On Monday, 11th November, it was reported that one of the leading eCommerce websites sold out billions of dollars’ worth of products within hours. If we are counting in the freight costs, the energy bills, the advertisement costs etc that are incurred by such a massive sale, it is safe to predicate that this single website has made at least 1 per cent of national GDP on that particular day.
Not long ago, buying and selling stuff on the web was still an obscure thing to do. Actually, an online shopping system was first used in early 80s. But now it is a multi-billion business that could weigh as much as the traditional commerce business. It even boosts up the development of many other online applications such as electronic banking, electronic payment, instant messaging, content management, stock management, post tracking and so on. E-commerce also has derived many business models such as B2B, C2C, and B2C etc. And the most recent e-commerce trend is not the group buying any more but the mobile commerce.
Because of e-commerce, for most men the good news is that they do not need to spend a lot of time go shopping with their significant other; the bad news is that it increases the chance of getting bankrupt or getting dumped.
Inspired by the success of many e-commerce sites, I was asked how to build an e-commerce site. First, let’s make clear that many e-commerce sites are there more for the purpose of branding and information. For example, people would go to a BMW e-commerce site to view and compare its parts or souvenirs;you wouldn’t really expect massive sales on that.
In addition, not everyone can afford an e-commerce site. Licensing a site on an e-commerce platform provider would cost you at least hundreds of dollars per annum. Building and maintaining a customised one would cost you endlessly more. One of the retailers that I’ve heard of spent tens of thousand dollars upgrading their customised e-commerce platform just to cope with their new64-bit infrastructure.
So in case you really want to have an e-commerce site for your own. There are four major parts of the puzzle you need to solve. Number 1:IT infrastructure – where do you want to host your site and the product data.2: Website design – it decides the site’s look and feel. 3: Product stock management – manage your product pricing, location and quantity that could maximise the profit. 4: Payment and delivery – this is the key part as well as the constraint of any e-commerce site; and it usually does not depend on the site itself but how well it integrates with the third-party provider.
Last, a piece of fun fact about e-commerce: Although it launched in 1995, Amazon wasn’t able to turn a profit until 2003.
Last time we were talking about the requirements for building an e-commerce site from the technical perspective. Certainly there are more hurdles before launching one.
From the financial perspective, e-commerce presents a major challenge for tax administrations, given the often multi-jurisdictional nature of the transactions and the potential anonymity of the parties. For example, if you purchase something from Amazon US site from China, it is a question whether you need to pay US sales tax or Chinese sales tax. Also for those who sell things on eBay, do they need to pay trading income tax?
Another tricky aspect is the virtual payment. Credit card payment starts to gain trust from consumers. However reliability and privacy requirements vary from time to time, place to place. For example, in some country a website is not allowed to retain any payment information such as credit card number or holder’s name unless the website passes certain financial institute’s compliance audit.
E-commerce also changed the landscape of consumer experience, which is something very closely related to marketing and sales. Especially,when it comes to the ugly part of returning goods or refunding, it has to be treated differently from the traditional way. Even dealing with the day-to-day dispatch of goods is not an easy task. Customers are generally expecting faster and safer delivery at all time.
Anyone who passed all the hurdles is almost guaranteed to make money. In recent years, all the e-commerce sites that I know about enjoyed at least double digits growth every year.