The Pros and Cons of E-Commerce
E-commerce is taking over the US market in both manufacturing and sales. In fact, in the last report published by the US Census Bureau, an estimated it was estimated that almost 65 percent of manufactured goods were shipped through e-commerce. This could be because of the rise of the US economy, or it could be because so many businesses now look for ways to expand to the online market. But more than likely, it’s a combination of many different factors. Whatever, the reason, the numbers can’t be ignored. And if you own a business, it may be time to expand to online sales. Just make sure you know all the pros and cons upfront.
One of the pros of e-commerce business is the fact that you can cut down significantly on employee expenses. This doesn’t mean you won’t have any, but it does mean you can reduce them. For one thing, you may not need full-time staff. Depending on your type of business, you may even be able to hire virtual employees who work for you as needed. With an e-commerce business, you also won’t usually have to provide employee benefits, such as health insurance or paid time off.
Accounting for e-commerce can be quite a bit different for e-commerce than for brick-and-mortar stores. Some might consider this a disadvantage, but truthfully, it’s just an adjustment. For one thing, state tax laws can vary, making collecting sales tax online a bit tricky. But purchasing goods for resale can also come with its own set of complications. For example, your business may be tax exempt for some purchases in some states, but liable for it in others. In order to make sure you’re compliant, make sure you hire a company, such as fully accountable e-commerce accountants. This can avoid complications both now and in the future.
Scaling your business
Counted in the “pro” column is the fact that it can be much easier to scale your business with an e-commerce platform than in a brick and mortar store. Rather than just being able to serve people in your area, you can market your business to the whole world. Depending on the type of business you have, you may also be able to use platforms like eBay or Amazon to sell your product. And these sites already have their own built-in marketing and audience to help you scale your business quickly.
One big disadvantage of e-commerce is the delayed delivery of products. And studies indicate that our need for instant gratification is huge. But even with the fastest delivery, your customer still does not get the immediate gratification of taking the product home immediately. This is not always a deterrent to sales, but it can result in more returns because of buyer’s remorse.
A definite win for e-commerce over brick-and-mortar is the need for less physical space. You won’t have to pay rent for a building to display your products. You won’t have to worry about parking or room for customers. And if you dropship, you won’t even have to have a place to store your inventory.
And lastly, probably the biggest advantage of e-commerce is the ability for greater inventory reduction. If you’re selling your products in a brick-and-mortar store, your customer base is limited by your surrounding location. But if you sell your products online, you are much more likely to sell all your inventory. This is especially true if you buy liquidation products in bulk. You may have only one or two local customers interested in the item. But if you list it online, you’re expanding your potential customer base by millions.
Claire Peters is a contributor to the Los Angeles Post-Examiner and Baltimore Post-Examiner.