Online businesses are attracting customers more than offline ones. It’s because of the internet usage by customers across the globe. Especially in India, the customer behavioural pattern has changed a lot since the hit of the COVID-19 pandemic. Everyone wants contactless purchases of goods and services, and that is how eCommerce has filled this vast gap of customer needs in the past three years.
Since merchants have to incur many types of expenditure while working with offline businesses, many costs can be reduced using online platforms. That is why eCommerce websites are growing in exponential numbers. This is possible due to social media marketing, online platforms, and many other tools through which an online business can grow and maximize its worth by reducing operational costs. As per the research data, the eCommerce market is expected to experience 948.4 million users by the year 2025 and an expected user penetration of 52.6% in the year 2022. In the following article, we will discuss how eCommerce can reduce business operational costs. First things first, we need to under a few basic things.
What is an eCommerce Business?
An eCommerce business is an online platform where merchants can sell their goods or services to the customer and collect the payment using digital payment methods. It is a platform that uses end-to-end software applications that allows retailers to operate their businesses.
What is Operational Cost?
Operational costs are the expenses that are incurred on a day-to-day basis to run the business effectively and smoothly. Inventory costs, marketing costs, rent are the best examples of operational costs in a business. These are the costs that are related to the core areas of business.
How can eCommerce Reduce Business Operational Expenses?
There are several ways to reduce your business operational costs by using an eCommerce platform. Some of them are as follows:
- Relaxation from the brick-and-mortar model: A brick-and-mortar model is one where the business operates physically offline in a building or any other structure and collects the revenue face to face from their customer. This model costs a lot to a business because the revenue has to be allocated over electricity, rent, maintenance, etc., of the place. However, when transacting through the eCommerce website, these costs are automatically eliminated. A merchant needs to establish an intelligent Ecommerce payment gateway where it can receive payments from customers with lesser hassles. eCommerce payment gateway services have helped many merchants in collecting their payments. This is because, in the offline model, there are many outstanding sales that merchants have to incur to release the products. Zaakpay offers a one-stop solution for all of your eCommerce payment needs by making it easy for you and your customer to pay for the transaction in just 2-3 seconds.
- Inventory handling cost reduction: This is one of the most valuable things eCommerce has provided to merchants. There is a considerable cost to handle the inventory offline, such as receiving, unpacking, displaying, storing, and releasing as speedily as possible. eCommerce helps you to reduce the inventory cost, and you can create healthy relationships with your manufacturer and wholesalers who will see the products directly, without you paying for rents and salaries unnecessarily.
- Hiring a VA (Virtual Assistant): This is a great way to save full-time employment costs because virtual assistants cost lower than regular employees’ costs. Another benefit of hiring a virtual assistant is that they can be available 24/7 for online business, and there are high chances of getting a more comprehensive range of customers visiting your website and solving their queries. Outsourcing non-core tasks to the virtual assistant is a great way to focus on the core areas of your business.
- Implementing SCM: SCM or Supply Chain Management is a system where you can integrate supply chain methods into your business line. Streamlining the distribution channels such as implementing JIT (Just In Time) to your business where you will only need to store the required stock of the product. This can be an efficient way to reduce operational costs with a high margin. By designing effective SCM, an eCommerce business can earn over and above its average net returns.
- Re-negotiation of payment gateway charges: Payment gateway charges are the fee you pay for your gateway service provider whenever a transaction is entered between you and your customer. It depends upon what method the customer is using to pay for the product. A slight decrease in the percentage of payment gateway charges can add up huge numbers to your operating charges if you are getting bulk orders. Therefore, it is essential to choose an intelligent gateway for the transactions which is both efficient and economical. A merchant can renegotiate the terms of charges with its payment gateway provider. Zaakpay’s payment gateway offers the customers a variety of methods to pay, and it charges no setup and maintenance fee, through which you can maximize your business returns and reduce operational costs.
- Optimization of shipping methods: A high shipping cost makes the customers less interested in your product and stops them from going any further with their purchase. On the other hand, customers love free shipping, but it may reduce the merchant’s overall net profit. So, it becomes necessary to adopt an optimized shipping model for your business because it can either make your business profitable or ruin it. A merchant should look for ways that can maximize the growth of their eCommerce website. They may adopt a hybrid technique. For international shipping, they may add some shipping charges and for the domestic, offer free shipping for a minimum amount of purchase. This will prove to be a strategic move for the customer to purchase more and more from a website.
In a nutshell, we can say that as the Indian economy is becoming cashless and faceless day by day, there is a massive opportunity for eCommerce merchants to grow. The growth will depend upon the cost of operations, and eCommerce has a variety of advantages through which such costs can be reduced, and payments can be collected easily from customers.