Like a bulldozer through a forest, for the last decade online retail has been charging forwards demolishing any pundit or cynic who dares stand in its way.
By the start of next year the average US consumer is expected to spend $1,738 online, which represents 9 per cent of their total retail purchases for the year.
There is no denying that the industry is growing, and here are the 5 critical reasons you need to be online by 2015:
1. The industry is booming
Since 2002 the ecommerce industry has experienced an average 13.47 per cent compound growth in the United States above ordinary retail sales, according to ComScore. This growth isn’t expected to slow anytime soon, with eMarketer predicting that global ecommerce sales will top $2.536 trillion in sales by 2018.
To put this level of growth in perspective, the Australian Mining Boom experienced 14.84 per cent in annual growth from 2004-2010.
So if you weren’t cashed up and couldn’t invest hundreds of millions in buying or starting a mine, then online retail is your opportunity to cash in on the largest global boom in modern history.
2. The barrier to entry is rising each year
Although anyone can set up an online store at any point in time, history has taught us that there is always a point in every market where taking significant share is virtually impossible.
Take mobile phones for example. Today, between Apple, Samsung and HTC, the market is pretty sown up. There will always be space for the likes of Nokia and Blackberry, but any newcomer wanting to take significant share will face an uphill battle.
Property is another great example. In 1980 the average price for a property in Sydney was $68,000,or 2 times the average salary at the time. Today, the same property will cost you over $800,000, over 10 times the average salary.
The same goes for online retail on many levels.
Once consumers are happy with a store, it is 8 times harder to get them to change to a new one than it is for their current supplier to retain them.
Plus, large companies are creating a bidding wars on all variations of advertising. From Google Adwords, where the medium price increased 26 per cent between 2012 and 2014, to Facebook Ads, which are rising by up to 10% per quarter. They are spending big and knocking small merchants out of the market.
Then you throw on the SEO side of things. It has long been known that larger retailers with thousands of pages are more likely to rank well than start up merchants. So if you’d like to out-rank existing retailers past 2015, it’s like trying to outrun Usain Bolt, the worlds fastest man, after he has had a 300m head start!
Bottom line: After 2015 the cost of starting a small successful business and competing online will be dramatically more difficult than ever before.
3. It’s the most cost effective growth channel available
According to Forbes, setting up a new retail store requires an investment of approximately $100,000. This is almost 5 times the cost to set up a customised, high quality and fully functional eCommerce site which normally costs $20-30,000.
Plus, unlike a traditional store where you have large overheads of staff and rent, your on-goings are far less.
The amount you’ll need to invest to grow your business on a monthly basis depends on your existing skill set and that of your staff. Do you have the ability to manage your social media, PPC, SEO and content marketing efforts, or do you need the help of an agency?
The average fully managed ecommerce marketing agency will charge $2,000 a month to take care of this all for you – which is far less than the cost of having staff standing around 10 hours a day!
4. Reduces overheads
The average retail store spends 31 per cent on overheads BEFORE Utility costs versus the average online retail. This can be reduced enormously by expanding with an online retail model.
The average overheads for an online store in 2015 can be as little as a few hundred a month, vs. over $150,000 a year for a premium retail location.
However, there are still a range of expenses that you simply can’t do without. Here is a list of expenses you should expect when you start:
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Secure web hosting – $50-100 a month
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Online Marketing – $1-2,000 a month
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Website changes & Support $1,000 a month
- Outsourced Admin Staff – $1-2,000 a month
5. Scalability
Birds of Prey reported that they once had 197,000 visitors to their online store in 1 day. Can you imagine fitting that many people into a standard 70 spm retail store? Its physically impossible – And that’s the power of online retail.
Thanks to the power of the internet, you can now expose your retail stock to buyers from all over Australia and the world, for less than it would cost to service your neighborhood in offline businesses.
Of course with massive scale, such as the Birds Of Prey examples, comes enterprise grade issues, many of which can be solved by Amazon’s Cloud. But unless you’re expecting thousands of visitors on your site at any one time, then you won’t have an issue.
But what if you start in Australia and want to start selling in the NZ, the USA, or the UK? Well, with software like Magento’s Multistore functionality, you can quickly and easily create a new store front to service these countries with specific information, domains and pricing to suit.
Conclusion
Online Retail isn’t so much a trend any more as the way of the future. It’s here to stay whether we like it or not, so the only question is, will you get on board?
2015 is the year when the tables are starting to turn. So if you’ve been thinking about expanding your business to make the most of online retail, then be quick, as every day you’re missing out of your part of this trillion dollar pie.
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About the Author:
Author, and Marketing Expert, Joel House is one of Australia’s leading authorities in ecommerce and online retail. Joel has been featured on Digital Marketing Radio and is currently the Head Of Marketing at Online Visions, a boutique ecommerce & Magento agency.
