Tag Archives: sales

Free, flat or variable shiping costs

Let’s talk about shipping.  Now, we all know that you need to let customers or potential customers know what the cost of shipping is before they hit checkout.  So you put in the necessary shipping estimators on the shopping cart and otherwise.

However, what kind of shipping methods do you use? The various options have pros and cons.

Free shipping (pure) generally means you put the cost of the shipping items in the cost of your products. This works quite well if, for example; you have a high margin product with a low shipping cost.  It also does well if you can get customers to purchase more than 1 of the item at the time, to save on shipping costs.

However, the cons are that you generally have to put a much higher price on your product which could make you seem uncompetitive.  I’d say this type of shipping method works best for really high value products (where shipping is a small portion of your actual price) or low value products  (where you can ship the order really cheaply).

Secondly, you can do a combined free / variable shipping method. Basically, you provide free shipping at a certain level.  Now, this shipping option pushes people to purchase a certain amount and if set right, can push people to the next ‘level’ of purchasing.  This kind of method requires more calculation but in many cases can be quite profitable.

Flat rate shipping on the other hand is perhaps the easiest for customers to understand.  It’s a simple number that they can work with, but has the disadvantage of requiring to you know your shipping cost quite well.  It also means that if a customer does a large order, and a lot of customers do that, you cost is going to go much higher than you expected.  Depending on how you price it, you might also be losing money on each order.

Lastly, you have variable – or actual – cost of shipping.  Here you charge everybody the actual cost of what it costs to customer to ship. This is of course the most fair method, but the customers that you really want – the large order customers might decide to go elsewhere because other businesses are offering them free shipping.

Bitcoins for E-Commerce in Canada

Ever wondered if you should integrate Bitcoins onto your site? Well, while Starlit Citadel isn’t the largest site around, we do have a significant presence.  Here’s a quick pie chart comparing the number of orders we received using Bitcoin as a payment method compared to our other payment methods.

Pie chart of bitcoin sales vs other payment methods

Bitcoin sales for half of 2014 compared to other payment methods

This pie chart consists of our sales from Q1 to Q2 2014 on Starlit Citadel.    We have Bitcoins on Fortress Geek too, but since SC is much larger, we figured it would be a better chart.  There’s not a significant difference between the two.

I don’t have to say much – Bitcoin’s a nice idea, but right now; at least in Canada, the uptake has not reached a point where it’s a significant payment method.  It might be different in the US where the population numbers are much higher as usual, but in Canada it’s probably not worth the time (unless you have nothing better to do).

E-Commerce Ain’t Rocket Science

As much as people might wish it to be.  At least with rocket science there’s a lot more science than art to it, a lot less guesswork and a lot more fixed variables.  It might be incredibly difficult but the vast majority of the factors are known.

E-Commerce Isn’t Brick & Mortar Retail

We don’t deal with walk-in customers.  We don’t have to worry about displays or shelving or the appropriate amount of space between racks.  We don’t worry about the butt brush effect or seeming too crowded for customers.

If you are coming for retail, you have a great handle on logistics and inventory and what to order and when.  You have no idea about site design, usability, conversion rates and marketing.

E-Commerce Isn’t a Service Business

I have a friend. He runs a service business doing IT consulting.  He charges hundreds of dollars an hour consulting on IT.   His problems are very different from ours.  He never has to deal with inventory, but time management is important.  He can only ever sell a fixed amount of time unless he hires more staff.  He doesn’t have to worry about uploading products or designing new sites or generating a thousand customers a  month- just 2.   If you run a service business, your experiences are important but they aren’t part of the equation here.

E-Commerce Isn’t Affiliate Marketing

Affiliates create sites, they generate content, they sell space on their sites and eyeballs and clicks.  They are the front-face and the beginning advertising platform.  Developing a strong affiliate business is very different from developing a strong e-commerce business.  You could potentially develop a strong passive income from affiliate marketing.  E-commerce is all about fulfilling that order – because whether you drop-ship or hold inventory yourself, you got to have stock to sell it which means you have to active in managing stock.

