What About E-commerce?

E-commerce is the act of buying or selling a product or maybe even a service using a website.  On the site you will be able to add products to a “cart” and you usually make the purchase by using a credit card.  While the idea of selling products using an E-commerce type of website is an attractive idea for some businesses, it is wise to tread carefully and to be absolutely sure that its the right fit for you. 

Is your business an E-commerce business? When it comes to making a decision whether or not to develop an E-commerce website depends on very long list of factors – the cost of storing your product (inventory) and the cost of delivering it on time to the right person. (shipping), the processing of credit cards, refunds, support and so on. But the most important factor is knowing whether or not you want to sell on price alone or on the quality of the solutions you can provide. If you want to sell on price the challenge is whether or not you can establish a price point that is not only profitable but competitive.

Distributors could fit quite nicely into the E-commerce mold. They should already know what the inventory and shipping costs are and the cost of the product itself is already been set by the manufacturer.  They are also willing to sell on price alone. A price point is pretty easy to fix depending on the kind of competition there is for that product.  If there is a lot of competition, then the sales margins are probably very low and it will take a lot of work to make a profit. If there is very little competition, it might not take that long.

Manufacturers, on the other hand, are not a good fit for E-commerce. They  are more concerned with the cost of materials and labor and not necessarily the costs associated with selling the product. And they often know even less about inventory, shipping costs and what the price point might be for their products.  In a lot of cases , its cheaper if they  get someone else to take care of that for them, i.e., a distributor. If a manufacturer not only makes single products, but entire turn-key systems composed of many products and processes, i.e., engineering, programming, etc., they will not be interested in selling on price alone, but on the quality of their systems.

Service Companies can work nicely with an E-commerce business model provided that its easy to fix a price to the service they provide.  Some service companies might charge a fixed fee for a certain service while others don’t want to fix a price point because of too many unknown variables. They have to decide whether sell on price or not.

Solution or Systems Providers are not a good fit for E-commerce because it is impossible to fix a price point on a system or solution and make a profit. A solutions provider may sell a single item, but only when it is one of many components in a much larger system.  While it is easy to fix a price to a single component, it makes no sense to find a price point for system or solution since it constantly evolving and will be different every time it is installed.  When a system or solution involves any kind of engineering or programming, installation, training, or labor of any kind, it even makes less sense sell on price alone.