5 Biggest Challenges for e-commerce business

Posted by Vikash Rathee on Fri, 23 Jan 2015 13:31:43 GMT

5 Biggest Challenges for e-commerce business

Having a successful e-commerce business is both a boon and a curse for the owner. An online store is conveniently open 24 hours a day, 7 days a week, and round the year, enabling business transactions to occur no matter what time of day. Also the e-commerce website has the advantage of proximity; customers can be from any part of the globe yet have immediate access to its virtual storefront. According to eMarketer's latest forecasts, worldwide business-to-consumer (B2C) e-commerce sales will increase by 20.1% this year to reach a whopping $1.5 trillion. Forrester estimates that US online retail sales alone will total $294 billion by the end of this year, and will grow to $414 billion by 2018. These are some mind-boggling stats, but then there are powerful forces driving them.

For instance, rapidly expanding online and mobile user bases in emerging markets are sky rocketing sales. This year, for the first time, consumers in Asia-Pacific will spend more on e-commerce purchases than those in Northern America, adding the number to $500 billion and making it the largest regional e-commerce market in the world.

The e-commerce online market has definitely reduced the cost that would be spent behind running a brick and mortar business but it has its own challenges. As per Forrester’s recent report, US e-commerce forecast: from the year 2013 to 2018, the analyst firm concludes that “retailers have their work cut out for them in the coming years”? As per the Vice president and principal analyst at Forrester, Sucharita Mulpuru “Retailers have to pay more money for mobile development, it will be more expensive to ship packages in the future, and there is going to be more price competition from companies like Amazon,” she further explains that “All of these factors will make it harder to have a very profitable e-commerce model.”

So here is the detailed 5 Biggest Challenges for e-commerce business‏ :-

#1 : Building the trust factor

Even in today’s technologically savvy world we have a mind set as the why to order from a virtual world while we can check the stuff out in a brick and mortar store ourselves. Though for some this a boon and convenient still a maximum chunk of people think it not trustworthy. If possible, list the names and photos of the individuals (including yourself) who help support your website’s or store’s operations. Customer testimonials are also helpful, especially if they can be posted to a forum or blog-like site that helps verify that these testimonials are genuine.

#2 : Mobile Integration

Research shows mobile shopping accounts for nearly one-fourth of online purchases. Last year, mobile commerce sales reached $4.7 billion in the second quarter. To attract customers and multiply sales, e-commerce businesses must continue optimizing their shopping experience for the mobile web(Snapdeal CEO, Kunal Bahal has announced that 50 percent of its sales now come via mobile). This means your business must ensure your website is optimized for mobile devices and even launch a mobile application for your store. These tactics will definitely improve the shopping experience for your customers and increase sales.

#3 : Market Size/ Margins

India has the lowest levels of ARPU anywhere in the world. E-commerce players will have to resort to deep discounting to build scale. Amazon had to do this for 9 years. In India the margins will be extremely thin due to the inefficiencies in all the underlying infra for e-commerce like logistics, payments and cash collection. For Flipkart to be successful not only do they have to be an online retailer but they have to build a UPS and a PayPal and a physical cash collection system that works (which doesn't exist in developed countries as eCommerce players don’t support COD ). That is a mammoth task to pull off and maintain for small start-ups.

Also Read :

How to maximize the margin using pricing monitoring software

#4 : Payments

This is one big challenge for the e-commerce. Technology wise the payment gateways are really poor. Thus spoiling the customer experience. Payment gateway error rates are high (>25% of transactions fail at the gateway). RBI has made it really hard for anyone to use virtual mediums of payments (credit/debit cards, cash transfers etc). Payment gateways and banks also charge way too much commission on each transaction which is bad for the smaller players - which eats into their margins significantly.

Try to setting up professional payment gateway, such as PayU India. I heard about the technology and automation to check if bank site is down from Nitin Gupta(CEO of PayUIndia) in a entrepreneur conference in Bangalore

#5 : Shipping and Tracking

Amazon Prime, which costs $79.99 per year, gives shoppers free two-day shipping on orders placed on the site Amazon.com and affiliated online retailers. ShopRunner offers a similar two-day shipping service with free returns for $79.99 per year or $8.95 per month. Same- and next-day delivery, easy tracking options, and return policies that are hassle free are just a few of the standards that e-commerce giants have set in place for the industry. Thus each new entrant in the segment has to have these basics set up before opening the selling arena to the client. Customers are now well versed and are expecting a high level of service, and consistency no matter which site they're purchasing from, that brings a lot of pressure on small retailers.

Challenges such as these listed above can limit the effectiveness of an e-commerce website; however, knowing what they are is the first step to also addressing them as opportunities for improvement. Even e-commerce merchants who are experts in the field need to keep these points in mind as there is always a scope for improvement and no one wants to lose a customer because of these small issues, traffic and conversion rates, and product branding, highest price. These things need to be kept in mind as when it comes to e-commerce keeping customer and user experience on top is the first priority that you should have on your checklist after all that is the key for ongoing improvement.

About the author

Vikash is the Founder @PriceTree (a price comparison site for shoppers and retailers) and loves business intelligence solutions & online marketing.

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