Affiliate marketing isn’t e-commerce.  The skills might help, but it isn’t everything.

So What is It?

It’s not rocket science.  It’s not unique skills.  It’s a series of skills that are required, that you need to put together to make the business work.  You can gain those skills from a variety of areas, but learning to put them together requires time and money and if you’re lucky, assistance.

Canadian Anti-Spam Law & E-commerce

Canadian Anti-Spam Law (S.C. 2010, c. 23) is coming into effect very soon (July 1, 2015) in its first part with the final part coming into force July 1, 2017.

The law is actually relatively straight-forward especially if you have been following best practices (and the CAN-SPAM act down in the States) and should require few changes in any e-commerce business dealings.  For most e-commerce companies, the area they should be most concerned with are ‘commercial messages’.

Commercial Messages

Commercial messages are defined by asking oneself Is one of the purposes to encourage the recipient to participate in commercial activity? 

When determining whether a purpose is to encourage participation in commercial activity, some parts of the message to look at are:

  • the content of the message
  • any hyperlinks in the message to website content or a database, and
  • contact information in the message.

If you are sending a CEM, you need to comply with three requirements. You need to:

(1) obtain consent,

(2) provide identification information, and

(3) provide an unsubscribe mechanism.

Pretty straight-forward for the most part.  Now, about obtaining consent…

Obtaining Consent

Consent can be obtained via implied or express consent.  Implied consent boils down to the individual having provided you with a way to contact them / have contacted / bought from you before.  Now, consent is tricky so I’d recommend you read the entire bulletin yourself since frankly, it makes no sense to summarise a sumary.

However, one thing to note – you can’t get express consent via a pre-checked box anymore.  That’s right, you  need to opt-in customers, not use an opt-out method which is allowed under CAN-SPAM. So, one major change.

Abandoned Cart E-mails

One major promotional method used by some e-commerce businesses are abandoned cart e-mails.  However, under the new regulations this is a commercial electronic message and since no purchase has been made, there is no existing commercial relationship.  Which means that you don’t have implied consent, which would make abandoned cart e-mails illegal.

Fun isn’t it? So, turn it off before 2017 when you can be fined for up to a million a person.

Revenue Streams Online (1) – E-Commerce

Let’s talk about the various ways you can generate revenue online when you have a website.  I’m just going to do a comparison between eCommerce vs Affiliate Marketing vs Advertising vs Subscription revenue streams and we’ll start with eCommerce.

eCommerce Sales

For those of you who don’t know, it’s where you sell a product on your site and send it to them.  Generally, a physical product but it can be digital and you can drop-ship (have someone else carry the product for you).

Profit margin breakdown using ‘normal’ retail markup for holding stock on your own compared to drop-shipping is 50% to 20-30%.  That is, for every $1 you either get $0.50 or $0.20-30 back.

With digital products of course, if you own the copyright the markup is enormous since your cost of good sold is insignificant (marginal cost that is, not upfront).

Pros:

  • Easier to build a brand, especially if you have products or a product mix that is unique
  • Conversion rates can be significantly better as you are not sending traffic away first – that is you get 1-3% conversion from all your traffic, not just the one’s that travel to the affiliate marketer
  • More control – you can adjust your site to better convert your traffic and have a much better understanding of the needs of that traffic than an external site
  • Lifetime customer value – you are drawing the full lifetime value of each customer especially in a business of repeat purchases.  Unlike affiliate sites where you generally only receive the revenue for a fixed amount of time.

Cons:

  • Inventory can be extremely expensive (requiring tens of thousands of dollars)
  • Building the website is often much more complicated than an affiliate site
  • Developing the brand can be a much longer process
  • A more complicated business model as more ‘moving parts’ from inventory, site updates, design, customer service and more.
  • Generally not a passive income stream as orders must be fulfilled, customer service completed, etc.
  • Ongoing customer service issues compared to affiliate sites (e.g. questions, returns, exchanges, etc.)

