Ecommerce is big business in Australia. According to NAB's Online Retail Sales Index, online retail sales reached $15.7 billion in the 2013-14 financial year.
That’s a big number but this is an industry still in its infancy. Online retail sales currently represents just 6.6% of the money spent through traditional 'bricks and mortar' stores – but that percentage has been rising steadily for the past five years, while growth in traditional retail sales remains stagnant.
No wonder, then, that Australia Post has identified small eCommerce operators as a market of significant potential. Richard Umbers, Australia Post’s executive general manager for parcel and express services, says small operators, starting from individuals at home selling goods through online marketplaces such as eBay, will drive huge growth.
“Many will only send a few parcels… But individuals trading in their own right are generating huge volumes of parcels. That really is saying the engine room of eCcommerce growth is the small player,” he told BRW. According to Umbers, more than 70% of eCommerce parcels sent are from small businesses.
So what does this mean for small sellers who are yet to dip a toe into the brave new world of eCommerce? Well, it means you're not the first, so there are plenty of things to learn from those who have gone before you and the multitude of service providers which have popped up to meet the needs of online business large and small.
The pros and cons of ecommerce
For both buyers and sellers there are advantages and disadvantages to online retail.
According to Ajeet Khurana, an eCommerce author and lecturer (who lectured on eCommerce at the University of Texas in 1993, before the word had even been invented), the main strength of eCommerce is its ability to overcome geographical limitations.
That means no travel, no time differences and no closing hours. An online store run by a grandmother selling knitted baby clothes in the English midlands can theoretically compete head to head with the biggest global retail players. The ability to serve global demand for very niche products means businesses that would be far too small to operate in a local area can flourish online.
Another big advantage is the ability to gain new customers simply through being able to be found on search engines – the primary way people find stuff online. Customers don’t have to think about which store to visit first, they can go straight to the exact product they want by typing a few words into Google. Branding and relationships are still important, but search traffic can be a tipping point for some eCommerce businesses.
While establishing and running an online business certainly isn’t free, it is free of many of the overheads traditional retailing is slugged with, such as rent and staffing. The number of people required to run an eCommerce business is generally lower. Basic marketing techniques for eCommerce are some of the most cost-effective available to a small business.
But eCommerce isn’t all good times. It’s hard work, and the absence of the face-to-face communication of a physical store can lead to communications problems. Indeed, Khurana cites the lack of personal touch as the biggest disadvantage to doing business online, as it’s something that a large number of people will find strange and foreign.
The other disadvantages for both customers and businesses (if they care about happy customers) is the delay between purchasing and receiving the item, as it must be shipped after payment is made.
In the fashion industry in particular, another major disadvantage to online shopping is the inability to experience a product before purchase, to test the fit or fabric of a garment. (That also highlights that the cost of processing returns should be factored into an online retailer’s business model.)
Security is another major issue. The fact that anybody, anywhere can set up an eCommerce website is one of the empowering beauties of digital business, but it also creates risk, as trusting a faceless username on eBay is much harder than a physical store at the shopping centre with people staffing the floor. As Khurana points out, credit card fraud and identity theft are possibilities which can scare off customers and catch out unscrupulous, or just unprepared businesspeople.
There are unique challenges, but also great opportunities to expand your customer base and tap into the growing willingness for Australian (and even global) shoppers to buy online.
Quick guide: common eCommerce terms
The ease with which visitors can find their way around an online store (the easier the better)
- Shopping cart
Items a shopper has selected to purchase while browsing a store
Systems in place to protect the behavioural and financial data of customers
- Payment gateway
the connection between the customer’s shopping cart on an ecommerce site and the payment company to verify payment (whether that’s Visa, MasterCard, PayPal etc)