Table Of Contents:
- Why E-commerce?
- Key Success or Failure Factor
- How is AOV directly affected by gross margin and logistics cost?
- Channel margins
- 11 Reasons For E-commerce Platform Failure
- Best Sources For Your Learning Before You Start
- Conclusion
Why E-commerce?
With the increasing prevalence of online shopping, e-commerce business has become an essential component of the modern economy. It has brought about a significant change in the way business is conducted, allowing companies to access customers anywhere in the world and provide them with an extensive range of products and services through their online stores.
We also know a few famous personalities from e-commerce businesses like Aman Gupta and Piyush Bansal. By embracing e-commerce, businesses can reach a much wider audience, expand their customer base, increase sales, and improve brand recognition without the need for physical storefronts. Today, the more traditional retailer is no longer the sole option for consumers, and e-commerce is here to stay, providing consumers with limitless choices and enabling businesses to take advantage of the numerous benefits of online shopping.
Key success or failure factor
Choosing The Right Product: Selecting the proper product for e-trade is important for the success of a business. It ensures marketplace demand, profitability, competitive advantage, and customer pleasure. By imparting products with high demand and favorable earnings margins, businesses can entice customers and generate sales. By imparting products with high demand and favorable earnings margins, businesses can entice customers and generate sales.
The right product preference allows for differentiating the business from the competition, constructing brand recognition, and establishing a loyal consumer base. It additionally allows targeted advertising and marketing, green operations, and flexibility for growth. Ordinary, selecting the right product sets the inspiration for a thriving e-commerce enterprise with lengthy-time period sustainability. Here’s how can crack the further process after product selection:
Do Market Gap Analysis:
- Market Gap Analysis
| Competitor Name | Top selling features | Pricing Category |
| Bose | A – feature/unique | Premium |
| Sennheiser | B – feature/unique | Mid |
| Boat | C- feature/unique | Affordable |
Evaluate Trends, gaps in the market, and the right pricing.
Strong and good quality of the product > fewer returns more engagement.
Spend a lot of time at this stage, as your success depends on this.
After this stage, it’s 80% marketing and 20% operation effort.
Another important metric to keep in mind is the unit economics of the business. This includes factors such as the average order value (AOV), cost of goods sold (COGS), gross margin, and customer acquisition cost (CAC). A higher AOV indicates customers are spending more per order, while a higher gross margin indicates profitability and efficiency of operations. Effective management of COGS and CAC is also crucial in ensuring a healthy bottom line.
By keeping these metrics in mind and actively tracking them, businesses can make informed decisions that lead to growth and sustained profitability.
Link: Unit Economics Excel Sheet by Kshitiz Sanghi
AOV – Average Order Value: The average amount of money spent by customers in a single order on a website or mobile app.
- Gross Margin: It represents the difference between the revenue generated from sales and the direct costs associated with producing or delivering those goods or services.
Gross Margin = [total revenue – cost of goods sold (COGS)] / total revenue Gross Margin percentage.
- Cost Of Goods Sold: COGS is a financial metric that represents the direct costs associated with producing or acquiring goods. It plays a vital role in determining the profitability of a business and serves as a foundation for pricing decisions and operational efficiency.
- Customer Acquisition Cost (CAC): It refers to the amount of money a business spends on acquiring a new customer. Managing CAC is crucial for businesses to ensure a healthy bottom line. A high CAC indicates that the cost of acquiring customers is exceeding the revenue generated from them, potentially leading to financial challenges.
How is AOV directly affected by gross margin and logistics cost?
- The Average Order Value (AOV) in e-commerce is influenced by both the gross margin and logistics costs.
- A higher gross margin indicates greater profitability and allows businesses to offer discounts and promotions without significantly impacting their profit margin.
- This can encourage customers to make higher-value purchases, increasing the AOV. On the other hand, high logistics costs can increase the overall price of products, potentially discouraging customers from spending more and reducing the AOV.
- By effectively managing these factors, businesses can optimize AOV and drive higher revenue per order, contributing to the success of their e-commerce operations.
Channel margins(fee charged by Amazon/Flipkart):
11 Reasons For E-commerce Platform Failure:
- Ignoring Omni Selling.
- Neglecting SEO Strategies.
- Lack Of Valuable Content.
- Choosing an Inappropriate E-commerce Platform.
- Failing To personalize the shopping experience.
- Not utilizing analytics.
- Lack of credibility signals.
- Neglecting Continuous Improvement.
- Lack Of Focus on Customer Experience.
- Poor Product Quality And Unmet Expectations.
Best Sources To Learn From Before Your Start:
- Youtube Video: Link
- Excel Sheet – Link
Conclusion:
In summary, e-commerce has revolutionized the way businesses sell products and services, offering numerous advantages such as global reach, expanded customer base, increased sales, and improved brand recognition. The e-commerce market in India is thriving, presenting significant opportunities for profitability and sustainability.
Success in e-commerce hinges on key metrics such as market demand, profitability, competitive advantage, customer satisfaction, and personal interest in the chosen product. Conducting market gap analysis and competitor pricing evaluation helps identify trends and pricing strategies.
Monitoring unit economics, including metrics like AOV, COGS, gross margin, and CAC, provides insights into profitability and operational efficiency. Fashion, electronics, home goods, groceries, beauty, and health are prominent e-commerce segments in India.
However, neglecting important aspects like omnichannel selling, SEO strategies, valuable content, appropriate platforms, personalized experiences, analytics utilization, credibility signals, inventory management, continuous improvement, customer experience, and product quality can lead to e-commerce failure. Businesses must address these challenges to succeed in the competitive e-commerce landscape and capitalize on the vast opportunities presented by online shopping.
