The article is contributed by Mr. Pankaj Sharma, President – The Lexicon Group of Institutes and Chairman & MD – Pune Mirror & MultiFit.
Global is the new local in today’s digital marketplace. And, as international markets develop, we are entering a period of extraordinary growth prospects. However, every excellent opportunity comes with its own set of adversities and advantages.
E-commerce has now become a need for many organizations, so it’s critical to establish a digital marketing strategy that supports online selling. To expand, modern companies require eCommerce marketing solutions. However, the abundance of alternatives may quickly become overwhelming. The most difficult difficulty that eCommerce organizations confront these days is lowering cart abandonment rates. The average cart abandonment rate across sectors is a mind-boggling 70%.
That indicates that for every consumer that buys from you, two walk away without completing the transaction. As a result, innumerable possibilities to develop your organization, boost income, and establish a stronger online presence are lost. Due to the obvious lack of face-to-face interaction, providing excellent customer care on your e-commerce site might be difficult, but it is just as crucial as in any other customer-facing firm to make the close.
Here I will list down 3 effective methods that can help you reduce your cart abandonment rate:
Add Proactive Live Chat to Checkout Pages
Set up a friendly, proactive chat pop-up to capture the attention of visitors who have a particular question. Instead of looking for methods to contact someone, users may just write their queries into the box and have an immediate response.
Allow guests to check out
One of the most common reasons individuals abandon their carts is the need to fill out lengthy paperwork. So, if you want to reduce cart abandonment, you’ll have to avoid requiring registrations. You may still provide the option to register and even promote it with a modest additional reward. However, you must always offer an alternative. Allow customers to check out as guests.
No Hidden Charges
If you’re upfront about charges, you may even include them in your brand positioning. When clients buy with you, they can be confident that the prices they see are the amounts they will have to pay.
The article is contributed by Shivaani Jain – Co-Founder, TAGGD
In this age of ‘new kind of fashionable’, it’s no longer uncool to sport homegrown labels. Back in 1991, the Indian economy opened doors and flooded the market with foreign goods. These were mostly lifestyle brands that Indians had long heard about, but never got to sample. Liberalisation also created the conditions for—maybe even inspired—indigenous creators to later prosper at home and also abroad.
More than 30 years later, from those watershed weeks and months, Indian fashion designers – to name just one creative niche – are now making waves, among local as well as international clients. Once restricted to those with money to spend, fashion has become democratised as it has penetrated non-metropolitan India. And because it is online, it is widely available, accessible and affordable. No wonder it is being endorsed and embraced by millions who reside off the beaten metro track, who crave the same apparel and attire – casual, formal and informal – as their megalopolis-living counterparts, and also the same comforts and indulgences.
Indeed, the bigger transformation is happening outside of Delhi, Mumbai, and Bangalore. Today, it is small-town India – small in size but certainly not in aspiration – that is shaping the India of the future, in terms of what it buys and even the lifestyle trends to come. So, what a Moradabad, a Coimbatore, a Nasik and a Cuttack thinks today, India will likely think the same tomorrow.
The changing face of lifestyle
This is not entirely unexpected, but it has been hastened by COVID-19, a process quickened by families being confined indoors and thus relying on e-commerce to take care of their desires as much as their needs. The pandemic brought home to us that life indeed is short, and we might as well make the most of it while we’re at it. So, if wearing that funky outfit, or that sexy one-piece (designed by one of us) allows us to feel good, why not indulge?
Unsurprisingly, it’s the digital revolution that has made e-commerce accessible to Tier 2 and Tier 3 markets, thanks to the government’s Digital India initiative. This has enabled fashion and other brands alike to target the country’s non-metro towns and cities as future growth areas while giving the clientele here options besides the tried-and-tested names, and the opportunity to stay in touch with the latest trends in the fashion domain.
Because, when it comes to fashion, brands and collections are the same almost everywhere, and online shoppers are not guaranteed any exclusivity when they go looking to add to their wardrobes. Hence, now, they are more than willing to try out – and accept – labels that don’t come with the big-city tag, and to experiment with brands that are new to the market, and of which little is known.
In fact, the very thought of helping homegrown brands from locations off the fashion radar, in towns and cities away from the major urban centers, has empowered patrons in these places to own and wear such labels with pride. And while the brands may lack the staying power and cachet of the top-of-the-line labels, they do understand the power and magic of digital. So, assisted by on-off lockdowns and a population habituated to virtual shopping, they are evolving by adapting to the digital savviness of the consumer as well as the changing face of the industry.
The success of homegrown brands has been further driven by the ubiquity and high impact of influencers. Alongside, the rise of influencer marketing has given small-city youth a platform to leverage their presence on social media and earn a decent living. Fashion offers rewards as much as it lifts spirits and boosts confidence.
The well-heeled and well-travelled may still opt for high-street chains such as Zara, Marks & Spencer or H&M (among many others) but a growing number of Indians are much less hung up about the ‘name’ than their predecessors once were. And the reason behind this change is the fact that there are many more indigenous designers and labels out there, a majority of them boasting creations of great standards, and more than capable of giving British, European and American brands a good run for their money.
Moreover, these made-in-India brands are nowhere near as overpriced as some of their international counterparts are. In fact, they are very reasonable on the average middle-class pocket, offering fashion and lifestyle that is affordable for you and me.
The metros may be where all the action is, but hidden from the eyes of many metro denizens is what’s happening in India’s Tier 2 and Tier 3 cities. Already, girls and boys from these urban spaces form a sizeable chunk of service economy across the country. This is a demographic that is growing, and it is one that will constitute a greater part of the workforce of tomorrow’s India. And, as their profiles grow, so do their ambitions. These confident Indians seek nothing but the best—in clothes and accessories, in gadgets and cars, in holidays and experiences.
There are e-commerce marketplaces and e-retailers successfully catering to and answering this swelling demand. Yet, while women’s wear and menswear might make up the bulk of the sales, Mrs and Mr are just as interested in jewellery, cosmetics and home décor—and when it comes to clothes, their junior or teen daughters and sons don’t want to be left behind.
It really is a whole new ecosystem – of hip and homegrown fashion and lifestyle brands, and their customers who are looking to keep themselves up-to-date with the latest trends. And in this ecosystem, the fashion influencers are key facilitators, playing an important role by sharing styling ideas and tips—to bring out the best in you, to make you look good.
Thankfully, gone are the days when fashion in India was a preserve of the elite and the wealthy, and that is surely for the better. Because its increasing inclusivity has exposed the majority of Indians to lifestyle choices they never had. It’s of little surprise, then, that homegrown brands are making a beeline for Tier 2 and Tier 3 cities, for it is here that cash registers are ringing at their loudest. When it comes to fashion, there’s no more happening place in the country than the small-town India of big dreams.
We often come across the question of whether e-commerce or retail is best for a business. E-commerce is a replica of business that enables individuals and companies to sell their services or products via the internet. On the other hand, retail refers to the brick and mortar businesses, in which individuals sell their goods or services from person to person in shops, malls, and localities.
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According to Statista 2021, total retail sales, both online and offline, amounted to 24.2 trillion USD, out of which 19.1 trillion USD was generated by the brick and mortar retail channel and around 4.9 trillion USD was generated by the eCommerce sales channel. In the same year, global retail sales accounted for a growth of 9.7% as a whole and eCommerce accounted for around 19.6% of total retail sales.
The digital form of business has seen a great increment specifically in this pandemic. But at the same time, the heavy revenue generated from retail cannot be ignored. In this article, we will discuss different factors that will help you know what is best for your business between eCommerce and retail.
Retail Ecommerce Sales Worldwide from 2017 to 2022
In the following points, we will discuss a comparison between eCommerce and retail from different perspectives:
Which Has Lesser Prior Investment?
Ecommerce Starting an eCommerce business may sound like an expensive process but with proper planning and execution, one can start running it on a budget. The investment required to start your eCommerce business in India is nearly 5-10 lakh rupees. It includes building your business website, hosting, domain, sales and management tools, web development, and advertisements.
Retail Investment in setting up a retail store can be an expensive process. A retail store has to invest in various things before selling its product. These include building, buying, or renting a store, paying license fees, hiring staff for multiple positions, paying location tax, investing in filling up the store with sufficient items to attract a customer, and other necessary resources relating to business and government. All such expenses make setting up a retail store far more expensive than starting an eCommerce store.