Online Competition

If you are starting an online business now, you’ll realise that you aren’t gong to find it that easy to build traffic. Nevermind getting your message out there; you’ll also need to deal with competitors.  It’s easy and cheap to start up an online business; and the real costs don’t really start factoring in till later.

Need a website? Sure – pay $50 and you can host a website.  Oh? Your server is having issues? I guess you’ll need shared hosting.  We start at a small price of $100 a month…

Oh look, you need a credit card processor.  PayPal works right? Sure, if you don’t mind losing customers and 0.3 – 0.5% of each transaction.  Bah, that’s not much! Except it is when you are processing $50,000 a month.

And on, and on.  You can’t work out your garage anymore, you need a storage space.  You can’t just walk-in and drop the packages off, but Canada Post isn’t picking up from a storage lot so you need a warehouse.  Oh look, you need at least 1000 sq ft for a warehouse.

On the other hand, your competitors are starting up small.  They don’t have to worry about paying themselves a salary yet or the higher cost; so they can be lean machines.  There’s an inflection point there where it goes from a hobby to a business and some never pass it, but till they hit it they’re your competitors nibbling at your heels.

Remember, hold tight to what you know and what you are.  Build it right, it’ll get there eventually.

The Victoria Secret Fashion Show and Selling the Dream

Watched the Victoria Secret Fashion Show last night and I was surprised by just how well done it was. Both the production values, the editing, the musical guests and the cut-in segments showing just how much work goes into it.  It was an amazing branding exercise, one that I’m just in awe of us as a marketer.

Speaking with a friend afterwards, we discussed what Victoria Secret really sells. It’s not bras & panties.  Those you can get at Target or Wal-Mart or Marks & Spencers.  What they sell is a dream.  They sell sexiness and beauty.

It’s probably the hardest thing to sell, a dream.  It requires such a tight balancing act.  Your entire brand has to be in sync all the time because a moment of wakefulness for a viewer and the dream could be over.   Look at Lululemon – they screwed up, and instead of owning it, they accused their customers of being the problem.  Poof.   What? Not everyone can look good while working out? You aren’t selling the dream of looking good while working out? You aren’t granola munching love-the-world individuals? Oh…

It’s an incredible job to do that, to sell a dream.  It requires dedication and belief and the ability to see what is missing and the commitment to push through the slow periods.  On the other hand, once you have sold that dream… well, who wants to wake up from a good dream?

Not to sound alarmist or anything…

Has anyone else noticed that this Christmas season has had a slow start? Normally, right after Rememberance Day; like clockwork we get this huge surge of sales on our site.  It goes up by 1.5 to 2x and just keeps climbing till a week or so before XMas.

Right now, it’s gone up but not to the same amount. I’d say we are at 1.3x our normal sales volume.

A bit worrying since we have been banking on a good Christmas to cover some bills.  Anyone else feeling the heat yet?

Time + Money + Expertise = Result

While doing business or taking on any project, I always (consciously or unconsciously) refer to a small equation in my mind. It’s what is used as a headline and it basically states that the Result that you desire comes from the amount of time, money and expertise you are able to devote to the project.

These are the 3 major leverage points / inputs available, and if you reduce any one such input, you’ll need to increase the other(s).

So to finish a project quicker, you’ll need to increase the amount of money you spend on it and the expertise e.g. instead of buying stock photography and touching it up, you hire a professional photographer.

So when taking on a project, I like to consider the options available including:
– can I do it in-house or should I hire someone?
– how much would it cost to hire someone?
– do I go with someone cheap who might need more guidance or someone expensive who knows what he wants?
– how flexible is the final result? What’s the minimum acceptable quality?

And thus, from that simple equation, a variety of potential solutions appear quite often.