Advantage and Disadvantages of selling on E-commerce portals

One of the common questions that we get with regards to E-commerce is whether to start your own E-commerce portal or sell on other E-commerce portals. Off course, both methods have their own advantages and disadvantages.

Before the past 1 decade, E-commerce portals like Snapdeal, Flipkart and Amazon did not exist. Even if they did (Amazon and Ebay had presence) their sales was too less.

But a decade back Android came in the market and it shook the smart phone market to its core. Now there are billions of people using smart phones and the apps in it. And one of the most common apps installed by people are E-commerce apps. Not only mobile, but desktop sale of E-commerce too grew a great deal due to the penetration of the internet and the usage of smart phones / laptops / computers.

Before the advent of E-commerce, websites were the sole selling point of most companies and the online sales mainly used to comprise of mass e-mailers and through Search engine optimization.

But with the Amount of money being pumped into advertising for E-commerce portals, it is for sure that E-commerce has a far better brand equity then your website (especially if you are a small business). But still there are exceptions, where your website will perform better then E-commerce. Let us discuss the same.

Advantages of selling on E-commerce portals

1) Footprint – The total number of people buying online in India as of 2015 were at least 65 million. This number is only going to increase and it will not decrease. So we can be rest assured that your product will receive much more page views when it is on an E-commerce then compared to your site.

2) Brand building – When more and more people put in the reviews for your products, your product comes up the search pages and therefore the brand is imprinted in consumers mind. There are several kitchen appliance brands which did not exist 5 years back but are household names now because of the exposure they received in E-commerce portals. Mind you, the brand will be built only if the product is of high quality.

3) It is easy – Selling on E-commerce portals is easy. This is the biggest argument for you if you are a non technical person. Take it from me (who owns this website) that building an E-commerce portal is not easy if you are non technical.

A base rule is, if you do not think yourself to be almost equivalent to a professional in Microsoft word or Microsoft excel, then building your own E-commerce portal is not for you. You can learn off course, but there is a steep learning curve. If you still want to do it, then i suggest shopify.com.

4) You can Negotiate with the portals – There are many options within these E-commerce portals to increase your sales. If you are ready to invest, you can buy banner ads, push your products higher up with a “Sponsored” tag or in general, offer a higher marketing budget so that the product managers take care of the sale of your product. This ensures that even if you are a comparatively new company, you receive good sales.

5) You can outsource packing and shipping – I highly recommend that you outsource your packing and shipping requirements to a 3rd party or to the fulfillment warehouses of the E-commerce portals. Amazon has FBA which is fulfillment by Amazon. Snapdeal has SD plus and Flipkart has its Flipkart Advantage. This gives you lesser headache as you just have to fulfill inventory and the packing and shipping is taken care by the E-commerce portals.

6) Volumes are fantastic – A major factor people are loving Online sales is because of the volumes they achieve through online sales. If through physical distribution, you were able to reach a state or a region, with online sales you can reach across the country and in some cases, international shipping can be done as well. Thus, the volumes are fantastic, the reason most online players are attracted to it.

Here are the disadvantages of selling on E-commerce portals

1) Price Competition – Whatever you do online, exposes you to more competitors. And there are so many of them out there. If you offer a unique product, a similar product with a different brand name will be launched soon, many a times with lesser price. This would probably be by a competitor who also got the idea of selling online once you started to sell. So, there is no extra advantage to you for this idea of “Selling online”. The better you go online, the safer you will be. But price competition is sure to be there.

2) It does not sell large products – One of the major disadvantage of E-commerce portals is that large products are not sold that easily. For example – Amazon does not sell anything above 8 kg in Easy ship and it does not sell anything above 30 kg through fulfillment. You have to higher a 3rd party transport to do the same. Although Snapdeal does offer the sale of these products, but the sale is far lesser for large products and handling charges are very high.

3) Returns of products are high – In Flipkart, i once had 40% sales return for a complete quarter. The returns were almost equivalent to the sales and i almost gave up. But later on, by giving feedback and fighting with the logistics team, i could bring down the product return date. Overall, with online sale, you can expect a higher rate of return of products when compared to offline sales.

This fundamental is also brought into place because people are afraid to buy online mainly with the doubt “What if it is a defective product”. The result is that most of these E-commerce portals offer easy replacement / return of the product. This topic has irked many online sellers and there was a recent strike against Flipkart too. Bottom line, be prepared for a lot of accountancy and return problems including damaged products being returned.

4) Profitability – Your profitability is generally very low in online sales. There are 2 main reasons for this.

1. You are already operating at low margins due to solid and visible competition
2. Your operating expenses are relatively high in online sales because of the storage, transportation, packaging and sales return debits.

Taking all the advantages and disadvantages of selling on E-commerce portals, one thing stands out – The sheer size of the market right now. If so many people are buying online, and your product is not selling online, then that is a disadvantage for you (even technical products have portals like Industry buying)

However, if you don’t want to sell on online portals because your product is technical or unique, then you will better off owning your own domain and advertising it online.

Also Read – E-commerce segmentation