10 Jan Does e-Commerce Make Sense for You?
Perhaps you’ve seen reports predicting that online retail sales will grow three times faster than retail overall. Maybe you’re struggling to find retailers to distribute your product, and you think selling directly to consumers might be a better plan. Will 2018 be the year you take the plunge and add e-commerce to your website? Let’s look at the pros and cons of selling online. We’ll also consider alternatives to creating your own online store, like Kibo, Amazon, and Etsy.
The case for e-commerce
Adding e-commerce to your website dissolves geographic barriers between you and your customer. No longer are you limited to those within a reasonable distance of your storefront, or those who attend a consumer expo, craft show or a sheep and wool festival. Anyone within reach of the postal service becomes a potential customer for your product.
E-commerce allows customers to purchase your product 24/7. We have become a culture of constant shoppers. We can recognize a want, do a search, make a choice and click the buy button – all within minutes. If your customer needs to plan a visit to a store to buy from you, the opportunity to make the sale may be lost.
Your page ranking in search engine results will improve if e-commerce is a component of your website. This can lead to more potential customers finding you via web searches, then clicking through to make the purchase. In fact, the top 3 placements in any Google search result will garner over 50% of organic traffic1. If you own a niche craft business and can secure a top slot, sales are almost a guarantee.
Further, E-commerce allows you to collect information that enables you to better target the messages you send to your customers. You can build your list and gather information on customer preferences and purchasing patterns.
Another great benefit is having the ability to stay in touch with customers who are seasonal. Susan Post, who owns the Florida-based yarn shop, A Good Yarn Sarasota, for example, has a robust online platform and markets specifically to her “snowbird” customer base in the off season.
For wholesalers, e-commerce can be a great vehicle for moving odd lots of merchandise. Whether it’s a few samples, an off-kilter dye lot, or the last inventory of a product that’s being discontinued, you can make these products available to customers via your web store.
Should you decide to delve into e-commerce selling, one strategy we recommend is to limit your inventory to exclusive products so you’re not competing with other online retailers selling the same yarn or fabric. Selling one-of-a-kind samples, local artists work or exclusive colorways available only at your shop are great ways to beat the competition.
The case against e-commerce
But, e-commerce isn’t for everybody. You want to be able to provide the same level of service to your online customers as you do for those who walk in your door. You’ve invested a lot of effort in moving customers through the funnel of know, like, and trust. It is important that the e-commerce experience supports those efforts.
While e-commerce doesn’t require the same sort of physical overhead as a brick and mortar store, it’s not without cost. Of course, there will be costs associated with your shopping cart and payment portal systems which can run upwards of thousands of dollars to set up in addition to monthly maintenance fees. Will these systems integrate with your accounting and/or inventory management systems? Be sure to speak with your accountant about the tax implications of running a webstore. Will you need additional staff to manage data entry of products or to process, pick, pack and ship orders?
Search engines make it easy to compare prices online. What they don’t do is highlight differences in quality. In the craft business, the appeal of a product is often dependent on touch or subtle nuances of color. Will your potential customer dismiss your offering based solely on price if they don’t have the opportunity to appreciate the quality that justifies the higher price point?
Logistics are critical to the success of any e-commerce operation. You must be able to ship every order quickly and correctly. The ubiquity of Amazon has created high customer expectations. Will you commit to shipping every order within two business days, even during your busiest season? Can you process the paperwork associated with international shipments, or will you limit the countries to which you will ship? You also must be prepared to handle returns, issuing prompt refunds and returning the product to inventory.
Shipping is expensive. At the beginning, you are unlikely to generate enough volume to negotiate competitive shipping rates. If you sell a bulky product, like yarn, your customers might balk when the cost of shipping is added to their purchase. Will you need to absorb some of these costs in order to compete?
For a wholesaler accustomed to selling product by the case, or yarn by the bag, fulfillment of small orders may require establishing a separate area of the warehouse for open cases. You may need to create new workflows for picking and packing e-commerce orders.