So, comparatively, the cost of investment is lower in the case of eCommerce than in retail. The advantage of owning an eCommerce store is that it reduces the cost of setting up a brick-and-mortar store or hiring delivery staff. This is because eCommerce stores send their manufactured products to branches such as Amazon, FedEx, Ship Bob, Flipkart, etc. for order fulfilment. After this, it is the responsibility of these branches to pack, track and send the order to the buyer.
Ecommerce It is easier to maintain eCommerce compared to a retail store. But there are still some complications that need to be checked from time to time so that the store can run smoothly. For example- you need to maintain a warehouse or any proper space to keep the products safe and accessible for dropshipping. Since you are not directly connected with your customers, you will have to keep a check on analytics to track customer experience and discover their new tastes and likings. You will also need to keep a check on the timing of product delivery to avoid negative feedback from customers.
Retail The retail business is considered to be a bit more complicated in terms of maintenance. This is because for various reasons like there is a need to maintain a proper brick-and-mortar store and inventory, and maintenance of an adequate communication balance on both sides in real-time with suppliers and customers. Also, you have to keep a regular check on your staff if they are handling the customers politely. You will have to train them and make them more knowledgeable about the services and products you are offering so that they can deal with the customers pleasantly and accurately.
It is easier to modernize the stock in an eCommerce store. But this task becomes pretty difficult with retail stores as for updating products, you need to set up meetings with suppliers now and then. So, in case of ease of maintenance, eCommerce is a better option for your business.
Share of consumers going to brick and mortar stores by country in 2021
Which Has Better Profitability in Future?
Ecommerce With eCommerce comes a great benefit which is unlimited access to customers. Once you are over the internet, there is no limit to the number of people you can reach. Ecommerce allows you to showcase your products and services to a large number of people, therefore, no limitation to any particular locality. Moreover, you can always expand your business and attract new customers via smart and modern marketing techniques. These include offering free shipping, discounts, gift cards, reward points, etc. All this ultimately ensures better sales and thus, better profits.
Retail Retail stores do not have very wide access to the customers as they have limitations due to their fixed location. However, this does not mean that there are no benefits of a retail store. Even in today’s time, many customers do not feel satisfied until they can touch and feel the products themselves. So, the customers who are still skeptical about online shopping contributes to the sales and profits of retail stores. Moreover, there are fewer chances of online fraud with retail shops, as the customer doesn’t need to provide their personal information including emails, mobile numbers, bank details, etc.
In this case, eCommerce will be the clear winner because the products and services of eCommerce stores are visible to a huge audience which makes for a large potential customer base and thus, better sales and profits.
We compared e-commerce and retail stores based on investment, performance easiness, and profits obtained. Although there are factors like trusted quality and physical interaction that make retail stores better than eCommerce ones. But after making an overall comparison and looking at the future of the digital world, we concluded that eCommerce stores are the best way to expand your business and earn more profit in the future since it offers a wider reach with less investment.
However, you can also take another way which is you can opt for omnichannel retail as it allows you to buy products either online or physically through the real stores to keep your customers satisfied in all the possible ways.
FAQs
What is the difference between eCommerce and retail?
Retail is something that can be conducted in a brick-and-mortar store, online, between persons, or through direct mail. However, eCommerce refers to electronic commerce which means commercial transactions that are conducted only through the internet.
How owning an online store is better than physical stores?
Owners of the online stores can sell and ship their products and services to a large number of people with fewer investments as buying a website is easier and more economical than buying a physical store.
What is the biggest challenge faced by eCommerce?
One of the most significant challenges faced by eCommerce is the security issue. Ecommerce involves a great deal of personal information and even a small technical issue can create huge damage to a business’s operations and image.
What is a retail store?
The most common example of a retail store is the conventional brick-and-mortar stores like Walmart, Best Buy, etc. However, retailing as a whole includes goods or services sold through stores, kiosks, or even on the internet.
Every extra penny earned need not come from a new customer!
Sometimes it only takes a few tweaks to encourage your existing customers to spend more on your eCommerce store. After all, they already trust you and are 60-70% more likely to place an order.
For instance, we all have visited some fast-food chains such as McDonald’s. Food chains like these boost their sales by offering combo offers (Buy burgers, fries & coke to save ₹89) or small ad-on like french fries.
Essentially 4 major metrics impact your eComm store: Number of new customers (over a period of time), Average order value (AOV), Repeated orders, and Marketing/ retention costs.
Today we will focus on ways to enhance the average order value of your store. Before we jump onto strategies, let us understand what the average order value is and why it is important.
The average order value is the average amount spent on your store by a customer that purchases from you. For instance, in a month, your store gets 500 orders and generates ₹50,000. Then, the average order value is ₹100 for your store.
Average Order Value= Total revenue/ Total number of order
How would you feel if a customer enters your store looking for a ₹200 purse But, then purchase a purse and other accessories worth ₹1500.
So, an increase in the average order value helps in:
More revenue without extra marketing spent
Increasing customer lifetime value (LTV)
Recovering customer acquisition cost
Increasing profit
Clearing out inventory
Generally, eComm store applications, such as Shopify, provide AOV on the dashboard. Nonetheless, you can easily calculate it with the formula. More the AOV, the better it is.
The average order value increases when a customer places an order of a higher amount. No one wants to buy more. Your offering should have a higher perceived value to encourage buyers to spend more on your store. Note that just increasing customers will not boost your AOV. Here are 15 strategies to incentivize the customer to splurge a little extra. After all, a store earns 40% of its revenue via repeated customers.
Now, let us look into 15 ways to increase your average order value.
1. Increase Free-Shipping Threshold
One of the easiest ways to increase your average order value, almost instantly, is by increasing the free shipping threshold.
For instance, if you offer free shipping at ₹500, increase that to ₹600. Make a leap of about 20-30% of the current average order value. So, if your current average order value is ₹780. Then, increase the free shipping threshold to ₹700.
In case you do not offer free shipping, we highly recommend opting for it. It helps a lot to move the AOV high. In alternate cases, people place small orders as they have to pay for shipping either way.
Also, highlight this limit on the cart or at the top of the website. Let customers know that they are ₹x away from availing of free shipping.
A great example of the same is the classic ₹500 free shipping base on Amazon.
Free shipping threshold
2. Cross-Sell
Cross-sell means recommending and selling complementary products. They are not similar products but products related, such as toothpaste and brush. The aim is to prevent the buyer from purchasing items from different stores and provide it with all in one place.
You could display these related products on:
Home page
Product page
Cart
Check out
In this case, Amazon offers the option to add a tempered glass, warranty with the mobile phone.
Cross-selling
You can take this a step further by providing what other buyers pair the product with and personalized recommendations based on user history. Another effective way of cross-selling is by recommending a product after the order confirmation at a limited time period discount.
3. Upsell
Upsell means selling an upgraded version of the product. It can mean recommending a higher version of a product or a larger size.
For instance, you can recommend a more expensive camera model for added features and better utility.
Upselling occurs in two ways: upgrading to an expensive model or high-profit margin services such as an extended warranty.
You can offer a comparison chart like this on the product page itself. It should clearly communicate why the upgrade is worth those pennies.
Comparison chart for upselling
4. Create a Combo/ Bundle offers
Let us say you enter a store to buy a printer. What if the seller offers you 4 cartridge ink and printing paper all together at a discounted rate? Would you not be tempted to buy it all?
Similarly, you could create bundles or combo offers with related products to make a higher value sale. You could also provide custom combos/bundles to make it more engaging and relevant.
Combos/ Bundles
These bundles really work well in case you see multiple small purchases in the store. This one again ensures the purchase of related items all from your store instead of different stores.
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5. Offer Discounts on Bulk Orders
One of the best ways to increase basket size is to offer great discounts on bulk orders.
Display clearly the savings on placing a bulk order. It is similar to wholesale orders where customers get an added discount due to bulk purchases. These bulk orders could be customizable, which would further enhance the ROI of the strategy.
Here is a WooCommerce plugin to add discounts to your bulk orders.
