Estimated reading time: 12 Min
Are you thinking about starting your own ecommerce? There are different aspects that you should consider. Business models, costs, commissions, logistics, platforms, customer satisfaction, are just some of them, our Co Founder and COO at Cubbo, Josu Gurtubay, has created a comprehensive guide with the most important features you should consider, join us on this journey and take note.
7 most important aspects of the e-commerce world
1. Business models and costs
Currently, there are two online sales channels that support 80% of demand in Latin America, the Marketplace and the DTC (Direct To Consumer), to better understand them, you can think about the differences between: being in a department store vs. being the owner of your own store, now let's explain them better:
Linear Business — DTC: your own eCommerce, your own.com, in which you have a direct relationship with the buyer; the customer gives you money and your online store provides them with a product or service; being your own channel, you can start generating value right from the start.
Marketplace: is a distribution channel where the customer and the supplier come together. Marketplaces such as Mercado Libre, Linio, Amazon, Costco, Coppel, and many others charge a commission to serve as intermediaries to generate the sale. Sometimes they buy the inventory, sometimes they receive it on consignment and until they sell it they pay the ecommerce.
When starting an online store, you don't yet have the recognition to generate high sales volumes, in addition to having your own.com, we recommend that you also sell your products on the Marketplace, taking advantage of its recognition to publicize your brand.
Which one to be in? Depending on your niche market, you can start with several and see where you get the best results. You can start with your DTC and Marketplace at the same time, a good strategy is to let the customer know you on the Marketplace, but keep buying from you ecommerce.
Cost structure by sales channel
Find out how much it costs you to sell on your own DTC vs. the marketplace.
Let's start by describing how the operation can be carried out. When you have a ecommerce and you don't outsource services, you are solely responsible for delivering; logistics planning and delivery compliance depend on you. In the case of the marketplace, there are 2 operating options:
Fulfillment: in this modality, the marketplace is responsible for the entire process of storage, readiness and delivery of the product. This service is provided by some brands such as Amazon to those who purchase their Prime Fraud or Mercado Libre badge in their Mercado Envios Full plan.
Fulfilled by Vendor: in this case, the seller is the seller, not the Marketplace, even so, the latter oversees that it is made within the times contemplated in the delivery promise.
Now, let's go into detail, these are the costs that your ecommerce
- Fixed: The Marketplace and the DTC have similar fixed costs, for example, Amazon and Mercado Libre charge a fixed amount of $600 pesos per month for the use of the platform. In the DTC we can talk about approximate fixed costs starting at $750 pesos per month for the use of platforms of ecommerce like Shopify.
- Sales commission: when you make a sale through a marketplace, you must pay a commission, which is usually between 15 and 20% of the value of the product; in your ecommerce You don't pay a sales commission, but if you use the platform, for example, in Shopify, depending on the plan, you can pay between 0.5 and 2% for the sale of each product, which is charged for the operational and technological support they provide; there are platforms that don't charge you anything, but you'll have other additional costs such as servers, configuration tools and, most likely, a person or technology team, among others.
- Payment gateway: it is the banking terminal of your online store, in the marketplace the sales commission includes the payment gateway, in the DTC it is your ecommerce The person responsible for paying for it usually charges you 3% or more of the value of the product sold.
- CAC: the Cost of Customer Acquisition is one of the most important amounts to consider; in the marketplace you can invest in a pattern to make your product move more, usually it will be between 5 and 10% of the cost of the product, in some cases, up to 50% when you want to announce a launch. In DTC, the guideline can be especially important if your product is not well known, so you will have to invest in digital marketing and standard campaigns to publicize it. The value of the investment depends on your budget, the channel chosen, the reach and results you are looking for.
- Storage: How much does it cost you to store your products? In the case of a Fulfillment Center, the value of a cubic meter is close to $500 pesos or more. If the product doesn't rotate, marketplaces will “penalize” you and “push” the inventory out of the warehouse, increasing the cost of storage up to 10 times. In DTC, this value can range from $200 to $350 pesos per cubic meter.
- Operational: refers to the cost of management and enlistment tasks (receiving, filling, packing, etc.) that are carried out before shipping; the Marketplace with Fulfillment It includes it in the price of the shipment. In the case of the DTC, the operating cost can be between $5 and $20 pesos per piece, depending on the type of product.
