The E-commerce Sector

The e-commerce sector is undoubtedly one of the fastest-growing for several years now. Born when websites made it possible to sell products or services directly from web portals, it has become increasingly important, reaching an annual turnover that, globally, has exceeded 2500 billion dollars.

This sector includes not only online stores for consumer sales but also those dedicated to B2B and the sector of services offered via the web, from booking flights and vacations to online courses.

Past

In the early stages of their history, e-commerce had to face many challenges, related both to technical aspects and consumer habits. The internet was not as omnipresent as it is today, where a phone is enough to access it, and even those who could do so hardly thought of making purchases on a website.

On the other hand, the potential market size was practically unlimited and allowed many entities to grow enormously.

Present

Over time, the barriers to entering the world of e-commerce have progressively reduced to almost disappearing. Just think that today, to open an e-commerce, you do not need to know any programming language. The opening of the market and the increasing familiarity of the medium for users have led to a growth in the number of activities operating on the web to sell products or services.

The competition is therefore very high, but the market is always growing and shows no signs of slowing down. What are the strengths and weaknesses of this sector, though?

In this article, we try to analyze both to better understand which levers to work on to minimize the risks due to weaknesses and make the most of the strengths.

Strengths

Let's start by analyzing the elements that constitute the main strength of e-commerce, particularly compared to the traditional retail sector.

Compared to Physical Stores

An "offline" store requires a series of formalities and investments unknown to almost all activities managed via the web. This is due to their very physical nature, being in direct contact with people and a territory. A space is needed to carry out the activity, which has a high cost compared to that of a website, staff to manage sales, salespeople, managers, warehouse workers, cleaning services... some of these figures have a digital equivalent, but a small online store can easily be managed by a couple of people.

Accessibility

Not being necessarily tied to a territory, or at least being able to serve customers over very large areas, e-commerce has a significant advantage in terms of potential customers reachable. This allows, for example, online stores that deal with a niche of products, or even a single product, to still be successful. They can indeed be easily accessible by a large number of potentially interested customers.

Cost Structure and Selling Prices

The fixed costs, for the same number of customers reachable, are lower for an online store compared to a traditional store. This is for the reasons we mentioned earlier, in part, the store itself costs less: utilities, space for setting up, sales staff are extremely limited compared to a physical store. This reflects in the possibility of reducing the selling costs of products and gaining an economic advantage.

How to Enhance Your Strengths

On which factors is it appropriate to push to have greater competitiveness compared to competitors, both physical and not?

Compared to Other Stores, Even Online

Increasing one's ability to serve a larger slice of users is important, especially if it allows obtaining benefits in terms of supplier costs, for example, a lower cost for shipping each product due to the increase in the volume of items shipped. The main means by which one generally aims to expand the number of customers is marketing, a theme on which you can find a dedicated article here on HelpForShopping.

Spend Wisely

The underlying idea must be to have an economic return higher than the expense incurred, for any type of intervention one goes to carry out to improve the competitiveness of one's store. Whether it is an expense in advertising or a special offer or any other kind of initiative, the important thing is to spend one's money wisely. Therefore, focus on those solutions that allow you to have a significant economic return. If the discussion may seem trivial, in reality, applied methodically, it allows you to immediately filter proposals with potential from others that resemble more of a gamble.

Weaknesses

The strengths of e-commerce lie mainly in the great ability to reach potential customers at a relatively low cost. The weaknesses are multiple, and it is very important to be able to limit their effects if one wants to be successful.

Specificity: Not Everything Can Be Sold Online

Some products are difficult to sell online. The problem may be related to shipping the product, which can have significant costs, or, as more often happens, due to the difficulty of being able to choose what to buy simply based on images and description.

In some cases, e-commerce benefits from the presence of the same product within physical stores, which, albeit reluctantly, serve as showrooms where the potential customer evaluates the product by seeing it in person and touching it with their hands before ordering it online. In some cases, however, this is impossible, especially if your product is not sold through a traditional channel, and therefore the customer cannot have a direct experience before purchasing.

Competition

Products that, on the other hand, have no difficulty being sold online often cause a fierce price war among the various competitors. This is obviously a problem particularly felt by stores that cannot obtain significant discounts from the supplier for their sales volumes, and thus constitutes a substantial barrier to entry. In these cases, it is necessary to leverage other elements to secure a market share.

A direct consequence of this problem is what we discuss in the following point.

Monopolies

In some sectors, the challenge can be open and faced with the right tools; in others, however, there are Titans whose market attraction force is difficult to overcome. The problem is very much felt especially for those products with low added value, where the battle is fought almost exclusively on quantity and price.

Returns and Shipments

As if the price war with other stores was not enough, in some merchandise categories, the problem of returns is particularly important, almost inevitable. Just think of online clothing stores. It is therefore essential to have accurate control of the return rate and implement all possible solutions that allow reducing its incidence in the economy of one's online store.

Shipments also pose an almost inevitable problem compared to a physical store, namely that what is bought is not received at the moment of purchase. If for certain products the problem can be relatively negligible, this problem prevents or makes it more difficult to sell some items online when they are needed in short times.

Risk of Fraud

Although the "offline" world is moving more and more towards the use of digital payment forms such as credit cards and even apps, websites are potentially more exposed to payment fraud problems. It is very important, therefore, to arm oneself with the right tools, capable of guaranteeing payment security and protecting the store from this kind of attack. These solutions obviously have a cost, which further impacts operational margins.

User Experience

Even if the percentage of people who have made at least one online purchase continues to grow, it is not yet a simple and intuitive experience for everyone. There are several steps that can create difficulties compared to purchasing in a traditional store.

How to Reduce the Impact of Weaknesses

Once the weaknesses have been identified, especially those to which our store is most subject, we need to study solutions that allow us to mitigate their effects.

Not all points affect the same way regardless of the type of product; it is necessary to understand therefore to which ones one is more subject. A store selling Hi-Fi systems will reasonably have high shipping costs (which the physical store does not have to bear), a greater difficulty in helping the user understand which speaker to choose, and so on.

There are several possibilities and services to rely on depending on which problem we perceive as potentially more dangerous. After drafting a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats), the next step is certainly to measure one's metrics so as to have "non-feeling" parameters on which to then evaluate the capacity for improvement made possible by the various changes implemented. Some key parameters to pay attention to are the well-known conversion rate, average cart value, cost per acquisition of a single user, return on advertising spend, return rate.

Strategies to Adopt

How to increase one's competitiveness immediately within a sector as dynamic as e-commerce? We at HelpForShopping strongly believe that one of the best strategies is to have a clear and intuitive user experience, perhaps combined with product guides on sale. This can make purchasing easier and increase the conversion rate. Greater clarity and user assistance in the pre-purchase phase can also reduce the number of returns and thus allow for greater overall profitability.

Using HelpForShopping

HelpForShopping was created precisely to improve the user experience of online stores, leading to an improvement in performance through the integration of some elements of the user experience that each of us is used to when entering any traditional store.

Thanks to the help of our community of experts and a live chat loaded on the e-commerce site, the user can be assisted in selecting the product most suited to their needs.

The expert's help is crucial to reassure the user about the validity of the choice, allowing to reduce the brake on purchase due to possible indecision. In certain cases, it is also possible to generate a purchase impulse at the moment when assistance is provided by the expert. The two main effects are a higher conversion rate and, in many cases, a higher total cart value for the user assisted via chat compared to the case where they were left to themselves during the entire product search process and subsequent purchase.

Another significant advantage of a more conscious choice by the user is a lower return rate.

Are you curious to find out more? Contact us for more information about our service and how we can help you grow your online store.