WooCommerce Plugin
6. Loyalty Programme
Many brands have loyalty programs for their customers. It aims to encourage regular customers to purchase from the brand in exchange for various perks.
They work great to increase repeated orders. Also, repeated customers tend to spend more on the store compared to new customers.
You could offer benefits such as a lower free shipping threshold, early access to sales, 24/7 customer support, cashback, bonus points, free samples on each purchase, and much more.
Loyalty program
7. Personalized Experience
A personalized shopping experience can enhance the customer’s experience via curated recommendations. It generally eases the process of navigating through the website.
You can personalize product recommendations based on their search history. You can offer custom bundle offers depending upon their activity on the website. You could also recommend product refills and repeat purchases based on the order history.
Provide limited-time offers to create a sense of urgency among the buyers. Time-sensitive offers combined with dedicated product discounts could boost the average order value.
Offer product discounts, remove the free shipping threshold, provide discounted bundles, or any other incentive to encourage people to purchase.
Highlight special offers on the product page, homepage, and cart to make sure that people know about the limited-time deal.
Limited Time Offers
9. Add Social Proof
Social proof is crucial to stimulate sales for any store. But, how would it impact the average order value?
Add customer reviews and ratings to the complementary products while cross-selling and upselling. Also, add pictures and other social proof on your website to ensure trust and build credibility.
There are many products on Amazon that do not sell only due to the absence of reviews and any other social proof. Hence, testimonials and social proof are really important to encourage sales and average order value.
Provide Social Proof
10. Free Gift
Offer Free Gifts
Offering gifts to your customers can be a great incentive. You could offer free samples or gift cards at a certain threshold. This would increase the average order value. Free samples, as well as gift cards, could also stimulate future purchases.
Keep in mind your margins decide the value of the gift. You do not want to bear the cost of free items.
For free samples, pick items or variants that don’t generally perform well to keep the inventory running. You could also give special offers on special occasions and boost sales.
11. Incentivize First Purchase
For a new eCommerce store, it is crucial to get the first hundred/ thousand purchases. You can motivate people to make their first purchase by offering them discounts, offers, and other perks on their first purchase.
Most of the stores offer a 10 to 20% discount on the first purchase from the website or their application.
In this image as you can see, Amazon goes a step further and offers free shipping on the first order but in a particular category. This would motivate customers to purchase from different categories. It’s a great strategy in case you do not see sales in a particular section of your store.
However, ensure to promote the offer to your customers effectively to ensure order placement.
Offer on first-time purchase
12. Build Trust and Authority
Building trust and authority is crucial for eCommerce stores. People might avoid placing orders or not come back if they do not find your store reliable.
Mention the policies very clearly and have FAQs in different sections of your stores. Use live chatbot and other customer care services to ensure credibility and security. These things do not affect average order value directly but play a major role in impacting customer psychology.
Simple things like a dedicated domain name, customer reviews, and contact details make a huge difference.
13. Flexible Return Policy
For the longest time, people did not purchase from online stores due to a lack of trust and quality assurance. People prefer offline stores as they can return the items in case of defects or any other discrepancy.
Offering a flexible return policy helps your store build that trust and encourages people to make their first purchase.
Today, most eCommerce stores offer a return policy of 15-30 days. As a result people also purchase more products as they are assured that they can return the products if something has to happen.
Flexible return policy
14. Coupons (Product Discounts)
Buy 2, Get 2 Free!
We all get tempted to buy 2 products and pick 4 products in total to avail of such an offer. It helps companies clear the inventory, increase order value and enhance brand image.
Coupons that offer product discounts are well received. Offers such as:
₹500 off on the purchase of ₹2499
Buy 3, Get 1
Flat 20%
25% off on purchase of ₹3599
Cashback of ₹350 on purchase of over ₹2499
These offers encourage customers to increase their order value automatically. All these discounts need to be tactfully placed to ensure margins and sell off more products.
Offer Coupons
15. Downsell Add-ons
We do not think twice before picking up chocolate or candy at the checkout counter of a supermarket. Why? Because it is cheap.
Similarly, you can increase the average order value by offering a complementary product that is inexpensive. It becomes a no-brainer to add a product that doesn’t cost much and pairs well with the item purchased. For instance, offering batteries with the clock.
It is easier to incentivize the customer and at the same time increase order value.
Offer a complimentary product
All of these strategies would enhance the ROI and get more profit. However, ensure to implement one strategy at a time and not all together. This way you can track which ones are the most beneficial and double down on those tactics.
Also, you should clearly communicate these offers and discounts to your customers. What’s the benefit if your customers are not aware of these incentives?
These strategies would have different effects on different stores. Hence, you need to do an A/B test and find the right way to promote the average order value.
The average order value impacts your profit and your revenue. More AOV implies more profit without having to spend more. Apart from trying to sell more and encouraging customers, here are some simple ways to enhance your average order value.
Firstly, take an analytical approach to the average order value. This involves segmenting your audience based on the amount spent by them. Start by cross-selling to the customers that spend less.
Alternatively, customers that spend more would find loyalty programs appealing. Further, you could move on to free shipping, providing coupons, and other incentives.
Secondly, ensure to provide a smooth website experience. A website with a lot of pop-ups, slow loading speed, lots of lag, or frequent crashes would negatively impact customer experience. In this case, you might not be able to sell at all and drive customers away!
Lastly, understand your audience to provide a relevant and personalized experience. Consider what your audience needs and map out the customer journey. Find the motivation points for your customers by talking to them, looking at competitors, and analyzing past campaigns.
Conclusion
So, It all narrows down to understanding your customers, segmenting them, and providing suitable incentives to increase average order value. It acts as a window into the purchasing behavior of the customers. Hence, a higher average order value can attract added profit and revenue without extra cost.
FAQs
How do you increase the average value of a basket?
Upsell your products, provide free shipping, keep time-sensitive offers, personalise customers’ experience, and provide bundle offers.
How is the average order value calculated?
You can calculate your average order value by simply dividing total revenue by the number of orders. For instance, in a month, your store gets 500 orders and generates ₹50,000. Then, the average order value is ₹100 for your store.
How can I increase my eCommerce AOV?
Provide bundle, provide limited time offers, offer free shipping on minimum orders, and keep a flexible return policy.
Company Profile is an initiative by StartupTalky to publish verified information on different startups and organizations. The content in this post has been approved by Club Factory.
Fashion is not futile. Your clothes and accessories say a lot about your personality and of course your mood. Thankfully now fashion is affordable too!. All thanks to the e-commerce sites now men and women from even remote nooks and corners have easy access to Fashion. An e-commerce site that we cannot miss when it comes to affordable fashion is Club Factory. This China-based e-commerce site offers apparel, accessories, and more at factory prices. Though Club Factory is currently banned in India owing to security threats and rising tension between India and China, we cannot surely afford to miss the story of this amazing e-commerce startup, that gained immense popularity in India. Here is all about Club Factory. The startup story, Club Factory founders, funding, revenue model, and competitors.
Founded in 2014, the Chinese e-commerce platform Club Factory became quite popular internationally as a platform offering trending fashion goods at a very affordable price. Club Factory delivers in many countries across Europe, America, and Asia.
Club Factory’s major USP is that its products are trendy yet much cheaper as compared to many of its competitors. The reason it can offer goods at a much cheaper price is its strong base of over 200,000 suppliers who want to sell directly to consumers and thereby liquidate their inventory.
For customers, Club Factory is very user-friendly as it offers recommendations to consumers based on their past choices of products and their preferred price range. The platform sorts out appropriate suppliers based on the quality of the products, their productivity, performance, and price. According to Club Factory founder Lou Yun, Club Factory uses AI and big data analysis to understand the users and suppliers better. Club Factory App uses AI technology to compare the prices charged by the manufacturers, find the lowest price of a particular product in real-time, and suggest to the customer the product having the lowest price.
Using Big Data Analysis, Club Factory shortlists the products that have the highest probability to be bought from a huge number of SKUs. Club factory offers insights to the manufacturers on the goods that are most preferred by customers so that the manufacturers can take appropriate manufacturing decisions.