- Consumables: these materials used for packaging products, such as boxes, envelopes, bubble wrap, etc., are usually given away by the Marketplace, when the operation is on your own, it can cost you as little as $5 pesos per piece.
- Shipping: Marketplaces are generally quite cheap when it comes to shipping nationwide. When it is a unit piece, shipping can cost approximately $70 pesos. When you do them from your ecommerce, shipping may be a little more expensive, around $75 pesos, however, you can include more pieces for the weight covered by the guide, and lower the price per piece.
- Repurchase: How many out of every 100 orders per month are there returning customers? This indicator is super valuable, as you won't be paying the CAC to attract new users. In the Marketplace you always pay the same commission for the sale, in the DTC your margin increases with the repurchase.
2. Types of premises
In the world of sales we can find different scenarios, in traditional retail a physical point is the kiosks, the mall, the stores, etc., but in the ecommerce, the point of arrival is the platform known as shopping cart, where you can do custom development or contract SAAS services, a software that already has everything in place to set up your online store.
Internal or custom development, requiring a full team of programmers, resources and investment, was common a few years ago, when shopping carts didn't exist. With the current alternatives, our recommendation is to choose a SAAS such as Shopify, where you can manage your store, without the need for other areas or specialists, as is the case with internal developments (unless you are an expert in the field). In the world of ecommerce everything is agile and fast, the more dependence you have on the technology area, the slower the process will be.
Another SAAS platform option is WooCommerce, a free tool that requires other additional investments for the configuration of the store, such as the server, the support of a technology area, the plugins, etc., you will also find providers such as Prestashop, Magento, Vtex, among many others, which offer different advantages and services, depending on the type of ecommerce.
From Cubbo, we are preparing a super article, where we will tell you the pros and purchases of the 5 platforms of ecommerce most common in Latin America, you will soon find it on our blog.
3. UI, UX interior design
By this we refer to the experience generated by the ecommerce in the user, based on aspects such as photography, the catalog and the usability of the store. At a physical point, you enter, you see the place, you feel, you smell, you touch the product; in the digital world this does not happen, so you must find a way to provide a good shopping experience, having a visual and modern appeal, facilitating the buyer's navigation, having clear and concise information, among other characteristics.
80% of people seek to have a previous interaction, before making the purchase in the ecommerce. It is important that you can resolve customer concerns, only with the content, you must have enough information to answer everything the buyer wants to know, if you have free shipping, if you offer exchanges and returns, the characteristics of the product, etc., the page must be as complete as possible, and also have communication channels such as chat or WhatsApp, since there is no face-to-face advisor to answer questions, as is the case in the physical point.
Tu ecommerce must be an APP, that is, Trouble Proof, it cannot happen that the customer does not know how to make the purchase or find a product, that they notice inconsistencies in the information, or that they face refusals of their card due to the lack of compatibility with the payment method, leading to multiple purchase attempts that end in the withdrawal of the card.
Analyze Your Conversion Rate
For every 100 people who enter your ecommerceHow many are buying from you? Measure your conversion rate and identify all the changes you can make to improve your percentage; an increase of a single point generates significant impacts on sales. Depending on the industry, the average conversion rate is between 1 and 3%. In other words, out of every 100 online visitors, between 1 and 3 will buy from you.
There are tools that allow you to improve your conversion rate, here are two of them:
A/B Testing. If you place a red button and a green button, which one do you sell the most with, which one do your buyers click the most? A/B testing allows you to compare two versions of something, which one is the most effective in achieving your goal.
Hotjar: this tool allows you to know how the user behaves within the ecommerce, which are the buttons with the best interaction, the most viewed pages, up to what place on the page the customer observes, among other information, is a tool that you can use for free in their basic plan and will be very useful to you.
4. Increased flow
If you want to sell more, you must increase the number of visitors to your ecommerce and improve your conversion rate. It's no use having the best store, the best product, if no one knows you, if no one comes to your store and buys from you.
