In the continuously growing ecommerce world, the relationship between the seller and the marketplace is such that they are quite occupied in listing products online in order to drive sales. However, when it comes to selling online, simply listing products and waiting for orders from customers is not sufficient. For selling online, after listing and selling the products, both, the sellers, as well as the marketplaces, must make money in the process. But, are the sellers actually making money, here? We often come across the term ‘Seller Frauds’ and other scams regarding poor product qualities, SLA (Service Level Agreement) breaches, wrong product delivery, etc. Well, have you heard anything about ‘Marketplace Frauds’? We haven’t yet! The marketplaces quite usually hide the terms and conditions knowingly or unknowingly from the sellers. From the past 10-15 years, the ecommerce market has exponentially grown globally. It is a great medium to start selling online as well as develop a business. For completing the on-boarding process in a marketplace, the seller has to sign an agreement, list the products, wait for online visibility, and lastly generate sales. However, there are a few problems in this; therefore, in this article, we will be discussing the problems while answering the question of whether selling products online is a profitable business. In this article, we will be talking about the profitability of selling products in India.
What are the problems faced by the sellers?
The Commission Structure
When selling online, there are a few major business models that are typically followed; marketplace model, SOR (Sales or Return) model, omnichannel model, through distributors model, OR (Outright) model, direct selling model, and many more. However, the challenge is to understand the varying commission structures for these models. The commission structures are not mentioned clearly in the agreement. Usually, the commission varies from marketplace to marketplace and so does the commission structure. There are two elements in the commission, they are:
These elements are inclusive of a fixed listing fee, closing fee, packaging fee, delivery fee, etc. All these predefined fees are to be paid by the seller over and above the commission. Usually, these fees are not negotiable as well.
Percentage of Sales
These elements comprise the commission percentage, marketing charges, payment gateway costs, etc. Although these fees may or may not be negotiable, it indeed has a great impact on product costing.
Upon adding these charges, the total commission may surge to 40% – 42%. Additionally, when accounting the return charges, penalty charges, Return to Origin charges, the commission charges can reach up to 60% as well.
Visibility and Marketing Charges
Apart from the commission and fixed charges mentioned above, the online sellers are bound to keep a marketing budget as well in order to gain some visibility in the marketplace. The marketplaces provide the sellers with various options to market their products including social media promotions, banners, notifications, etc. However, all the options come at huge costs which are not affordable by many, especially the Small and Medium-sized Businesses (SMBs). Now the tricky part is, although the marketplaces collect money from the sellers for the features they avail, they usually do not assure any commitment.
Getting access to customer data is crucial for retail as well as growing brands. Customer data such as the list of customers that best suits the brand, the best performing area, demographics, etc. help the sellers take strategic steps to run an effective online store. Now, the sellers get access to the geographical customer data only in marketplaces wherein the shipment challan is raised. However, when it comes to the OR and SOR model, the online seller hardly gets any access to the customer data. One thing online sellers must know is that the marketplaces do not share the customer data directly. However, the sellers can seek inputs from the marketplaces for altering their online store for more sales.
The penalties are other charges that are not informed by the marketplaces to the online sellers at the time of onboarding. These charges are visible to the sellers only when they start selling. From all other penalty charges induced, the most impactful is the RTO and SLA Breach. The RTO is the return of products to the origin as mentioned earlier. In this case, the products are packed as it is and the customers would have refused to accept the order. Such cases are a result of uncertain customer lists of the marketplace. Ideally, the sellers must not be charged for RTO as they do not have any control over the genuineness of the customers. Even though, the marketplaces do charge the sellers for RTO. The SLA breach is a flat cost charged on the sellers when they fail to confirm an order, pack the order, or ship the order in a given timeline. The timeline provided may vary from marketplaces to marketplaces. However, the standard time for this is 12 hours to 24 hours. Now the problem here is that even if the sellers are functioning on time, if there is a delay in collecting the products by the marketplace, or the malfunctioning/ delayed functioning from the logistics partner, or anything occurs that surpasses the timeline, the penalties are to be paid by the seller. However, the good part is, if the sellers provide evidence for their timely service, there are chances that they get the reimbursement.
Is it profitable to sell products online after all?
Now is the major question; is it actually profitable for you to sell online? Let us make that clear; selling online is definitely a profitable business; much more than many other prominent business ideas. Although the online sellers face many issues in selling efficiently, not a single problem is a continuous process; when managed well, all the problems can be kept at bay. Moreover, the profits earned from selling online will blow your mind and no sane person would deny starting such a profitable business. Below are a few compelling reasons to make the above statement:
Higher Earning Potential
The money you can earn from selling online is infinite. Many prominent businesses can help you earn a 6 digit or even better, a 7 digit income. Now, earning more depends on your business plan and your selling strategies. Not all online businesses are as successful as Amazon, right? But, the thing to be noticed is, selling online can help you reach where Amazon has reached, or can help you become a small or medium-sized online business. The potential is extremely high; the results are, however, upon you!
We have already described the problems that online sellers face in selling online which also included the charges they need to pay. No, we are not going to make any contradictory statements. Those were the problems faced by online sellers who sell products on marketplaces. There are many other ways to sell online, like creating an online selling space for you! We are not kidding; you can create an online selling store for your business without knowing the complications of coding and other technicalities. With Builderfly Ecommerce Platform, all you need to do is register by providing a few details, pick a plan, connect a domain, design your store, and start selling! You do not have to panic; at any point, you can get immediate assistance from various sources including FAQs, user manual, training documents, live chat, email, call, and messages.
Wide Array of Customers
Unlike any other business, the customers seek for online businesses selling the products they wish to purchase. With the world going online due to the COVID-19 outbreaks, the chances of earning more with increased customer base lie in the online selling business. Moreover, when the majority of online shoppers are found on social media platforms, online selling businesses can easily approach the right audience in the place where they spend most of their time. The social media platforms also let businesses market and sell their products through the integration of product links, posts, and the use of buy buttons. While the customers are scrolling through their social media platforms, they can not only view the products you sell but also complete the purchase without leaving their social media account or searching for the seller’s website.
These were the three most important and convincing reasons we found to answer whether selling online is a profitable business. As mentioned, there might be various problems or even risks of selling online. As an online seller, it is your prime role to invest quality time in research and make strategic decisions while selling online to avoid any complications. To start with, you can start your 14-days free trial period with Builderfly, to understand how the online selling business actually works.