Income Generation Series: Full E-Commerce Websites

Overview

Full e-commerce websites are focused on promoting a website to generate sales of physical goods. Once a sale is made, goods are then packaged and shipped to the customer. These websites can range from simple part-time operations to huge virtual mega stores. These require much more energy to promote, establish and maintain, but the profit margins can be significantly higher.

ecommerce1Many of these websites have a potential to be optimized. Procedures such as shipping, accounting, and customer contact should be examined to look for opportunities. The goal in running these websites is to streamline operations and increase sales. Sales could potentially be increase by seeking out new untapped sales channels, such as eBay, Craigslist, Froogle, etc.

Analysis

  • Time: There is significant time requirements to run an e-commerce website. Time must be allocated towards marketing, e-mails, shipping, inventory, accounting, and website maintenance.
  • Capital: There can be significant capital expenditure required to acquire inventory. Additionally business overhead increases to accommodate inventory storage. There can also be cashflow issues associated with storing inventory, as well as inherent risk of inventory loss.
  • Scaling: These websites are very difficult to scale. As sales increase, the work associated also increases almost proportionally. Economies of scale can create efficiencies as the websites grow. Although additional employees need to be brought in at a certain growth level, which increases overhead and decreases margins. Significant capital expenditure is often required to properly scale up these types of websites.
  • Outsourcing: These types of websites are not conducive to virtual outsourcing. Hiring employees to work in-house is needed, due inventory issues. Some of the marketing may be a candidate to outsource to virtual assistants.
  • ROI: Typical ROI is expected to be 50-100%, although factors such as employee overhead, storage rental fees, transaction fees, and marketing costs can significantly impact profit margins.

Recommendation

There are opportunities in running full e-commerce websites. However, due to the time commitments, lack of scale, and capital requirements, these types of websites will not be a priority in my business plan. The opportunity cost of time is significant with these sites, and my time will be better utilized in other websites that can potentially produce passive income.

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