In India, Club Factory did face some controversies. The biggest of all controversy was the tax evasion charges raised against Club Factory. Club Factory and a few other Chinese e-commerce companies like Shein were found shipping products from China directly to customers in India by marking these orders as gifts to avoid custom duties. To do away with the problem the Government of India started imposing custom duties on gifts as well from November 2019. Besides these, from late deliveries, late payment to sellers, and delivering damaged products, Club Factory has faced many charges in India.
Yet, Founder Vincent Lou perceived India as one of the biggest markets for Club Factory and had lofty plans to establish the company in India. The company had plans to invest in warehousing, technology, marketing, and delivery, and wanted to become India’s “One-Stop fashion marketplace” for sellers as well as customers. While initially, Club Factory sold only goods imported from Chinese manufacturers, in early 2019, the company adopted the local marketplace strategy whereby it brought in Indian sellers to the platform. The company onboarded around 5000 Indian sellers on the platform and was planning to bring in more local sellers. Club also Factory invested heavily in marketing in India. In 2018 Club Factory appointed Bollywood actor Ranveer Singh and Miss World, 2017 winner Manushi Chhillar as the company’s brand ambassadors.
Ranveer Singh and Manushi Chhillar in a Club Factory Ad
Club factory was looking forward to adding more product categories to the platform soon. But the ban on the app came as a shock to the founders.
Club Factory began as Baokuanyi, which was a SaaS data intelligence platform that helped manufacturers take manufacturing decisions based on stock and inventory-related data of over 200,000 factories. The aim behind starting Baokuanyi was to empower the manufacturers with better inventory data so that they can make their decisions better.
While working with Baokuanyi, the founders realized that liquifying inventory was challenging for manufacturers. So, they thought of coming up with an e-commerce platform through which manufacturers can directly sell to customers. Thus Club Factory was founded.
Currently, too Club Factory has a SaaS product that offers insights to the manufacturers regarding the products that are sold the most and the most popular designs so that the manufacturers do not end up making products that are not in demand.
Vincent Lou and Aaron Jialun Li are the founders of Club Factory.
Vincent Lou
Club Factory founder Vincent Lou holds a Master’s Degree in Computer science from Stanford University. As a student, Vincent had a deep interest in applied AI. At Standford, Vincent along with Aaron Li developed an AI-powered solution to help WHO optimize the costs of medical devices. Vincent worked as a Research Assistant at The University of British Columbia, and also at the Standford Biomedical Informatics Training Program. Vincent was working as a Software Engineering Intern at Facebook during the early years of his career. In 2014, Vincent founded Baokuanyi which later pivoted to become Club Factory.
Aaron Jialun Li
Club Factory co-founder Aaron Jialun Li holds a Masters’s degree in Business Marketing. Aaron also did data analysis in Alibaba Group and looked after Product Management at Sharethis before founding the SaaS platform Baokuanyi with Vincent Lou.
Founders, Club Factory
Club Factory – Tagline and Logo
While the company keeps experimenting with its tagline from time to time, the company had to face legal wrath in India in 2020 due to one of its slogans that involved the name of Indian e-commerce unicorn Snapdeal. In 2020, Club Factory was running the “everything cheaper than Snapdeal” ad campaign. Snapdeal approached the Delhi High Court against this ad campaign, in response to which, Club Factory discontinued the ad campaign.
Club Factory logo
Club Factory – Business Model
In India, Club Factory’s business model was quite different than its peers like Amazon and Flipkart. In India, Club Factory charged zero commission from the sellers. The Indian sellers could sell the products through the platform for free.
“Club Factory will continue to provide a level-playing field to all sellers by not charging any commission fee so that they get to increase their earnings while transferring the cost-benefit to buyers,” said Club Factory founder Vincent Lou, in an interview, before the platform got banned in India.
Club Factory does not stock inventories. It uses algorithms to match orders and sellers. When a customer places an order, Club Factory finds a seller who can fulfill the order. The supplier then sends the product to Club Factory’s warehouse, from where Club Factory ships the products to the customers. Club Factory also takes care of customer service.
Club Factory has raised a total amount of $220 million in funding over the 3 funding rounds.
Date
Transaction Name
Money Raised
Lead Investor
October 11, 2019
Series D
$100 million
Qiming Venture Partners
February 14, 2018
Series C
$100 million
Bertelsmann Asia Investments
January 1, 2017
Series B
$20 million
–
To date Club Factory has raised funding from 8 investors including institutional investors like Bertelsmann, Qiming Venture Partners, FREES FUND, ZhenFund, Kunlun Trust, and IDG Capital.
Club Factory – Growth
As per 2019 reports, Club Factory had over 70 million users worldwide, of which around 40 million were Indians. Club Factory also emerged as the most downloaded shopping app on the Android platform globally for the months of September and October 2019 (according to Sensor Tower’s Store Intelligence platform). Now that Club Factory got banned in India since June 2020, it has lost a huge user base. However, Club Factory is still delivering in many countries In Europe, USA, and Asia.
Club Factory – FAQs
Is Club Factory Working in India?
No Government of India banned Club Factory along with other 58 Chinese apps in June 2020.
Who is the founder of Club Factory?
Chinese entrepreneurs Vincent Lou and Aaron Jialun Li founded Club Factory in 2014.
If you’ve purchased something online, you may have observed the feature to buy now and pay later, that’s becoming increasingly common across e-commerce platforms. And you may have observed this feature in offline places as well, such as retails, and for several folks, this choice is very effective because usually, you’d have to save up until you could purchase that fancy new pricey item that you want to shop, no one intends to do that, notably if it’s on sale now and won’t be in a couple of months. We need things right now.
We wish to shop for them now and pay for them subsequently, and the typical approach was a form of credit or a credit card. However, obtaining a credit card in India is not always simple, and when you do, you’ll be hit with a slew of interest charges. You are mysteriously in debt, if you’re not cautious, that credit can take ages to pay off.
So, either you save for quarters or you go into debt, and that’s where buy now pay later comes in. The BNPL startups are capitalizing on the appeal of paying for stuff later, just like you’d with a credit card and aiming to make it convenient.
I stated earlier about snazzy new valuable stuff such as mobile phones, tablets, and televisions, but BNPL is now becoming accessible for daily necessities as well. Groceries, apparel, and even diner food Zomato and Swiggy are now providing BNPL as an alternative, and these types of BNPL use scenarios are probably a major root of rivalry right now for existing companies in the lending space, with the expected count of BNPL users in India reaching million by 2026.
By 2026, this will account for nearly 7% of Indians. Cardholders now contribute to just over 2% of India’s populace or 30 million, and it’s more than twice the average of BNPL users, which is between 10 and 15 million, and that number is burgeoning.
So, if you’ve not guessed, BNPL and credit cards are related in terms of the services they provide. Credit cards and buy now, pay later cards (BNPL) is a type of credit. This is a debt, not a credit card. You’re deriving funds from a 3rd person in both instances. It could be a BNPL firm, one of the financiers with which they have affiliated, or a credit card issuer, which is typically a bank. However, the issuance of credit cards and BNPL differs significantly.
So, if you’ve ever applied for a credit card in India, or if you already have one, you’ve most likely received a call or an email from a bank salesman congratulating you on your new card eligibility. Moreover, what’s happening here is that your contact details, that is linked to your identity, are now in circulation among most monetary organizations in India, as well as a few swindlers, but there’s a good chance that if you seek to get one of these cards, your request will be denied.
Irrespective of what the sales representative told you, acquiring a credit card in India is seldom as simple as the sales representative makes it seem. You must be beyond a certain age, you must meet an income cap, which implies you must have a career with a decent payslip, and you must most likely have a high credit rating, which makes it incredibly tricky for novel applicants into India’s lending market, folks residing in remote areas who may not even have a proven credit file, and same goes for freshmen who have just begun.
They’re steering clear of defaulters. Folks they believe pose an undue risk. Essentially, they maintain their NPAs minimal by upping the ante for their clients. But once you’re a client and obtain a credit card, the hardships and obstacles do not end there so you have to pay for your credit card.
Some credit cards charge a yearly fee only to own the card, close to a membership, but those that don’t typically cost exorbitant interest and a slew of other fees for stuff like exceeding your credit line, reimbursing your minimum deposit late, and cash withdrawals from your credit card to your bank. When you add up all of these obstacles to entry and client pain points, it’s no shock that many Indians dislike credit cards.
