It goes without saying that the online retail and e-commerce market is continuously evolving and heading in new directions. This has led to tremendous competition between online sellers, and those retailers who do not adapt and keep up the pace tend to disappear very quickly.
Keeping this in mind, here are 5 most common pitfalls that you, as an e-commerce seller, should look out for:
1. Steep competition on pricing
Usually hundreds of online sellers and merchants list identical products on marketplaces and quite often the only differentiator is the price-point. It’s this sort of price competition that especially hurts retailers who do not have the purchasing power to compete with large online sellers.
One of the ways to compete on price is to procure larger quantities in a single order and get bulk discounts; this comes with its own problem, namely working capital finance to pay for such orders.
2. Managing returns
Marketplace policies are highly favourable for buyers. The usual 30 days return policy provides a lot of time and often buyers return used products to the seller within that time frame. The seller would have to pay commission to the marketplace even if the product is returned in a damaged state.
Also, generally it’s the seller who pays for the return charges. The biggest challenge is to resell the product, once the label or the packaging are significantly damaged. To solve this problem, e-commerce sellers can connect with various refurbished goods sellers, who are more than willing to buy such products, although at discounted prices.
3. Lack of working capital finance
The recent trends in the Indian e-commerce industry has seen mostly established, large, offline retail outlets doing well online due easy access to capital from traditional banks & NBFCs; since they have physical assets to use as collaterals, large turnovers & multiple years of vintage. A new entrant to the vibrant e-commerce space does not generally have easy access to any of these.
Here again a financer can help them out. Their loans are completely collateral free and do not require extensive financial documentation. All that is needed is proven e-commerce marketplace sales of 6 months, and the seller is given a multiplier of his sales as a loan. These loans can go upto big amount.
4. Competition with OEMs
Many small online stores buy products at wholesale prices from distributors or manufacturers to sell at retail prices. This is the classic business model for retail stores.
Unfortunately, e-commerce’s low barrier to entry has encouraged numerous manufacturers to start selling directly to customers. This means that the same company that sells your products may also be your competitor. As more manufacturers start selling online this problem will likely become worse.
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5. Customer loyalty
Simply put, it’s easier and much more profitable to sell to loyal customers than it is to constantly search for new ones. Smaller e-commerce sellers rarely have resources to drive loyalty for their products or store. Also, the loyalty built is generally towards the marketplace, and not the actual e-commerce seller.
The best way to tackle this is to create a delivery experience which is memorable for all customers and drives them to give high ratings on the marketplaces. Positive reviews can also be sought by connecting with the customer post-delivery via SMS/emails.