If you’re a wholesaler, your retailers may not be happy to see you branch into e-commerce. How will you ensure your webstore does not undercut your retail customers?
It is possible to dip your toe into e-commerce without building your own webstore. Kibo, Etsy and Amazon are three possibilities.
Kibo (formerly Shopatron)
Kibo’s e-commerce platform enables wholesalers to work with their existing retail partners to fulfill online orders. Customers place orders through the wholesaler’s website. These orders are then transmitted to participating retailers. The retailer fills the order from their own inventory, and ships to the customer.
When orders are fulfilled by a local retailer, shipping costs are reduced. Even better, the customer is introduced to a local source for future sales and customer service.
Kibo can be an attractive solution for wholesalers looking to strengthen retail relationships. Instead of competing with your dealers, your website serves as a vehicle to attract new customers and generate sales.
Etsy was founded in 2005 as a marketplace to connect makers to customers. While it has evolved over the past 12 years, Etsy remains a platform where creative entrepreneurs can sell their products with relatively little investment of time or money.
You’ll need to create a listing for each product you wish to sell, with photos and a description. You’ll have to file sales tax returns, just as if it were your own website. And you’ll need to handle the logistics of packing, shipping and returns.
You won’t need to add e-commerce features to your website – simply insert a link to your Etsy store. Etsy also handles payment processing. You establish your own policies about returns and exchanges, and you can set expectations about delivery time.
With Etsy, you and your product are presented within the constraints of the Etsy format. You can’t alter the webpage design to suit your brand.
If you anticipate selling relatively small volumes, Etsy may be a good starting point. You can list as many or as few items as you like, and getting started is easy. Customer expectations may also be more forgiving. Since they are coming to Etsy for an artisan product, customers are more likely to accept longer delivery times and reasonable shipping costs.
Etsy charges a fee of $.20 for each product you list, plus a commission of 3.5% on each sale, plus a payment processing fee of 3% + $.25.
In any conversation about e-commerce, the elephant in the room is Amazon. Since 2000, Amazon has made it possible for individuals and companies to sell products via Amazon.com. There are two main channels for selling through Amazon – as a third-party seller, or Fulfilled By Amazon (FBA).
As a third-party seller, you work with Amazon much as you would with Etsy. You’ll create a listing for each product, set your prices, and handle packing and shipping. Amazon also requires that each product have a UPC and SKU number. If you are not already assigning UPCs to your products, you’ll need to implement systems to assign these codes and include them on your packaging. Amazon collects payment, notifies you of the order, and makes a deposit to your bank account.
There is no listing fee, but Amazon charges a fee of $.99 per item sold. You’ll also pay a referral fee of 15%, with a minimum fee of $1 per item sold. If you’ll be selling more than 40 items per month, lower fees may apply.
The Fulfillment by Amazon program is much like selling your product on consignment. You create the listings and set the prices, then you ship your product to an Amazon fulfillment center. They store the product, and pick, pack and ship the orders. Amazon also handles customer service and returns for these items. Products sold under the FBA program are eligible for free 2-day shipping through Amazon Prime, which can be a significant factor in driving sales.
As an FBA seller, you’ll pay monthly storage fees for your inventory at the fulfillment center. Storage is priced per cubic foot. You’ll also pay fulfillment fees, which cover picking, packing, shipping, customer service and returns. The fulfillment fees are based on the weight of each unit, with oversized items subject to additional charges. In addition, you’ll be charged the per item and referral fees noted above.
The major downside to Amazon, like Etsy, is the lack of opportunity to reinforce your brand. Your products are shown within the Amazon framework, nd may get lost in the crowd.
Setting aside the obvious benefit of Amazon’s reach, the major upside is that Amazon’s programs are “pay as you go”. With the exception of FBA storage fees, you only pay fees on what you actually sell.
No one can afford to ignore the impact of e-commerce today. Whether you choose to create your own webstore, or become a seller on Etsy or Amazon, we’re ready to help you integrate e-commerce into your marketing plan. Contact Leanne@stitchcraftmarketing.com to learn how we can help you grow your craft business.