Brands such as Slice, Zest money, Simpl, Lazypay, and Uni are limiting the barriers that credit card companies have raised. In India, almost anyone can BNPL; all you have to do is offer information such as your PAN and Aadhar number. Rather than focusing on credit scores, these BNPL companies are using their algorithms to identify how much loan you must be awarded based on your previous transactions and site, once you’ve been a BNPL client for a while and are in good condition and have billed your loans, they’ll also boost your spending limit.
Another element to take into account is the timeframe. Card issuers anticipate that you will decide when to pay off your loans. They offer you a monthly minimum payment that you should return to them, principal and interest, but again, it is up to you to pay back the loan, and many struggles with that freedom. They reimburse the bare minimum without creating much of a hole in the principal, which is the original loan value before interest costs.
With BNPL, credit payout is spread out over a set period, typically a month or two, using a process named as EMIs. If you pay these monthly installments, your BNPL loans will be paid off after a set period. Is this to say that the BNPL plans are interest-free? Both yes and no. It depends on the console and BNPL firm from whom you are accruing.
The longer the loan term, the larger the interest rate. If you choose a short-term BNPL tenure, such as 15 – 45 days, you will most likely avoid paying any interest if you pay back on time. You’ve essentially just spread out a fee that would’ve been made immediately over a period of several weeks. However, if you choose a longer time frame of 3 months to a year, your interest rate could range between 10 and thirty percent, based on a range of factors. However, this is made upfront so that BNPL clients are cognizant of deferring fees for a longer time.
Card issuers, on the other hand, allow you to dig yourself a big trench. One credit transaction here, another there, and you’re unexpectedly trying to cope with minimum payouts, while your loans continue to increase as interest compounds. So, BNPL appears to be the clear victor here, correct? Isn’t it a type of loaning relevant and personalized?
That’s the story that BNPL fintechs want you to believe. But let’s look closely at how these companies work.
Let’s begin with the final consumer, who is acquiring a product now and paying later from a vendor who is an offline vendor, such as a shop owner, or a virtual vendor, such as a D2C firm or an eCommerce storefront. Then there’s the BNPL supplier, who is responsible for supplying the tech here. They examine the final consumer using sophisticated algorithms and decide how much to lend them, but this credit isn’t flowing from their wallets, at least not most of the time. Rather, these BNPL businesses have teamed with lenders, either nonbanking financial firms or full-fledged banks.
So, here we have a true overview of the consumer, vendor, BNPL mediator, and bank or NBFC. Often the BNPL vendor is an NBFC, and that’s just one of their many product lines, and they’re often a Fintech firm, such as Paytm, which offers BNPL, and often the BNPL company is also a vendor, such as Flipkart or Amazon, which have their specialized BNPL solutions.
So the concern is, how do BNPL firms earn money? There are a couple of income streams.
The first one arises from vendors such as card issuers and point-of-sale (POS) providers. BNPL firms charge margins ranging from 2 to 8% of the original cost. The vendor is fine with it as they see the chance to network with the BNPL supplier. For starters, they experience a rise in conversions and an average deal worth because clients who previously could not afford high-ticket items in their shop or marketplace can now do so. So, partnering with the BNPL firm facilitates vendors with more clients who spend thousands, and the best feature is that they don’t bear any of the risks.
The BNPL firm earns on behalf of a client. As a result, the monthly EMIs buyer pays do not benefit the vendor. The vendor has been fully paid; rather, the final consumer pays the EMIs to the BNPL firm, which accepts all of the peril.
And what if the end-users are unable to meet their monthly EMIs? Since many BNPL firms charge late fees, this is where the 2nd income stream comes in. As per bank bazaar, these fees vary from 2 to 8 % of the foremost loan balance, or they can be a fixed fee ranging from 0 to 750 INR.
To try to get these debtors to pay up, it’s almost like a punishment. It’s worth mentioning that some BNPL companies don’t cost extra payments and instead prefer to start slowly to avoid defaulters. They initially give an amount owed that they can easily lose, and if the client repays them, their line of credit is gradually increased. If a payout is late, the user’s ability to repeat procuring items through that BNPL site is revoked, and the user’s credit rating suffers as well.
Challenges Faced by BNPL Clients and Customers
The industry is facing a lot of issues. Many BNPL clients still have no idea what a credit rating is. They are unaware that avoiding paying off their BNPL dues on time will permanently harm their fiscal identity. They have no prior loaning experience. They haven’t been a client of a lender, and that’s where we soon run into troubles because, as I previously stated, BNPL companies make it extremely simple to obtain a loan. Even for those with no previous fiscal expertise and little financial self-control.
Sadly, some folks can spiral out of control. Without realizing it, they are overspending than they can manage to cover later. Of course, BNPL parties are aware of this, and they argue that it’s early in the season. Because debt users in India are low, they don’t have huge data to deal with, so they’re developing concepts.
They are steadily accruing a ton of information on first-time Indian debtors, and as they derive insights, they are reworking their equations, working with first-time debtors by starting with small loan confines and then providing larger loans to reliable debtors and identifying unreliable ones.
To put it another way, they’re laying the foundations for enlightening the fiscal reliability of a sizable undiscovered segment of India’s populace. It’s like a public good, or so they’d describe it.
Customers, particularly those who are not tech or monetarily savvy, are uninterested in these concepts. This bird’s-eye view means nothing to them. When they seek themselves suddenly in a sea of loans, they fear, curious how a relatively harmless buy now pay later forum got them there and how no one will offer them a loan to pay off their other line of credit since their credit rating, which users didn’t realize they had, has now turned red. They may lose hope of coming out of the financial mess.
This, of course, will not cause BNPL entities to slow down. At least not without the government’s help. Indeed, as more capital is poured into buy-now-pay-later businesses, the situation is only heating up. To stay viable, BNPL firms must connect with more prospective customers, either by entering untapped communities in remote areas or by poaching clients from rivals by giving them even simpler loans.
You can now adhere to BNPL from 4 or 5 multiple devices and collect up to one lacs with surprisingly fewer formalities and no payslips. There are even reports of BNPL firms failing to perform precise KYC or credit bureau checks. They’re expanding so quickly that they can’t extend their due diligence, and there have been reports of failures not being disclosed to credit bureaus.
To be honest, matters in India’s BNPL space are currently out of regulation. Unapproved credit institutions are springing up in the lack of sufficient regulations. For instance, in early 2021, an influx of Chinese lenders apps harassed and humiliated clients into repaying loans at exorbitant daily escalating interest rates by using user information and phone authorization.
The RBI discovered that of 1100 lenders apps in India, 600 were illegal, while these 600 unauthorized apps aren’t all BNPL apps, they are a manifestation of a bigger issue in the loaning space in India right now. Financiers and loan mediators are throwing caution to the wind in favour of expansion at any cost.
RBI Working Group Report on Digital Lending
The RBI’s online lending working group is developing innovative forms for safer business exchanges. Although the online lending market grew 12x between 2017 and 2020, the RBI did not govern several of the new businesses, according to the latest study.
Typically, these companies and apps collaborate with banks and NBFCs to assist. As a result, prompt loans are becoming available at the expense of higher risk. It has also led to client excessive debt, legislative arbitrage, and high costs.
The report reveals such flaws while also offering a great structure for the industry. The study’s pertinent points are explained below to provide a clear grasp of the proposition.
Differentiation among LSPs and BSLs
Loan Service Providers (LSPs) and Balance Sheet Lenders (BSLs) are separate entities (BSLs). LSPs are apps that offer clients borrowing choices. They don’t get to be explicitly controlled, so they must collaborate only with governed financiers that can offer the assistance.
BSLs, on either hand, lend money and stably claim credit threats. They always are governed. This difference enables LSPs to handle the front-end expertise, whereas BSLs handle compliances and threats.
Ban On FLDG
An FLDG tool, or Ban On FLDG First Loss Default Guarantee, enables ungoverned companies to give credit to borrowers and claim credit risk. The study advised against using a trojan horse entry.
Many fresh lenders face difficulties because their systems are based on shadow lending. This part entails neo-banking and Defi (decentralized finance) concepts for a modal test. Innately, the study guides that only governed agencies should be allowed to take credit risk.
