Five methods of e-commerce to consider when entering the online selling game

With a growth of 66% in the South African e-commerce sector in 2020 alonee-commerce has become a pervasive feature on the websites of many businesses.

It is a feature that is:

  • simple to use
  • easy to set up
  • affordable to install
  • easily accessible to consumers, and
  • creates a 24/7 availability of a brand’s products.

With all of this in mind, it is no wonder that more and more South African entrepreneurs are weighing up their e-commerce options. And among the many things that they must consider when setting up an online shop, one of the first things is the method of e-commerce that they would like to pursue.

So, if you’re contemplating what course of action you should take when entering this space, do not worry – media updates Lara Smit is here to help lead the way.

Curious about your options? Then let’s put them in our trolley and check them out:

1. Shop ’til you drop with dropshipping

Dropshipping is one of the easiest ways for an entrepreneur to enter the e-commerce game. The way it works is that a person can set up an e-commerce storefront where they can list goods for online users to purchase using their payment method of choice.

This storefront is connected to a dropship supplier and when an order is placed in your store, this is communicated directly to the supplier. It is at this point that the supplier processes the order and ships the product to the consumer that has ordered it via your website. It’s that simple.

The supplier will, of course, receive payment for the product and you will receive whichever mark up you placed on the product on your website.

So, as with any decision, we need to weigh up the pros and cons.

Pros:

  • You do not have to pay for or manage storage.
  • It saves you time and labor as you do not have to package or deliver products.
  • Your product range is not limited as your website can sell a wide variety of products.
  • You can run your business from any place because you do not have to manage a warehouse.

Cons:

  • You have to rely on suppliers.
  • It is sometimes difficult to keep track of inventory.
  • You have little control over quality. Therefore, if a product is lost, damaged, or bad quality, or if there are shipping problems, it becomes your responsibility.
  • There is lots of competition.

2. Set up shop in a marketplace

Marketplaces are established e-commerce websites that allow entrepreneurs to list and sell their products using these platforms. With this method of e-commerce, entrepreneurs can either store their products in warehouses owned by the marketplace or store them in their own facilities.

Popular types of e-commerce marketplaces are Takealot, Bidorbuy, Amazon and Price Check.

Pros:

  • Marketplaces receive a lot of traffic and therefore reach wider audiences.
  • Marketplaces are reputable and consumers are more likely to trust the brands that sell their products on these platforms.
  • It is affordable to market on these platforms.
  • It produces healthy competition to have similar products sold alongside yours where prices and specifications are comparable.

Cons:

  • Marketplaces charge for their services, which means that they can charge a commission for every sale. These charges may pose a challenge for small businesses with less products than larger businesses.
  • Marketplaces may be restrictive as you have to abide by their terms and conditions.
  • You will not have access to any data about customers using this platform as you could with your own website.
  • There may be a delay in receiving profits from your goods being sold on the platform.

Become a wholesaler / online retailer

This hands-on approach to e-commerce is a lot more taxing on entrepreneurs and businesses as it requires more involvement on their part.

This method requires store owners to buy products from a supplier and store them in a warehouse. Therefore, when a customer orders the product online, the store owner has to ship the product from their warehouse.

Pros:

  • You have better quality control because you are involved in the inventory, packaging and shipping.
  • You have direct interaction with customers.
  • You do not have any extra costs.

Cons:

  • It requires store owners to invest a lot of their money at the beginning.
  • It is very time-consuming and laborious.
  • Buying stock in advance means that you could have leftover products.

4. Create your own private label

When creating your own private label of products, you can employ a company to manufacture products for you based on your own designs. From there, you can either use the services of a marketplace to sell your goods or sell them directly to consumers through your own e-commerce website.

Pros:

  • When employing the services of a manufacturing company, the costs of producing your products can be surprisingly affordable.
  • There is less competition for unique products.
  • You have more quality control over manufactured goods.
  • Your products can be tailored to the needs and specifications of consumers.
  • You are directly involved with customers.

Cons:

  • It is demanding and time-consuming to manufacture your own goods.
  • If you use external manufacturers, you have to rely on their abilities.
  • Manufacturers require a minimum number of orders.
  • You have to create brand awareness from scratch.

5. Give a name to a no-name brand

White labeling refers to when a brand buys products that are already created that have a white-label option where you can rename, relabel and redesign the packaging of these goods.

An e-commerce store owner orders white-label products from a supplier and has the product relabled. They then store these products and ship them to customers who order from their e-commerce sites.

Pros:

  • Products are established and do not have to be sourced or produced from scratch.
  • Packaging is customizable to brand image.
  • It is more affordable to source goods than manufacture them.
  • It is less time-consuming.

Cons:

  • Manufacturing companies require a minimum amount of orders.
  • Although you may customize your label, it can still be influenced by the manufacturer’s specifications.
  • You have less control over how goods are produced when they are created by a manufacturer.

Do you have any tips for people entering the e-commerce space? Be sure to let us know in the comments.

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For more tips on how to adapt to the e-commerce space in South Africa, be sure to read our article, How SA businesses should adapt to the e-commerce space: A Q&A with Jake Rubinstein.

* Image courtesy of Canva

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