and a preference for online sales events.

According to a recent survey of more than 3000 merchants using our platform, we found that marketplaces represent (on average) one third of total online sales – for some customers that figure is much higher.

Marketplaces and discount sites make it simpler for shoppers to compare between brands with decisions weighted heavily on price, making it more important than ever to stand out. It demands a commitment to better operational and marketing efficiencies to foster customer loyalty.

Savvy retailers make the most of existing marketplace partnerships to drive improvements, such as eBay’s partnership with Sendle to give its Plus members free delivery and returns.

Integration between the two simplifies shipping through instant label generation, order management and detailed delivery tracking. The upshot is an improved customer experience and less time and money for the seller.

Some shopping behaviour changes are placing increased pressure on retailers. For example, the rise of online sales events often sees buyers electing to hold off on purchasing in the hope of nabbing a bargain during sales. This not only impacts traditional seasonal revenues, but additionally makes inventory and fulfilment management more difficult.

Despite the operational challenges, retailers are getting on the sales event bandwagon, with a recent survey showing nearly 40 per cent of our merchants intending to participate in events like Black Friday and Cyber Monday to bolster Christmas trade and meet customer expectation.

The split is less defined

Whereas costs were once clearly assigned as pure operations or marketing, the line between the two is increasingly blurred. The lack of physical interaction in online shopping contributes to high (around 70 per cent) cart abandonment rates, making it necessary to offer a range of fulfilment (click and collect, expedited delivery and returns) and payment alternatives, including PayPal, credit card and buy-now-pay-later options. Considerations that were once deemed operational are now imperative marketing tools designed to drive conversion.

In an increasingly crowded marketplace, improved operational efficiencies that deliver a streamlined customer experience across multiple platforms is no longer a “nice to have” consideration – it’s become an imperative part of an omnichannel business strategy that the market clearly demands.

1 COMMENT

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