How Do Ecommerce Companies Make Money?

We live in an age of flourishing commerce, most notable in wildly successful ecommerce companies like Amazon, Flipkart and Snapdeal. Their revenue models are hybrid in nature and this sees them enjoy the kind of success that can only be dreamed of. To understand the success of these companies, it is important to analyze the ways in which they make money. Here is how they do it;

  • Fixed subscriptions: The sellers who are registered with the ecommerce company can put up their products for sale on the website of the ecommerce company in exchange for a subscription fee. The ecommerce company may also charge closing fees that are fixed in nature, this accounts for a substantial share of the revenue of the ecommerce companies.
  • Commissions: Depending on the product category, the ecommerce company can charge the registered sellers a particular percentage commission that is based on the sell value of the product. This type of commission can vary from 5% to a whopping 20% of the sell value of the product.
  • Logistics:For ecommerce companies, the logistics as well as the shipping charges comprise a substantial part of their revenue. Different ecommerce companies like Amazon, Flipkart, Myntra, Snapdeal and Jabong earn a lot through shipping and delivery fees.
  • Deep discounting: Economists justify the deep discounts offered by online sellers for products by arguing that the discounts are actually being offered by the registered sellers. Deep discounting benefits every ecommerce company like Amazon, Flipkart, Myntra and Snapdeal. The ecommerce companies have at their disposal analytics that are cutting edge along with resources that are dedicated to compare the product price across websites and stores. After they conduct their research on the price of products, the ecommerce companies are in a good position to set the price of the product on their websites. Also, sellers are compensated for the discounts that are offered by these retailers online, and this is a win-win situation for both of the players. This also creates a level playing field for both small and big ecommerce sellers.
  • Seeking out the correct niche: Prior to building online stores, successful ecommerce players put their focus on what to sell and how they will source the product. Seeking out a profitable and successful niche is key to conquering the markets. Also, by tapping the pulse of social media, it is ensured that the successful ecommerce company rises above the other competitors. For research on what niches to concentrate upon, reviews, suggested products and also YouTube videos are very valuable leads.
  • Tapping into social media: Once the online store has been established, all that is needed is for the word to spread. In this regard, social media happens to be a very powerful and effective marketing tool. Both leading ecommerce players as well as niche sellers possess their very own Facebook page. Also, leveraging the influence of Instagram influencers can lead to successful commercial growth and increased business and profits.
  • The right audience: The successful and leading ecommerce players make it their business to target the right customers. As an example, if the ecommerce company is selling fitness products, it will focus on those people who are active and who visit the gym regularly. Again, if they are selling diet formulas, the target audience would be people who are trying to lose weight.
  • Reinvesting of profits: With scaling up of business and growth in demands, the astute ecommerce company will reinvest its profits. Reinvesting is the only way in which the momentum of growth will be sustained and new customers attracted to the site. Successful ecommerce companies all go by the maxim of reinvestment of profits.
  • Marketing collateral: The most difficult part of the ecommerce business is traffic generation and sustainability. Most of the leading online retailers depend on standout marketing collateral in order to knife through the noise and generate a powerful voice so that they can build their narrative in such a way that it resonates with the customer. The ecommerce companies, in order to drive growth, rely on inbound marketing campaigns. Also, there is content marketing through which the ecommerce company can focus on the journey of the customer and also address the key interests and concerns of the customer.
  • Targeted ads: Another method by which ecommerce businesses can make money in the long term and improve upon their growth is through different targeted ads that focus on the customer and also the profitable niches right off the bat. If the advertisement is product specific and addresses the needs and wants of the customer, there is good scope for the ecommerce company to grow. Remarketing of existing advertisements is also a good catalyst for the growth and revenue generation of the company.
  • Multichannel methods of product distribution: In order to drive growth, the ecommerce company will need to be present in multiple locations online. Diversification, shored up by a number of channels of distribution is the key here. Those ecommerce companies that optimize and list their products on different multiple channels are the clear winners with enhanced growth and business. There are distribution agreements in place with the distributors and retailers with agreements on quality control and anti-diversion and these serve to build up the profits of the ecommerce company.
  • Search marketing: Besides organic reach, different platforms like Snapdeal also rank their products. Hence the ecommerce company needs to be absolutely clear on the strategies it adopts for search marketing and also the keywords prevalent in the industry. They also need the support of software tools, reports, case studies and also metrics and data to be able to drive their marketing campaign effectively.

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