How do you do it? With SEO optimizations, which allow you to position yourself in the Google search engine, creating content for the client that has the potential to go viral, running advertising campaigns to generate traffic to your ecommerce, structuring a strategic content plan for social media and identifying which of these channels is most effective for your objective, building communities in these environments, and finally, with content marketing, producing valuable content for the audience you want to reach such as articles, podcasts, videos, etc.
All these strategies will allow you to direct the buyer to your page; for the execution of each of them you must determine a budget, the total amount invested divided by the number of customers, will give you an estimated purchase value per customer. You must also stipulate measurement indicators (KPIs), evaluate them and determine which strategy works best for you, to focus on it.
5. Point of sale terminal, different payment methods
In a physical store, payment for a purchase is usually made in cash, a method that in the ecommerce it is not that easy to implement, because the traditional way of buying is through an electronic transaction with a debit card, credit card or PayPal; this is where an essential aspect becomes relevant: the banking of the population, where in the case of Mexico, only 37% of its inhabitants are banked, which means that if you only have digital payment alternatives, out of 100 people who try to buy from you, only 37 will, due to the lack of a payment method according to their possibilities. It provides some alternatives for unbanked users such as SPEI transfers, OXXO payments (although only 20% of them are finalized), COD or cash on delivery, so you can finish the sale with a larger number of visitors.
In addition to the above, there is the issue of fraud, a common behavior in Latin America, in the Mexican case, for example, we found that 25% of online transactions carried out have a risk of fraud; a fairly negative figure. Can you imagine that 25% of the sales you make through your store were fraud? It would be a serious blow to your profitability! To avoid this type of situation, gateways such as PayPal or Mercado Pago have developed some strategies, where, due to an increase in commission, they give you certain guarantees in the face of the occurrence of this type of event
6.In-store personnel (ecommerce operational team)
El Fulfillment and customer satisfaction are often the main headache in ecommerce, after selling, you must go through certain stages before making the delivery, processes that can affect your reputation and harm the sale, if the operating team does not develop them efficiently. You must ensure that everything works perfectly for your buyer to be a happy customer, with the service you offer.
Among the five main reasons why people buy online, the logistics issue is involved: being able to receive their purchases at home, saving time and accessing products that they can't find in the physical store, the other two criteria correspond to the comparison of prices before buying and the accessibility to products that are not sold in Mexico. If your logistics operation is the best, you will already have earned 3 of the 5 preference factors.
Another point to consider is the issue of exchanges and returns, where the logistics issue and the way in which your operating team develops it also intervene; in this case, we find that there is a fear of buying among online consumers because of the possibility of making a mistake when choosing the product, especially if they are not sure that they can return it or change it if it is not to their liking, implementing and making this policy visible will provide a greater guarantee to your customer.
If we talk about exchanges and returns, Mexico has fairly low indicators, since this practice is not regulated in the country, it depends on the ecommerce whether or not you want to offer this benefit; contrary to what happens in other territories such as Europe, where by law, it is mandatory to provide this service; thanks to which, in this territory, 30% of requests for exchanges and returns of the total purchases made, even reaching 40% in countries such as Germany, that is, of every 10 products purchased online, of 4 are requested an exchange or return.
El Fulfillment must guarantee customers an excellent delivery experience. How? Delivering the product in perfect condition, meeting delivery times, providing traceability and tracking of the order, supporting it with an exchange and return policy, among other aspects, if you ecommerce If you have these differentials, you will be doing things right.
Why is the logistics operation essential to survive in e-commerce?
75% of the success of your online store depends on knowing how to execute your logistics operation. The other 25% will be given when your product is accepted by the market.
Did you know that between 75 and 90% of SMEs fail before the 2nd year of operation, and that 75% of the causes for this to happen are related to problems in the execution of the operation. If you don't deliver on time, you lose customers, if you don't have customers, you don't sell, so you don't receive income.
For this not to happen, it is essential to have a scalable operation to withstand an increase of 100x, from one day to the next, the ecommerce it's that explosive. In traditional retail, you can have an increase in demand of 1 or 2x and satisfy it with available inventory, while, in ecommerce, you can have peaks in demand of 10, 20 or 100x in a day and that's where the logistics issue gets complicated. If you don't have the capacity to respond to demand, the joy of increasing your sales will be overshadowed by the concern of looking bad on your customers.
