Ecommerce Ingredient List: 2 – Budget

The next installment in our ‘Ecommerce Ingredients List‘ Series… If A is for A Value Proposition, then B is for Budget.

As an Ecommerce consultant, the hardest part about recommending a solution to a client is guessing how much money they have to spend. It’s an age old dance. Of course the client wants to pay as little as possible, but they also want something that is fit for purpose. Dancing around the B word is not really helpful to anyone in the long term.

Even a signpost – $10K, $50K, $100K, $500K, more than $500K really makes a big difference in finding the right solution.

Think About Your Budget Before you Start. 

An Ecommerce project should not an an afterthought or a ‘nice to have’. Events at the beginning of 2020 showed that not having a way to sell to consumers can cause huge disruption to revenue. So here are some ways to think about your budget…

How much did it cost to build and kit out your physical flagship store?

You really should consider your ecommerce website your flagship store. It has a larger geographical catchment area than any of your other stores, it will be open 24/7, it has the potential to be discovered by a larger number of customers than any of your physical stores through search engines. And, consumer habits are changing. While online may be a small percentage of total sales today, it is growing.

How much did your largest global competitor spend on their ecommerce platform?

The thing that set you apart in a physical world may not be a differentiator any more. You are now competing in a global market. Medium-term supply chain issues aside, if a company in the next city, or overseas can deliver your customer’s needs better than you, then you have an issue. Someone else has decided that there is a return on investment in spending big on ecommerce.

What is the opportunity cost of not being able to sell to customers online if you have to close your stores?

Physical retail has been struggling around the world for a while now. In some places there is a level of denial about this, but events in early 2020 that caused customers to be confined to social isolation and the closure of non-essential physical shops has forced the hand of many who have been resisting ecommerce. How much of your business are you losing to competitors who allow their customers to shop from home?

Consider ‘Total Cost of Ownership’

A word about subscription and variable pricing!

There are many advantages to Software as a Service (SaaS) and subscription models however… you may end up paying a lot more in the long-run.

Take Adobe Acrobat Reader as an example. You used to be able to buy the software for $75 and now you have to pay $20 per month every month for the lifetime of the product.

The same is true for Ecommerce platforms. Some, like Shopify, have seem to have lower ‘Setup’ Costs, they may charge a percentage of revenue and additional functionality via an App Store may also be charged on a monthly basis, all which add up and make the ‘total cost of ownership’ a lot more than other solutions.

Create some scenarios. Look at what each ecommerce plaform option looks like in Year 1, Year 2, Year 3 with sales growth assumptions and functionality roadmap options.

How Much does ‘Business as Usual’ Cost?

Think about a physical store. The costs don’t stop once it is open. An Ecommerce store is exactly the same. The launch is just the beginning – there are ongoing expenses which include:

• Team: Who is responsible for Merchandising, Customer Support, Content, Functionality road-map, Bug Fixing, Revenue Growth.
• Operational Costs: Stock, Warehousing, Shipping,
• Marketing: Bringing traffic to your site, promotions etc.

Next up on the Ecommerce Ingredient List – Brand.