Supervisory arbitrage must be eliminated
The study recommends classifying all credit lines as credit instruments and eliminating supervisory arbitrage. Eg: most BNPL providers treat this feature as a purchase rather than a loan, and thus lack adequate KYC computation. They are unrelated to the credit bureau.
Client Protection
In some cases, the fees and rates are as large as 100%. The working group suggests a few steps to safeguard consumers from such practices. These are some of the suggestions:
Use a proper APR for all interest and fees.
STCC – must conform to relevant standards to avoid exorbitant fee rates.
Limit high-risk, very short-term debts with no tranches.
Recapitalization and over-indebtedness should be limited.
Insurers must also make sure that the LSPs associated treat debtors fairly, particularly in collection practices. To verify trusting clients and a healthy ecosphere, all forcible actions are avoided.
Data Security
The info is owned by the customer, not the institution. All critical loaning situations require clients’ assent to use their data. This includes any e-commerce system that supports customer info to make underwriting choices. This improves data safeguards while retaining customer trust.
SRO And DIGITA
The study recommends that the RBI establish a Self-Regulatory Organization (SRO) to regulate operations and set guidelines. It also suggests developing DIGITA (Digital Trust of India Agency). DIGITA will meet the basic specifications for verification of conformance. Companies that have not been accepted by DIGITA will be considered non-compliant.
What Should Customers Be Wary of When Using BNPL Apps?
To begin, consumers must ensure that the app they are installing is from a licensed lender. If a firm does not have an RBI license, it must simply define under whose license it is selling products. Before installing, look into who is releasing the app, visit the site, and ensure it is a well-established and certified Indian corporation.
Second, if the firm is licensed, see if it explicitly shows this on its webpage, along with the RBI regulations that it adheres to, such as the grievance handling framework and interest rates. Furthermore, never install apps that request contact info because they are used for duress.
Third, while most BNPLs assert no charges or nil interest, you must learn the real loan amount. Even if firms claim zero percent, they are required to disclose their IRR – Internal Rate of Return – so buyers must ensure that the firm or app discloses all these for their safety.
Conclusion
BNPL is a valuable tool, but it should not be used for every acquisition a buyer intends to make or for daily purchases, as this would be over-leveraging oneself.
However, when handled efficiently and sensibly, the fact that rather than trying to make all of the payouts now or using a credit card to purchase, you are simply getting an option to acquire an item for nearly the same cost and drill down into 4-5 payouts is an effective device to have.
This is the benefit that BNPL firms provide, and it is the reason for the rapid acceptance because clients realize and require it. Buy Now Pay Later is an ideal, smooth payment system with vigilance on the part of the users and accountability on the part of the financiers.
FAQs
What are the risks of BNPL?
BNPL companies do not charge interest but charge high late fees which many consumers fail to pay and are later mounted in huge debt.
Is BNPL regulated?
No, Buy Now Pay Later companies are not regulated in India which has resulted in their growth and scams.
What is a BNPL company?
Buy Now Pay Later companies are companies that allow consumers to purchase the product and pay later in small installments.
Do customers add products to their cart but ditch them without completing the transaction? We know how badly it affects your business. That is why we are here with some expert tips on how you can reduce shopping cart abandonment. Delve in!
Most online shoppers have a bad habit of ditching their cart items. This ditching process is popularly known as shopping cart abandonment in the online shopping world. The customer might not care much about abandoning the product added to the cart. However, it is a major headache for the sellers. They take a note of each cart activity to calculate the cart abandonment rate by dividing the total number of complete transactions by the total number of incomplete or abandoned transactions. Currently, the global cart abandonment rate is around 74%, which is huge.
For the sellers, even a small cart abandonment rate is heartbreaking because they want their business to flourish like never before. Hence, they try their best to reduce the rate. But most of them are new to selling things online and cannot manage the work alone. If you are also one such seller, we are here to help. In today’s guide, we will teach you the best ways using which you can easily reduce the cart abandonment rate. Keep reading!
Here are some of the best ways you can follow to decrease the abandonment of shopping carts by customers while shopping on your E-commerce website.
Keep Multiple Payment Options
Most customers do not complete the transaction because they cannot find a suitable payment option as per their preference. Due to this, they often switch to some other shopping site and buy the same product from there. But you can easily avoid it by providing multiple payment options on your site. Some of the most common ones are PayPal, Stripe, Neteller, Skrill, and credit cards. You can also include third-party payment services.
Even though online payment is highly preferred by shoppers these days, some like sticking to the traditional mode of payment, which is paying with cash. Hence, make sure you also keep the cash on delivery option available if possible. Even new customers who are not sure about buying from your platform will be prompted to buy if you allow COD.
Exclude Shipping Charges
Nobody likes to pay shipping charges after adding their favorite item to the cart. Moreover, if the shipping charge exceeds the product’s original price, it is even more disappointing. High shipping prices can often be a reason for customers to abandon their carts.
We understand that shipping a product includes several expenses, and hence, providing free shipping for all products is not possible. But here are a few solutions following which you can keep the customers impressed:
Try to add the shipping charge to the price of the product. For instance, if you are charging $2 for shipping, add it to the product’s original price. If it is $30, make it $32. In doing so, you make the customer feel that they are just paying for the product and there are no shipping charges.
If you are selling products that have a fixed price, such as cosmetics and grocery, you can keep the shipping charges as it is. You will see that some customers choose to buy the product despite the shipping charges, whereas a few will abandon the cart. Now, you can send a new coupon only to those customers who abandoned their cart items. They can opt for free delivery or an extra discount using the coupon.
If you want to gain more loyal customers and are happy with little profit, you can exclude shipping charges altogether. This will give you better profits in the long run as the customers will choose you again and again because of free delivery.
Besides free delivery, you should also have a free return and free exchange policy for at least a week after the product has been delivered. This will help you become a more trustworthy shopping brand in the market.
As you might already know, new customers are often unsure about making purchases from a brand new website. They fear getting scammed off of their money, and hence, they like sticking to their old shopping platforms. But this problem can be solved if a trust seal reflects on your website. A trust seal is given by a renowned authority that analyses the platform and gives the trust badge if everything looks fine. Many such companies in the market offer a trust seal. Choose the one that is popular in your country. The usual popular trust seal choices that most customers rely on include Google, the Norton Seal, PayPal, GeoTrust, the McAfee seal, and Better Business Bureau.
Allow Guest Checkout
We know how important it is for a business to get new member accounts. But at times, the customers are either skeptical about creating an account on a new platform or simply too busy. In that case, a guest checkout helps a lot. It allows the customer to purchase from your site without creating an account. Of course, after they are done buying, you can ask them to create an account. But even if they don’t, you sold something at least!
Keep the Checkout Process User-Friendly
A complicated checkout process, where the customer has to do many things before making the purchase, can be tedious. So, please try and keep the checkout process easy and manageable. Also, make sure the interface of the site is easy to understand. You don’t want to scare the customer away by creating a website that is too hard to use.
Using a progress indicator in an eCommerce platform is also great. It helps the customer track their progress while making the purchase, motivating them to reach the end of the transaction after completing just a few steps.
Conclusion
We hope our solutions help you effectively reduce the cart abandonment rate and get better sales than before. At times, the reason for cart abandonment is also because the seller is selling faulty or unattractive products. Hence, make sure you also check the quality of the products before hosting them on your eCommerce platform.
Reducing the cart abandonment rate will take time, but you will be able to do it easily with the right techniques and a little patience. So, what techniques will you use for reducing the cart abandonment rate? We are excited to know!
FAQs
What is the shopping cart abandonment rate?
The Shopping Cart Abandonment Rate is the percentage of online shoppers who add items to a shopping cart but then abandon the purchase.
Why does cart abandonment happen?
Shopping cart abandonment can happen due to following reasons:
High shipping charges
Unavailability of preferred Payment options
Purchasing is not allowed without an account
How to reduce the shopping cart abandonment rate?
Things to consider to reduce the shopping cart abandonment rate are:
In the last few decades, online shopping has grabbed the full attention of everyone. It has become a part of our daily lives. From clothes to medicines, to groceries, there is hardly anything that cannot be brought from online. It is convenient, hassle-free and it saves time. Plus the pandemic accelerated the demand for shopping online; people find it safer especially during the period of lockdown.
