Etsy and eBay are a great place to get started selling online, but would you benefit more from selling from an e-commerce site? First, we need to look at what exactly an E-commerce site is and what differentiates it from marketplaces like Etsy and eBay.
There is an abundance of marketplace options for a range of different industries. Marketplaces sometimes offer the seller the chance to have little to no inventory by providing either an in-house or third-party print-on-demand service. For more customised or specialised items this isn’t always a viable option.
This print-on-demand, or holding little inventory method, is a great way of reducing overheads for a business. However, if it all seems too good to be true then you are on the right track!
Marketplaces often take posting fees or sales commission - and some platforms charge both. If you add that up along with the percentage that your chosen payment platform (such as PayPal or Stripe) takes, as well as postage fees, it all eventually takes a considerable chunk out of your profit margin. What does it mean if it takes out your profit margin?
Well, when it comes down to it you want to be making the most return on your product for little production costs. To accommodate the cut in the profit margin from these commissions and percentages, you have to either take the hit or pass some of it to the customer by charging more and essentially pricing yourself out of the sale. It’s the same with undercharging so you really need to be able to find the right balance.
Here is something to help you calculate it:
- Profit = Selling Price - Cost Price
- Loss = Cost Price - Selling Price
- Cost Price = Selling Price - Profit (or Selling Price + Loss)
- Selling Price = Cost Price + Profit (or Cost Price - Loss)
- Caution: Profit or loss per cent is never calculated on the number of items sold, but on the cost prices of the items.
For further help with profit and loss check out this handy page.
Don’t get us wrong - these marketplace platforms are great for starting out but the scalability of these platforms is limited and could hinder you in growing your business. You will have to sell more to make the same profit margins you can on an e-commerce site
An e-commerce site might seem a bit of a daunting step to take for your business and might seem like it's beyond expensive, the technicalities, the setup, the integration, we get it, it can be overwhelming!
Let’s talk a bit about what an e-commerce site is. e-commerce is your own platform, with your own branding, domain and hosting. With e-commerce you are completely in control of how many items you post up for sale, your pricing, the design and feel of the site.
These sites also allow for API integrations and third party services. What is an API I hear you cry, well here is the definition for you “API is the acronym for Application Programming Interface, which is a software intermediary that allows two applications to talk to each other” basically it allows things like Twitter and Instagram updates to appear live on your site. There are many variations of API from payment methods to booking systems. Having your own e-commerce site allows for you to have that flexibility to add and take away features you need and don’t need.
E-commerce also doesn’t have any listing or commission fees, and it's actually cheaper for you, in the long run, to pay for a domain once a year as well as looking into a one of payment for the website design in itself. The only percentages you will have to consider is the payment method you choose to use. Some plugins and third party services have monthly charges but there are often alternative functions that can be added to avoid using these plugins or services.
One of those third-party services can be a print on demand item, but bear in mind all print on demand services usually have a commission charge. But with no listing and sales fees on the site itself, you are likely to make a bigger profit margin. But if you don’t want or have the space to hold stock it's a great solution and saves on your overheads.
Contact us today if you would like to learn more. Let’s get you making the most out of selling online.