Ecommerce businesses are dynamic, and you have an option of selling through different marketplaces, shopping carts, and other channels. Here’s a quick rundown of the different ways you might be selling online.
Single Branded Store.
This is actually quite similar to hanging out a shingle in the days of yore. It’s just online. You start by creating a website and customizing it to make it your own. You include a shopping cart on your site so people can click and buy products directly from your website. Most new ecommerce sellers will use a popular integrated website/shopping cart for this purpose such as Shopify, BigCommerce, WooCommerce, or Amazon FBM (Fulfilled by Merchant).
- You can focus on just one brand
- You have control over the content on your website
- Sales tax responsibilities are much more straightforward and easier to manage (you’ll typically need to file in just one state)
- You are responsible for your own SEO and social media exposure, and helping people find your products may be challenging
- Amazon FBM comes with high merchant fees (15%+)
Single Branded Store + Point of Sale.
This business type may start with an online store and then add an in-person retail component (or vice versa). The “Point of Sale” (the in-person shop) may take a couple of different forms:
Retail space – this is your traditional local shop. You rent or own an actual storefront, and customers come to you.
Pop-up store – this is becoming an increasingly popular option with online sellers due to the relatively low overhead cost. These online sellers will order samples of their products and take them to a farmer’s market, festival, or flea market to see which products sell and which ones don’t. Then they’ll take the results of that market testing to determine which products to order and sell online.
Some of the most popular Point of Sale systems used by these sellers are Shopify POS,Vend, Square, and Lightspeed POS.
- You get direct interaction with your customers
- You can get real-time feedback
- More personal than online selling
- You might have to track cash sales
- You may have multiple merchant accounts to track, one or more for each channel
- You need to be careful not to “double-sell” inventory - if you take some of the online inventory to a pop-up store, make sure you don’t also inadvertently sell the same product online
- You will have to collect sales tax on every in-person sale
There are two types of selling on Amazon. One is with your own store where you are the one who fulfills the orders (FBM – Fulfilled by Merchant) and the other is where Amazon basically does all the work for you (FBA – Fulfilled by Amazon). The beautiful thing about using Amazon FBA is that once you send in your products to Amazon, they take care of the rest. They will automatically package and ship your products to your customers with little to no intervention on your part.
- Easy! Amazon does most of the work for you.
- You need to do very minimal marketing
- Only have to deal with inbound shipping
- Amazon has LOTS of rules
- It’s easy to accidentally get suspended, and if this is your only online store, a suspension can literally put you out of business
- Lots of competition which results in a “race to the bottom” on pricing which reduces your profit margins
- Sales tax becomes a nightmare - selling on Amazon FBA means you may have sales tax collection and filing requirements in 14+ states
Multi-channel refers to a combination of any and all of the above options. You might sell on multiple shopping carts and marketplaces (Shopify, BigCommerce, eBay, Rakuten, Amazon FBA), or you might have multiple stores for different market-targeted brands (i.e., two separate BigCommerce sites for different markets, socks for kids and socks for soccer).In either of these scenarios, inventory management is a core requirement, and you’ll need a cloud inventory solution to push your available quantities to multiple channels.
- Diversified risk - if one store (i.e., Amazon) gets shut down, you have other channels you can continue to sell on
- Potentially increases your sales and brand awareness
- Complexity of your business greatly increases
- Increased work to manage and maintain multiple sites
- Tracking inventory becomes more challenging
- Sales tax management is complex
The last type of online ecommerce relates to the sale of digital goods. These are intangible products such as webinars, music, software, subscriptions, and so on that don’t have a physical form and can just be streamed or downloaded instead of shipped.
- No inventory to manage
- Some come with recurring revenue in the form of subscriptions, so one sale can lead to sales in perpetuity
- Easier and real-time fulfillment
- Digital rights management (i.e., locking out non-paying users)
- Managing contacts and subscriptions
- Managing referral or affiliate commissions
- Sales tax regulations - different states have different rules regarding digital goods
Understanding your business, the pros and cons of each type, why and how to change from a single channel to multichannel, and implementing the best backoffice solutions, are all critical to your success as an ecommerce seller.