Now when we purchase any goods they are delivered or shipped to the preferred place that we have mentioned while shopping online. There are different methods of shipping and E-commerce sites are adopting different models for their business. To deliver the products to their customers, a number of ways can be followed. In this article, we will talk about one of the methods which are known as Dropshipping. So, let’s take a look into it.
“Dropshipping is the entry point for a lot of people to business, E-commerce, and entrepreneurship. It’s the perfect first business.” –Lachlan Delchau-Jones
Dropshipping is a way of selling and delivering products to your customers without managing, and shipping the goods. Here you contact the supplier and let them deliver the product to your customer.
Basically, your website is like the intermediary, from where the customer chooses the product and then you forward the request to the supplier of the product who will ship it to the customer.
You don’t have to manufacture, store or ship the product themselves, dropshipping is free from all these steps all you have to do is to find the perfect dropshipping supplier for the job. It is quite a good option for those who want to start an E-commerce startup. It is said to be one of the most profitable models in the E-commerce industry.
The history of Dropshipping actually goes back to the days of the 60s and 70s, way before the internet was developed. During that time, when mails were delivered to the people, small booklets or catalogues were present along with them, with the help of that, one could place the order for their desired product from the catalogue through telephone and then the order was delivered to them at their doorstep.
Sears Catalogue
Amazon and eBay then changed the way people used to sell products online. People who want to sell their products could just place them on the sites and let the E-commerce sites drive the traffic towards that product.
Currently, sites just need to find the supplier for the product who does the remaining job for them. Aliexpress and Shopify are some of the websites that made starting an E-commerce business easier as manufacturers and dropshippers are easy to find here.
How Dropshipping Works?
If you want to start an E-commerce site, dropshipping is one of the best options for you. Below are the steps on how it actually works.
The first and foremost thing that one has to do is select the proper supplier.
The second step is to connect the supplier’s app to your online website.
Select the products that you want to sell to your customers.
Set a price strategy for you dropshipping model of your business.
Accept the orders from your customers.
The orders of the customers then are forwarded to the supplier. And you have to pay them for that order.
The suppliers then deliver the products to the doorstep of your customers.
Advantages of Dropshipping
Some of the advantages one get to enjoy if they chose to dropship are:
E-commerce business that follows the dropshipping model doesn’t need a large amount of capital for their business. They don’t need to pre-purchase the products. So comparatively, it needs less capital.
No need for a warehouse, where you have to store the products. The suppliers are the one who takes care of the product by storing them. Therefore, you can select whatever product you this is appropriate for your business.
As the whole shipping process of the products is handled by your supplier, you can do your business from any part of the world.
You can try to sell any kind of product on your website and if it is not bringing any profit, then you can quickly drop it from the list of your website.
Disadvantages of Dropshipping
Some of the disadvantages of the dropshipping model are:
You don’t know what kind of quality your product will be. A bad quality product may cause uproar and can be bad for your business.
You don’t have any control over the time the supplier takes while shipping the product to your customer.
While serving the customer, difficulties may arise, if there is a problem in communication with your supplier.
Dropshipping can be expensive as well, the market is quite competitive and if research is not done properly, then you might see other sites dropshipping the products at a much lesser cost.
Future of Dropshipping
In the past few years in the E-commerce business, there is an increase of business sites adapting to dropshipping model and in the future, it is only going to increase. Dropshipping can only be a profitable model for your business if you play all your cards properly and follow all the strategies carefully. For example, you have to be careful while selecting the dropshipping company for your business, proper research has to be done and then you can follow your plan.
E-commerce sites if planned accordingly and follow this model properly will turn into a high return business and will be a source of great profit.
For startups that are interested to try their hand at E-commerce, the dropshipping model is quite a good option for them. With more and more startups emerging, it is just a matter of time before people will realize the model’s importance and need in their E-Commerce business.
FAQ
Does Dropshipping have a Future?
Yes, dropshipping can easily turn into a profitable model for E-commerce sites as the model is a low-risk one.
How did dropshipping start?
Dropshipping started in the 60s and 70s when people used to receive catalogues by mails and could order items directly from the catalogue via phone, and have the company deliver them.
Who is the most successful dropshipper?
One of the most successful dropshipper is Irwin Dominguez. In just eight months, he made one million dollars worth of sales.
What could possibly come to your mind when you first witness the term “Shopify”? The only possible fraction of this term could be “Shop“. Shopify is not present in the physical world and that’s why probably has more effect on the customers. Since every business has moved to a digital platform, why not start with helping those who want to survive the market online.
With other online platforms where retailers list their products to sell, it’s more like swimming in a pool to win against the other competitors. But with Shopify, one has to just keep swimming in his own pool and survive the water.
Let’s understand the complete business model of Shopify and how it makes money.
Shopify was first founded in 2004. It is an e-commerce platform that helps sellers build a website and sell their products online. With all the ups and downs, by the course of a decade, the sales of Shopify skyrocketed. Shopify had about 12,000 merchants by then and earned a huge revenue of $105 million. It is especially known for its flexibility of payments. Its adaptability in business helped it to flourish.
Features of Shopify
The e-commerce platform is easy to operate, it is designed for the easy understanding and accessibility of the retailer. The retailer gets numerous features useful in selling products like reporting, email marketing, SEO, analytics, or branding.
Blogging
Shopify Website Builder
Shopify also provides theblogging feature that allows developing the site; one can choose themes, write articles, and initiate discussions. Moreover, it provides hosting, which means that Shopify will handle all technical issues related to your shop.
Dropshipping
Shopify Dropshipping
For someone who is interested in Dropshipping, he/she can start with this platform. According to reports, Shopify has over 800,000 stores. The stores are built using this application. It is a comparatively safer platform. Apparently, Shopify and the online store are going to survive more than anyone can imagine as merchants are widely reliable.
Online Store
Shopify gives merchants their sole identity, they have their own digitally controlled store to brand and market. It even helps in the branding of products and accepts a wide range of payment methods from the customers of the merchants. Interested Retailers can build and create an online store with plans starting from $9/month. It also provides 14 days of free trial use.
Unlike other platforms, Shopify gives quite satisfying customer service which is the primary reason why they love Shopify. Shopify has a huge database of FAQs, email & chat support, most importantly with an informative and helping agent on the other side of the call.
You name the product and you can sell it on Shopify. Nothing limits the lists of products/services.
How Does Shopify Work?
Shopify, in simpler terms, helps one build their own website for their business. Shopify acts as a provider of online stores. It helps you to directly create a professional trade website by registering and logging into your account.
Setting up other simple things and then the users are ready to upload and sell the products at their convenience. It helps them to start a business journey, without requiring to have any knowledge about website building.
Now let’s look at How one can start selling on Shopify. It is pretty simple to understand how to set up the business on Shopify.
First of all, you have to create an account on Shopify to enrol yourself as the seller on the platform.
Add products or services from the account, add and customize the theme for the product and finally add a domain.
Add text as the description of the selling product and add a suitable image for it.
Enable payments from settings. It has got its own payment gateway called ‘Shopify Payments’, it’s a free service. If the retailer uses other gateways – such as PayPal, Amazon Pay, or other methods, he will be charged.
Add the shipping settings. One can buy shipping labels and decide at what rate the seller wants to charge the customers.
Users can add some apps from the Shopify App Store to market and sell the products on that platform too.
Select a Price plan. The user has to upgrade after the free trial by selecting the ‘Select a plan’ button at the end of every page to keep going.
When the process is done, the store can then be published.
Shopify Business Model | How does Shopify Make Money
Shopify makes the majority of its revenue through monthly subscription plans and payment gateways for the usage of its services. It also makes revenue from its merchant solutions which can be technical support, marketing, and customer services.
Shopify Subscription Plans
The business of Shopify is truly based on the subscription of the merchants. The subscription amount gives lucrative returns than merchant services. On the contrary, the company made over 50% of its revenues from another stream called merchant solutions.
Shopify’s gross volume comprises mainly from merchants paying for the Advanced Shopify and Shopify Plus plans.