The operation of any ecommerce Selling products begins with the receipt of the product, its storage, the generation of the order, the assortment, shipment and delivery, a process that can be a headache and chaos, when you don't have the resources or the experience to carry it out.
How to develop your operation?
You can do it internally (In House) or outsource it. In the first case, if you are not an expert in logistics, the time it will take you to learn and bring your In House operation to an optimal state will cost you errors and money, on the other hand, if you outsource, from day one you will have the best practices, allowing you to save on time and assets.
When you carry out the operation internally, you pay a lot of fixed expenses and your unit cost is more expensive, on the other hand, when you outsource, you know what your cost will be over time. Outsourcing is a worldwide trend in the U.S. In the US, for example, 85% of transportation services and 78% of warehousing are contracted with specialists (The Logistics World), thus the ecommerce can focus on other areas such as commercial or marketing, to continue attracting customers. If you delegate the operative part to an expert, you'll do it right from the start.
What is the best way to trade?
Focus on growing by outsourcing your operation, there are two ways to do this: outsourcing the entire process or in a hybrid way, if the ecommerce It's small, you can handle the storage with the internal space you have, and outsource the last-mile or parcel delivery service, when you don't have enough, that is, when you have between 50 and 100 monthly orders, the best thing you can do is outsource the entire operation. In doing so, you should look at the following:
Look for a strategic partner with whom you can establish a long-term relationship, it is essential that they have common objectives, that he wins when you win. In addition, you must be very careful with the hidden costs, those “small letters of the relationship” so that later there are no surprises, for example, “at Cubbo we are very transparent, from day 1 we inform the client in the contract, about all the situations that may arise and how they will be addressed”.
Second, look for a specialist, if you are going to outsource your logistics of ecommerce, you can't go with a company that doesn't know about ecommerce, you are going to experiment with your company, to improvise, to make mistakes and that will be very expensive for you. The logistics operator that serves traditional retail is different from an ecommerce, with the latter, that is, with a Fulfillment, you have competitive differentials such as unlimited operational capacity, better and more professional practices from day 1, efficiency, quality of service and lower cost, aspects that will undoubtedly take your operation to another level.
Finally, be clear about its scope, for example, when you operate and outsource with packages, you know that the reach of your supplier will be the last mile process, when you operate with a Fulfillment Center like Cubbo, you know that from the moment you deliver the product, they will be responsible for the entire process, until its delivery to the end customer.
7. Customer Satisfaction
One of the biggest differentials of ecommerce It is the closeness you have with the end customer, in traditional retail, the consumer buys in the store and you never see him again, you hardly know if the product met their expectations or not, on the other hand, in the ecommerce, you have their contact details, which allows you to have feedback on your product, to know what they liked and what they didn't in order to improve it, this information is worth gold, make an effort to know their opinion and take corrective actions.
“For our most successful clients at Cubbo, as well as for us, the priority is the customer and their complete satisfaction.” This is an aspect that can determine the success or failure of a ecommerce, “obsess” with your customer, make it a priority in your online store.
The top selling trigger in ecommerce
We have already talked about logistics and its scope at the consumer level, what is behind the process, now, we will talk about a certain characteristic that the customer is looking for to buy from you.
As the most important sales trigger, we find free shipping, the buyer doesn't want to pay for shipping, he wants all his money to go to the product. It's a conceptual issue, when they tell you that X is worth $95 pesos plus $5 for shipping, you immediately reject the purchase, you don't want to pay more. On the other hand, if they tell you that X is worth $100 pesos and that shipping is free, you immediately receive a benefit and complete the transaction. You can include the shipping value in the product or offer it after a certain sales amount, find a way to offer free shipping, without affecting your profitability.
We hope all this information and tips that we have shared will be of great help in creating your ecommerce, make the best decisions and start developing your store now. We have a video that illustrates all this content quite well, visit our channel: https://www.youtube.com/watch?v=ROVgQAotcRI
Are you looking for an ally to help you improve your delivery process, enhance your compliance and customer satisfaction? , do not hesitate to contact us, we are the best Fulfillment center for ecommerce in Mexico and Colombia, you just have to click Here.
