Let us start with a clear idea of what digital commerce means and the issues that affect success.
What is Digital Commerce?
Here’s a definition: Digital commerce enables customers to purchase goods and services through an interactive and self-service experience. Gartner.
That means digital commerce:
- Involves a purchase of goods and services
- Provides an interactive experience meaning that the buyer can control several elements
- That is also a self-service experience with no salesperson interrupting the buyer
The purchase could be a fully online experience, as when you find and buy a service online, which is then delivered online. Or it could be partly online and partly offline, as when you order a product online which is delivered physically at your doorstep by a courier.
In practical terms, it is digital commerce if the marketing and order placement are done online. For example, you create a website describing your offer and accept orders at the site. Next, you promote the website so that it comes to the notice of those looking for your kind of offer.
Why is Digital Commerce such a Great Thing?
A business transaction involves a buyer and seller. If both of these parties receive a better experience by completing the transaction in a certain way, it tends to become a more preferred way. Let us look at the buyer and seller experiences under digital commerce.
Buyer Experience: Convenient, Personal and Private
Under digital commerce, the buyer can complete the purchase:
- In the privacy of his or her home
- Selecting what to buy and from whom, after browsing available choices and prices
- At any time 24 hours a day, 7 days a week, depending on when the buyer is in the mood and
- Pay for it in different ways – credit or debit card, net banking or even COD if available
The buyer can even select items and keep it in the digital shopping cart for days or months until he or she is ready to buy.
Seller Experience: Low Cost and Low Risk
The digital seller:
- Doesn’t need an expensive outlet in the business district. Instead, the merchandise can be stored say, in a surplus shipping container for example
- Doesn’t have to incur costs of salespersons, signage, display racks and such incidental facilities
- Can even eliminate merchandise (and associated costs such as storage space and transport) by choosing the drop shipping business model (see next section)
- Can sell to the whole world, particularly under the drop shipping model where the merchandise is shipped by drop shippers located in different countries
The Drop Shipping Business Model
Drop shipping works as follows:
- You select a product that you can market
- You find a supplier of the product who would be willing to ship it under your name and address. This is the “drop shipper” and you agree on the prices and other terms with them
- You promote the product in different ways say, by creating a website and using SEO, social media and email campaigns
- If you are effective in your promotional efforts, you will get orders
- You get payment from the customer and then pass on the order to the drop shipper, paying the price you have agreed with them
- The excess of the price you get from the customer over the price you pay the drop shipper is your margin
- If you sell in sufficient volumes, you can cover your marketing and other costs and generate a profit
There are several agencies that help you find marketable products, find drop shippers and help you create and promote an e-commerce website. So if you are ready to work at it, to go into all details and do all that is necessary, you can create a drop shipping business.
Tapping the Digital Commerce Business Opportunity
Considering the benefits to both buyer and seller, it would be safe to say that digital commerce is going to increase in volumes in a major way. It has become a great business opportunity for entrepreneurs.
However, the entrepreneurs have to attend to several important issues to tap the opportunity successfully:
- Compete on costs: Large sellers like Amazon, Walmart and Reliance can afford to organise merchandise in huge volumes and also save on incidental costs such as warehousing and logistics. A new entrepreneur will have to find some way to compete against them on costs.
- Compete on quality: The entrepreneur can seek to source a niche product for which he or she has some unique advantage, such as local availability or innovative technology.
- Build a reputation for dependability: Digital commerce has attracted its share of fraudsters, and buyers have become wary of buying from unknown sellers. A new entrepreneur will have to find a way to build and maintain a reputation for quality products and dependable delivery.
- Effective marketing: The online seller is primarily a marketer. He or she has to build a brand name, a reputation for quality and dependability, and offer some unique value to compete against big players.
Effective operations: Sourcing quality products, organising the logistics involved in delivering orders at remote places and getting paid for all deliveries are other challenges that need attention and practical solutions.
Creating a Digital Commerce Venture
A good option is to start with the drop shipping model. You will gain experience in marketing products effectively. For example, you will gain first-hand experience of:
- Products that sell well, and the prices at which they can be sold
- Creating a website that creates a desire for the products being offered
- Promoting the website cost-effectively using say, PPC, Social Media, SEO and Email
- Providing the kind of support that makes customers happy
You will also become familiar with issues of:
- Logistics of delivering the orders in a way to meet your promises
- Getting paid for all the deliveries you make
- Handling returns and customer complaints
- Ensuring quality of the products
The experience, familiarity and contacts will prove of superb value when you start your own e-commerce venture.
On the other hand, if you invest serious money in a new venture without the above kind of familiarity, you could meet unexpected problems. And run the risk of losing your investment and more.