Shipping Hurts

Before you think about starting that ecommerce business, think about shipping and you’ll most likely feel a lot of hurt. The fact is, shipping is the one thing most entrepreneurs don’t account for – in other words, it’s damn expensive.

Wired reports that Amazon has raised shipping again – for non-prime members strangely enough. It’s now $49 minimum. How can a company even with the scale of Amazon have to raise shipping for customers? Here’s why:

In its last quarterly earnings report, Amazon revealed that paid Prime membership had increased 51 percent worldwide and 47 percent in the US in 2015. At the same time, Amazon’s shipping costs grew 37 percent to $1.8 billion last year—one of its biggest expenses.

When you’re thinking about shipping, think about the basket size. If customers shop in bulk, grouping goods together will lower your shipping costs. Another idea is to locate your warehouse/fulfilment as close to customers as possible – that will again lower shipping costs and time to fulfil orders.

Hosted vs Self-Hosted

I was browsing through some of my old bookmarks today and found an excellent article by EcommerceFuel’s Andrew Youderian. In the article, “Migrating to Shopify from Magento: The Results of our $50,000 Redesign”,  Andrew discusses moving his ecommerce store from Magento to Shopify.

This is well worth a read if you’re considering moving your site in general but more importantly, discusses the age old question in ecommerce; hosted or self-hosted?

Andrew sums up the argument:

I gave up having micro-level insights in order to more efficiently transform the website and brand into what I wanted it to be.

This is exactly why smaller stores and ecommerce newcomers should go with hosted aka less technology, more commerce. As you scale in terms of SKU’s, required functionality etc it makes more sense to go self-hosted (or proprietary for that matter).

What’s your thoughts on hosted vs self-hosted? your technology preferences?

Inside the World’s Largest Ecommerce Company

Alibaba Ecosystem
Alibaba Group released their SEC F-1 filing this week and in it we learn a lot more about the world’s largest ecommerce company. There’s plenty of amazing numbers to be amazed at – 231 million active buyers and 20% of GMV (Gross Merchandise Volume) attributable to mobile are two stunning statistics alone.

Some other things I found interesting in the F-1. First of, they’re clearly just getting started:

Our business benefits from the rising spending power of Chinese consumers. China’s real consumption in 2013 was 36.5% of total GDP, which is a rate that is significantly lower than that of other countries, such as the United States, which had a consumption penetration rate of 66.8% in 2013, according to Euromonitor International. We believe that growth in consumption will drive higher levels of online and mobile commerce.

The ecommerce (read ‘commerce’) market in China is massive. If Alibaba can continue to maintain and grow share, it will be one of the world’s great technology and commerce companies alongside Walmart, Amazon etc if it isn’t already.

Another interesting anecdote from the F-1:

China’s offline retail market faces significant challenges due to few nationwide brick and mortar retailers, an underdeveloped physical retail infrastructure, limited product selection and inconsistent product quality. These challenges in China’s retail infrastructure, which we believe are particularly acute outside of tier 1 and 2 cities, are causing consumers to leapfrog the offline retail market in favor of online and mobile commerce.

This is less concrete but nevertheless extremely plausible. In essence, Alibaba believes that China and more or less emerging economies in general will skip much of what we know in Retail. This is globalization taking effect but with a twist. Specifically, why bother with fixed cost – or bricks and mortar – when you can substitute it with the Internet, software and logistics?

This is part of the broader economic question; is globalization a case of copying what’s already out there or does Alibaba represent a much more dramatic leap about to be achieved by emerging companies and economies?

As many speculate whether Alibaba can top Walmart’s total retail sales or beat Amazon in global ecommerce, it’s worth remembering it’s a different company to the aforementioned:

We are the largest online and mobile commerce company in the world in terms of gross merchandise volume in 2013, according to industry sources. We operate our ecosystem as a platform for third parties, and we do not engage in direct sales, compete with our merchants or hold inventory.

This is not to say they won’t enter the world of true retail and maintain inventory but they’re a technology outfit. It could be argued Alibaba is different to anything we’ve seen in technology or commerce, it’s a truly unique company.

Indeed, it will be fascinating to hear forthcoming commentary on future plans now they’re public and secondly how they plan to take on the world now that the domestic Chinese market has been won.

Source: Alibaba Group SEC F-1