E-commerce is getting popular by the hour; all the online shopping portals have inspired people to start their own E-commerce sites. E-commerce is the fastest growing retail market and it is estimated to reach over $4 trillion in sales in 2020.
These E-commerce sites are making a lot of money and thus influencing people to begin with their own E-commerce. So what are the ways these E-commerce sites make money?
One of the major ways of these E-commerce sites makes money is by these fixed monthly subscription paid by the registered sellers so that these sites host their products on these E-commerce platforms. In some of these platforms, these E-commerce companies also charge a fixed closing fee for every sale.
This is as well one of the major ways E-commerce sites earn money by earning commission on products that are sold. Depending on the products’ category, the company charges these registered sellers a certain percentage commission on the value of the product that is sold. The commission of the product could range from 5% to 25% of the products’ selling amount.
The customers many times have to pay the shipping amount for the product to be delivered to their doorstep. This amount saves the company from having to pay from their own treasure for shipping as the customers are paying it for themselves.
There are also times when these E-commerce sites have their own shipping system and still charge the customers money for shipping. The shipping cost that is usually needed for these e-commerce sites is usually lower than what they charge the customers. It is this little charge where they gain extra money. Individually when noticed, they don’t really make any difference but when it is multiplied with a large number of people that are continuously using these sites to buy products for themselves.
These E-commerce sites also earn money by becoming a platform for publicizing other brands and getting paid for that. The famous E-commerce sites have a large number of brands wanting to advertise on this platform and they have become another of the major way these E-commerce sites earn money and thrive towards success
How do E-commerce sites manage to sell below the market price?
These E-commerce sites host sales and provide offers to the customers to keep them satisfied and happy, but is doing this in any way beneficial for these sites, or do they suffer losses because of these sales and offers?
Big online retail E-commerce sites have cutting edge analytics capabilities and dedicated sections to compare prices of products on different websites and in different stores. They judge from these prizes they suggest prizes to the registered sellers at which they should be selling their products. It is in this suggested prizes where discounting happens.
It is not mandatory for sellers to offer their products at these prizes but since they get compensated for the discount feature by the online retailer, these sellers only find it beneficial for themselves to offer products in the suggested prize.
Ultimately, a great E-commerce site is one that grows through constant investments, forming the profit cycle for continuous expansion.