As a report by Shopify, it earns heavy from the highest-priced tier (Shopify Plus) higher compared to the lowest tiers. Shopify Plus is a service for valued enterprise customers, with larger volumes.
Shopify Plus
Enterprise contracts are also way more promising as the enterprise clients usually sign an annual or multi-year contract. The huge organizations are more stable comparatively. The plans are automatically renewed unless there’s an intimation of cancellation by the enterprise account. It has around 5,300 enterprise accounts as of 2018. Just Imagine the returns!
Shopify Revenue
Revenue comprises services of Shopify POS, Payments, Capital which makes Shopify more reliable to provide a higher value to its subscribers. Thus making its subscription plans more genuine and reasonable.
Shopify defines its platform as a multi-tenant, cloud-based system engineered for high scalability, reliability, and performance. Shopify merchant solutions primarily make money frompayment processing fees from Shopify Payments, Transaction fees, Shopify Shipping, Shopify Capital, Referral fees from partners, and sales of point-of-sale (“POS”) hardware.
Conclusion
Starting an online business is the best option any person can do. Selling the products in the offline market is time-consuming and needs effort. But to do that you don’t have to create your own website or hire a web developer. All these can be done with the help of Shopify. Create a seller account on Shopify and sell your products online. Happy Selling.
FAQ
What kind of business model is Shopify?
Shopify operates on a platform business model where third-party sellers sell their products.
How is Shopify making money?
Shopify generates revenue from subscriptions, transactions, payment, referral fees, commissions and advertising.
Who is Shopify’s biggest competitor?
BigCommerce, an e-commerce platform based in the united states is one of the biggest competitors of Shopify.
E-commerce platforms have altered ways of doing business in a tremendous manner. They have rendered the impossible possible by making the market place accessible for all. Not just for customers but also for sellers.
This also means an increase in competition. Gone are the days where you can go on with your business without any change. Today, you have to plan and bring in innovation in every step that you take or else you see your sales plummeting down. To ensure better sales, here are a few tools that every Amazon seller must have:
This is a very basic app whose functions are way more than basic. They help you fix a retail price for your product. All you have to do is just scan and upload the picture of the product. The app suggests an apt selling price using various parameters. It is completely free and thus makes the process completely investment free. If you are planning to sell on Amazon here’s a complete guide to help you out.
AMZ Finder
Pricing – Prices vary from $49/month to $799/month Review – 4.3
AMZ Finder Tool Website
One cannot emphasise enough on the importance of reviews as far as firms like Amazon are concerned. A negative review can turn down many prospective customers apart from lowering product rank.
This tool helps you improve your customer relations and product reviews in a variety of ways. Automatic emailing, requesting positive reviews, alerting at the sight of negative reviews are a few of them. The last one mentioned is all the more important since it helps you act faster and address the issue immediately.
Facebook Advertising
Pricing – Price depends on CPC Review – 4.3
Long gone are the days when Facebook was just a social media platform. It has expanded to be a market place as well. Realising this potential, Facebook now allows sellers to advertise their products after choosing certain variables like location, target audience, budget etc.
PPC Entourage
Pricing – Price vary from $o / month per region to $200 / month per region Review – 4.3
PPC Entourage Website
PPC Entourage is yet another advertising tool for Amazon sellers. It claims to kill competition by putting your Sponsored Amazon ads on auto-pilot. They significantly help in improving profit margins. They completely take care of the advertising part while you take care of the business.
Sellics
Pricing – Prices vary from $198/month to $599/month Review – 4.4
Sellics Website
It is yet another tool that you may want to use as a seller on Amazon. This tool tailor made for Amazon monitors many key areas of business like SEO, research, reviews, Pay-per-click, competitor management etc. It is a must add on if you aim at improving your business at an exponential rate. The app is suitable, not only for pros but also for newbies.
Amazon FBA Calculator
Pricing – Free Review – 4.4
As the name suggests, this tool lets you view, calculate and realise sales and price ranks of the competitors. This is an added information which helps you assess where you stand amongst others. The different facilities available here can also be used to determine revenue, RoI, and Profit.
FBA Fox
Pricing – Prices vary from $30/month to $45/month Review – 4.5
It is an amazing destination for those Amazon sellers looking for a wholesale distribution platform. They catalogue almost 5 lakh items and extends services upto delivering your product directly to the buyer.
Kabbage
Pricing – NA Review – 4.2
Lack of operational capital is a big problem that most of the beginners face. Kabbage provides loans for such small and medium enterprises. They use data on merchant activity to understand details about business performances.
Source Mogul
Pricing – $67/month Review – 4.5
Source Mogul Website
This tool helps you to find the right product to sell. This being an important aspect of any seller it helps you in automating the process of searching. It gives you an option to customise your wholesale lists as well.
Shipworks
Pricing – Prices vary from $49/month to $799/month Review – 4.3
Shipworks website
As the names says it helps in optimising shipping of your orders. The orders will be directly downloaded from the website of the store. Apart from that, it also helps in procuring monthly reports, customer invoices etc.
Refunds Manager
Pricing – Prices vary from $690/Year to $1190/Year Review – 4.5
Refunds Manager Website
It is a tool that helps you to get your money back from Amazon. This includes the refunds for damaged products, excessive commission fees and so on. By keeping track of the refunds initiated, this tool will help you monitor the over cash flow of the business with much less friction.
Camelcamelcamel
Pricing – Free Review – 4.3
Camelcamelcamel Website
This tool is very popular among the Amazon sellers due to the service that it provides to them by monitoring the prices available on Amazon. It also sends you alerts if you feed in your requirements like a range of prices based on their availability. Camelizer is a browser add-on of the same tool which makes the job easier for the sellers. They let you see the price history with ease.
Amazon Sellers Lawyer
Pricing – You have to Contact the supplier for a quote Review – 4.4
Business is never a cake walk. And doing business through Amazon is no different. Things like suspension can happen. The tool Amazon Sellers Lawyers deals with the legal side of doing business and helps you revert back the suspension or any other kind of legal punishments imposed by the app. It also helps you to go on to the listings back. This is a go to place in case of any legal hurdles.
Currencies Direct
Pricing – NA Review – 4.5
If you are a seller who undertake transactions internationally, then this is a tool that you must use. It takes care of all money that comes through international marketplaces. And there is no need to worry about local bank accounts. Their clients can save 3% of the overall sales value when compared with other firms.
Profit Whales
Pricing – Prices vary from $69/month to $500/month (They also charge 2% to 3% monthly ad spend on some plans) Review – 5
Profit Whales Website
By using the potential of data science, Profit Whales automates pay-per-click nuances of Amazon for other brands and even third party sellers on Amazon. They do this through their completely automated custom-built algorithms. Hence it is safe to consider this tool as Amazon’s pay-per-click automation software
Helium 10
Pricing – Prices vary from $37 /month to $198/month Review – 4.5
Helium10 Website
This website is extremely beneficial for sellers who are launching a new product. SEO is an unavoidable aspect as far as online businesses are concerned. This tool aids in boosting your sales by optimising keywords. It tracks and finds out the best keywords that can be used so that your products come in all related searches the customers do. These high volume keywords will help you outrun your competitors.
Other tools that Amazon sellers can use
Salsify
Seller Repay
Codisto
Channergy
Billbee
AmazeOwl
Entriwise
SellerMobile
eComEngine
taxomate
Conclusion
There are a plethora of tools that you can use to improve your sales on Amazon. One thing that you need to keep in mind is that no tool can be used in all situations in the same manner.
You need to constantly adapt and improvise on tools. It depends on how your business fares on the platform. In a way, it is a cycle which determines each other. The right use of tools will benefit your business, and the changes in business will demand a change in the usage of tools. So watch your business very closely and use the tools in the best way possible.
FAQ
Which is the best Amazon seller tool?
Junglescout, Camelcamelcamel and AMZ finder are some of the top amazon seller tools you should consider.
Is being an Amazon seller worth it?
If you are serious about selling and growing your business on Amazon then selling on Amazon is quite profitable as it is one of the top ecommerce site.
What tools do I need for Amazon FBA?
Amazon Seller Central App, Amazon FBA calculator and Camelcamelcamel are some of the top tools you need for Amazon FBA.
Shikha Tyagi
