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.
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.
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).
- 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.
- 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.)
It’s strange working in the e-commerce field talking to disparate groups. If you talk to your ‘run-of-the-mill’ general folk, once you explain what you do ‘sort of like Amazon‘; most of them nod their head sagely and go ‘oh yeah, great field; you are the next big thing‘.
Then you talk to people who work in Brick & Mortar stores, people whose livelihood are impacted by our new venture, by the Internet and you get a completely different point-of-view. We are predators, we are everything that is evil and wrong with the world. We destroy local businesses and savage communities. In short, we are the enemies of all the right thinking men.
It’s a huge contrast, from a quiet ‘yay, you’ to ‘death to the heathens’ attitude so many bring. Sometimes, you’ll see it couched as other forms of discussion, how we are really ‘irrelevant’ or unimportant, how we are a small part of the economy. If we are (and we are to some extent); why are you bothering to even comment?
It’s funny sometimes standing in the middle, just trying ot make a living.
So, I wrote a blog post on Starlit Citadel’s blog on SEO.
Figured I’d cross reference here since I see no reason to write it twice. I’ll add that there is a 4th option, not covered in that blog post. Start creating your own properties now.
Obviously, this main blog is one of our attempts at creating our own property. It’s something I should probably pay more attention to, since I obviously can and should add more information as we develop the company but finding the time between developing two major e-commerce sites is challenging.
Still, if you are interested in starting an e-business; developing a tertiary property that can be linked and thus pass authority through is an important step.
Something I should have done with FG a while ago. Bah!
One of the most amazing aspects of business that I find is the lack of follow through by so many individuals who run their own business. Time and again, I’ve met numerous consultants, individuals or businesses who lack the ability to follow through and achieve a sale. Some personal examples:
- 2 different businesses that I’ve offered to help set their e-commerce websites up at no cost
- a restaurant that was supposed to help us schedule a party / dinner
- logistics companies that don’t follow through on contact forms
- a gateway provider we met in person who never followed through with a quote
- a freelance content writer who we were looking to hire
All of the above are real world examples of individuals and businesses who missed out on an opportunity for business. In many of the cases, we were ready to buy and just needed a little follow-up. Instead, we received silence. So, remember – follow through whenever someone offers – you never know where it’s going to lead.
And those who don’t, consult. Or teach. Depending on who you ask.
A lie, of sorts. There’s a million reasons why someone would consult or teach.
- Lack of capital to start a business
- Lack of desire to learn the other areas of business (e.g. logistics or accounting or HR)
- Enjoyment of the act of consulting / teaching
- Insufficient time to run a full business
- Using consulting / teaching to boostrap capital
Yet, like most things there’s a grain of truth in there. Be careful about the consultants and teachers you find, always check their previous references and check what they’ve done. Many aren’t able to run a business because really, they just aren’t that good.