Are you losing money on Amazon and Flipkart over selling directly?

In our earlier post – Business not online? Get ready to pack up – we shared that if you’re in the business of selling products, there really is no excuse for you to not have an online presence. 31% of consumers indicated that online shopping is their preferred mode of shopping and the trend is rapidly going upwards.

Many retailers usually start out by listing on the online marketplaces or e-marketplaces as they are called, such as Amazon, Flipkart, Ebay, Snapdeal, Myntra, Jabong etc. What most vendors don’t realise is that there are many hidden expenses and opportunity costs that could add up to ruin your business. These expenses are especially damaging if you are a small business competing with large multinational companies who have access to the massive budgets to spend on marketing and sales.

The best margins for selling online are usually attained by selling through direct channels. These include

1. Build your own website with shopping cart facilities from scratch
2. Utilise custom built templates or platforms already available to create your own e-commerce store
3. Hire a professional to build and maintain your website (External consultants or internal dedicated employee hire)

There are significant benefits of selling through direct channels

1. Showcase entire range: With your own online-store, you have better control and flexibility over the showcasing of all your products.
2. Build Loyalty: Your own online store helps build brand loyalty. Loyal customers and repeat customers prefer reaching direct to store online and offline.
3. Higher Profitability: Around 30-40% margin of online sales are eroded in commissions on other sites. Additionally, competition driven pricing and discounting cuts into profits through marketplaces.
4. Increase your Valuations: Having your own store helps differentiate brand value and valuations flexibility, offerings.
5. Analytics can be used to Grow Business: Ability to gain insights and analytics on buyer behaviour by driving targeted online campaigns.
6. Lead generation: You have a chance to capture customer details through your landing pages and cross-sell more products.

Whether you have just one product with multiple SKUs or multiple products it is beneficial and worthwhile to build your own channels. This is especially true if you already have a loyal fan following or if your strategy involves creating a strong brand for your products.

As with anything, there are tradeoffs to this approach

1. Initial capital will need to be set aside and invested to set up the various components involved. These can easily compound if invested in components that are not right for the business.
2. A significant amount of time and energy might have to invested especially if one is learning about these tools for the first time.
3. Driving customers to the site may prove to be big challenge if the brand is not yet well established in its niche.  However, this can be mitigated by utilising the various digital marketing tools available.

Final note

If you are willing to invest the time and effort to understand and build your own online sales store, the benefits of this channel can result in a dramatic boost to your bottom line.

Remember that no matter what method you choose to go online, you don’t need to be restricted to just one channel. Selling through your own e-commerce store doesn’t mean that you cannot also sell your products through a marketplace to reap the benefits of both; Nor are you restricted to listing in only one marketplace. Many successful retailers, especially the larger ones, prefer to be involved in multiple channels. However, each additional route takes time, money and energy to understand its processes and maintain it. What is important is that you take the time to consider the options available and formulate a strategy that works the best for YOUR requirements. I will continue to tackle the pros and cons of each strategy, along with the tradeoffs in further posts.