The idea of what a small business looks like has dramatically changed thanks to the proliferation of the internet. Ecommerce has leveled the playing field by making it so that small businesses are no longer confined to brick-and-mortar locations.
Today’s small business has a complex online presence that makes it possible to reach more customers in more ways. From branded websites and virtual marketplace storefronts to targeted social media ads and influencer marketing, the rapidly evolving nature of ecommerce has enabled even the smallest businesses to effectively and efficiently reach a broader audience.
With so many cost-effective ecommerce options available to very small businesses (VSBs) with less than 50 employees, how do business owners know which channels make the most sense for their bottom line?
If you do a quick Google search for “small business websites” you’re likely to be inundated with listicles explaining why it’s critical to have a standalone website. While it’s true that having an online presence is a requirement today, VSBs must also consider the financial and management commitments of having a branded ecommerce shop. At a time when businesses have multiple options for selling online, many VSBs might find wonder if a standalone ecommerce site is necessary for their online sales.
The Impact of the Marketplace Economy
In the last few years, we’ve seen a major shift towards a marketplace-first economy. The prevalence of mega sites like Amazon, eBay, Rakuten and Etsy have made it possible for even the smallest retailers to sell to customers around the world. In fact, third-party sellers on Amazon combined for a total sales volume of $200 billion in 2019.
For many VSBs, the primary benefit of selling through marketplaces is the expansion of their potential customer base, for the simple fact that marketplaces see significantly more web traffic than business-owned websites.
The reality for businesses is that consumers have more purchasing power than ever and are willing to look globally for the products they want. For example, I can buy a leather jacket from Spain and expect to receive it in a timely manner. With Forrester predicting that global cross-border ecommerce will grow to $424 billion by 2021, marketplaces are making it possible for VSBs to market their products internationally and keep pace with this global shift in consumer habits.
Aside from increased market exposure, marketplaces are also an ideal channel for VSBs because they take the pain and expense out of key components of the ecommerce customer journey, like shipping, fulfillment and compliance. Shipping can quickly become costly for VSBs, so having fulfillment services provided can save precious resources.
When it comes to compliance, the implementation of marketplace facilitator laws in most U.S. states, requiring the marketplace to collect and remit sales tax on behalf of sellers, relieves VSBs of the burden of doing so. However, the sales generated through the marketplace contribute to a business’s overall nexus threshold, which can create massive compliance responsibility for the business itself.
Many VSB owners are also drawn to a marketplace-only approach because of their ability to stay on top of the latest purchasing trends, like mobile app purchases. In 2019, Amazon saw 85% of mobile activity come through its app. Marketplaces enable VSBs to reach customers in unique ways and provide shopping experiences they wouldn’t be able to otherwise.
The Case for an Ecommerce Website
The impact of the marketplace economy combined with the restraints placed on VSBs by their size has pushed many business owners to consider going all-in on marketplaces or removing the transactional ecommerce functions of their websites. However, there are still several pros to creating and maintaining a branded transactional website for VSBs, including:
- Control: VSB owners have complete control over their ecommerce website, allowing them to create the entire design and customer experience
- Focus: An ecommerce website prevents visitors from being distracted by products from other sellers, reducing the likelihood of cart abandonment
- Recognition: When consumers make purchases through a branded website, they’re more likely to refer others because they can easily identify your business as the source instead of the marketplace or third-party website
Another important aspect of having a transactional ecommerce website is that business owners can market directly to website visitors and customers. Armed with their email addresses, you can send promotions, offer discounts and announce new products. This is extremely valuable for generating repeat customers and building brand loyalty.
For any VSB hoping to break into the omnichannel selling world, having an ecommerce website can serve as the central repository for product information and customer data, helping support selling strategy across channels.
At the end of the day, every business is different, which means that their ecommerce needs should be as well. Ecommerce has enabled VSBs to compete with larger competitors selling through multiple channels. However, for many VSBs the ability to manage multiple selling channels and afford the costs associated with an omnichannel approach is still out of reach.
While having an owned ecommerce website might make sense for businesses who want to have more control over the customer experience and can afford to do so, the innovation taking place across ecommerce is signaling a new era where small businesses might be able to get by without having to build and maintain their own site.
Greg Chapman is senior vice president of business development at Avalara