Last night at a dinner party, I spoke with someone who makes a living selling relatively cheap goods on eBay. As soon as I told him that I make websites for a living, he asked me if having his own personal storefront could improve his business. After hearing his current pain points and coming up with a quick strategy to improve on them, it hit me that there are a lot of other small businesses facing the same dilemma: is it worthwhile to invest in your own storefront?
Right now this eBay retailer has a fairly common business plan for online merchants. He gets these random goods (whatever is hot at the time) at bulk from wholesalers, lists them each individually on eBay and spends a lot of time handling sales and shipping to customers. Recently, however, competition has drastically increased from US and foreign-based wholesalers alike - items are now being shipped directly from factories in China. Even if he reduces his profit margin, his prices still end up being higher than his competition on eBay. With eBay and PayPal fees, his profit margin has been severely reduced and he is unable to offer the great deals he once had. Still, over the past years he has sold tens of thousands of products to different customers around the world and has saved their contact information, however it's scattered between PayPal, eBay and his own personal records.
So from that, we can extrapolate a few problems:
- Time - he has to invest a lot of time into the logistics of his business, including making the individual listings, handling sales and shipping to customers
- Competition - high merchant fees make it hard for him to be competitively priced with other factories and wholesalers
- Marketing - he has a list of tens of thousands of emails but does not know what to do with them
He knows that having his own storefront has the potential to make life easier for him, however he does not yet fully understand how, so he's been putting it off for years.
How an Online Store Can Help
Having an online storefront for his business could help tackle the majority of the problems he is currently facing. First off, instead of listing each product individually for better visibility on eBay, he can add and sell items at bulk and focus on marketing the website itself (rather than individual products). He will still have to deal with support and shipping at first, but there are ways to speed up that process as well (automatic shipping label printing, better support systems, etc.). Having his own website would remove eBay from the equation completely, allowing him to save that commission fee and use it for something else (like a sale). If he still keeps his profit margins low, he would gain a significant competitive advantage by lowering his prices.
Finally, he would have a centralized database of all his customer information, which is vital for any retailer. Take a look at Newegg, for instance - they send newsletters nearly every day that promote products that are on sale to thousands of their customers. If even a minuscule percentage of them purchases some of those products, their efforts will have been completely worth it.
The Game Plan
I made several suggestions over the course of dinner, offering some free advice on how I think he should/could potentially handle the situation. Here is what I came up with:
- Set at least 2-3 months aside (just mentally, don't have to stop all other work) and be prepared to spend a lot of time and effort during this time
- Hire a developer/designer and have them make the online store, invest in a strong domain and reliable hosting (~ 1-1.5 months)
- Add all products to the store at current eBay prices; use several pictures, strong wording
- Cross post items to other available marketplaces, including Amazon (with a link back to your storefront in your profile)
- Start an AdWords campaign for the hottest selling products, linking to the storefront product page
- Gather all existing customer e-mails and send them an announcement of your new storefront, some pictures/names of current hot products and a coupon code they can use (much like Newegg)
At the end of our 30 minute discussion, the retailer asked if I was available to take on the development and design of this project.
I wanted to illustrate two things with this article:
- The process in which I try to identify problems and use my background knowledge to come up with a solution
- How getting new web design/development gigs can be passive and come about almost unexpectedly
Lastly, I made it clear to the client that although I've been making websites for a long time, I've only done a handful of e-commerce sites, so what I told him (and have stated above) is based solely on my experiences and may have flaws in it. It will undoubtedly take more research on my end to solidify this game plan, so take my advice with a grain of salt.
Do you have any suggestions for retailers considering their own online shopping cart? Are there better ways to market that I'm completely forgetting? Did I completely miss the ball with everything I've said? Leave your thoughts in the comments!