Selling online in a profitable way – A starter guide
1. Legal Requirements:
Most of the marketplaces currently require the following legal steps to start selling online in India:
- Register your Business as a sole proprietorship, partnership firm or a private limited company if not already registered
- Get Current Bank Account
- Apply for TIN/VAT Registration
- Apply for PAN
- Trademark Registrations if required
- Upload and Verify Documents
This is where you add information about the products that you want to sell. This step is very important as it helps a buyer make a purchasing decision depending on the information given by you. To know more about listing please read Product Listing in Marketplaces.
Right pricing of your products is one of the most critical components while selling online profitably. You have to calculate the costs involved before pricing the products.
These are some of the important costs charged by the marketplaces:
- Shipping Cost – It completely depends upon the size and weight of the product. It may vary between INR 60 to INR 300 for normal sized products.
- Marketplace Commission Cost – It again depends upon the category in which your products fall under. For low margin products like electronics items it can vary between 4% to 10% where as categories like apparels and clothing it can be as high as 25% – 30%. These commissions are not fixed and may change anytime by the marketplaces. On top of these charges few of the marketplaces even charge a flat fee on every order.
- Marketing/Advertisement Cost – In few of the marketplaces you can opt for internal advertisements which is a form of paid marketing. It can be CPC(Cost per Click) or impressions or banners and posters within the marketplace website. They are very similiar to Google’s AdWords and is based upon keyword research and bidding.
- Extra Costs – You are penalized monetarily for non fulfillment of orders on time or in case of stock outs of products after the order is placed by the customer.
Following are some additional costs incured by the you:
- Photography Cost – Photography of your products is a mandatory activity for selling online and guidelines of the marketplaces have to be followed. For table top product photography the cost can vary between INR 80 to INR 150 and products with model can vary between INR 250 to INR 800 depending upon the service providers. If you are reseller of other manufacturers you can use images which are already available for reuse in the internet.
- Listing Cost – If you are using services of third party vendors for listing, the costs can vary between INR 10 to INR 50 per product per marketplace.
- Packaging Cost – Depending on the type of product you are planning to sell, you will need to consider the packaging cost. Check the different packing material and calculate how much you will need for one product. Calculate the total cost per product accordingly. Normally its between INR 10 to INR 45.
- Storage Cost – Depending on the product, you might need to rent warehouse or some storage space for your products. Some online marketplaces like Amazon, Flipkart or Snapdeal let you use their warehouses at a small fee.
- Lost or Damaged products Cost – At times products are damaged or lost in transit. A dispute has to be raised during such instances but there is a 50 % chance that you will have to incur this additional costs.
- Reverse Logistics Cost – The cost for returns have to be borne by you in most of the cases. It will be between INR 60 to INR 300 normally for each product return. Roughly 20% of the products are returned due to various reasons.
4. Inventory Management:
Managing of inventory across marketplaces is one of the most crucial activities for selling online which has to be at sync with the physical availability of the inventory in hand. You have to keep track of the inward and outward movement of your inventory. Most of the marketplaces will penalize you for non fulfillment of orders due to stock out. It impacts the seller rating as well which can impact selling online profitably drastically.
5. Fulfilling Orders or Order Management:
The most important part of selling online. Most of the marketplaces have these following steps:
- Receiving new orders from buyers and confirming the order.
- Packing that order – adding invoice and shipment label and keeping it ready for dispatch.
- Dispatching the order by using logistics partners of the marketplaces or self shipping by using third party logistics vendors.
- Downloading/Uploading the manifest to ensure pick up of the right product.
- Tracking orders until they are delivered to the buyers.
6. Return to Origin or Reverse Logistics:
Returns not only happen when a buyer is unhappy or dissatisfied with the product it may happen for the following reasons too:
- Buyer is unavailable during delivery.
- In case of COD, buyer might not have cash available with him or her.
- Buyer has changed his mind and it can be for any reason.
- Buyer places multiple orders from various marketplaces and only accepts the order which is first delivered to him or her and returns the rest of the products.
In case of genuine returns it may involve refund, exchange or replacement. Returns lead to buyer satisfaction making you a preferred seller but the extra cost incured for reverse logistics has to be borne by you.
7. Payment Cycles:
Payment cycles vary across all the marketplaces. Very few marketplaces release payment weekly, most of them release payment twice a month. Payments are released after deducting the commission or cancellation fees. Most of the marketplaces have a Seller Protection Program which exists to take care of damages when you are not at fault. Your grievances will be taken into consideration and resolved most of the times but usually the benefit of doubt is given to the buyers.
8. Track Performance:
You have to track your performance very closely for selling online such as your sales, quality of service and other factors. These help you to become a preferred seller on the marketplaces. Most of the marketplaces provide dashboards to highlight necessary information to check your key performance metrics. You have to constantly strive to maintain good ratings and getting good feedback from buyers for selling online profitably and in a sustainable way.
9. Trend Analysis:
You have to constantly work towards introducing new products to sell online. You can check the various marketplaces which have very good search engine and try to identify gaps where you can introduce these new products. The product gaps need not be only unavailability of a certain category of products, it can be even existing products but at a new price range.
10. Advertisements within the marketplaces:
Marketplaces such as Amazon, Flipkart and Snapdeal provides a platform to promote his products better on these marketplaces. The three things to keep in mind during promotion of your products are the following:
- Keyword research and selection
- Advertisement budget management
An experience with google adwords can really help to manage these promotions. In case you are not comfortable with selling online and promotion of your products in this new channel please get in touch with us. We provide end to end solutions for new and existing sellers like you.