The Rise of Multichannel E-Commerce

June 19,2018
by Matt Lurie

multichannel-ecommerce

If you're new to the world of multichannel e-commerce, the options, marketplaces, and terminology before you might seem daunting and confusing. However, chances are you're not as uninformed as you think, and will only need a bit of information to help guide you along the way. If you're looking to develop a multichannel e-commerce strategy for your business, but have no idea where to start, here's a quick rundown of the rise of multichannel e-commerce, why it's important, and what you need to get started.

What Is Multichannel E-commerce?

Multichannel e-commerce is the practice of selling products on more than one place online. Even if you've never sold anything online before, chances are you have some practical knowledge as a customer. If you've placed an order for giant googly eyes or yodeling pickles in the middle of the night—congratulations: you've participated in multichannel e-commerce.

While online marketplaces like Amazon and Walmart sell and ship their own products, they also allow third party sellers to list products for sale on their websites. Savvy sellers understand that having products for sale on multiple marketplaces is the best way to get their listings in front of the largest possible audience, so they choose the best channels for their product verticals and set up shop. But these marketplace giants aren't the only major channels businesses sell on. 

Every place your business sells products—marketplaces, hosted online stores, brick-and-mortar locations, even social media platforms that allow purchase integrations—is a channel. To engage in multichannel e-commerce, all you have to do is sell products on multiple channels at the same time. For instance, if you own an antique store in downtown Cleveland, Ohio, and also list your items on eBay, you're running a multichannel retail business. If you're an illustrator selling your artwork on Etsy, on a store on your website, and at conventions, you're doing multichannel e-commerce.

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What is the History of Multichannel E-Commerce? 

E-commerce as we know it began with a Sting album. (Really.) On August 11th, 1994, as reported in The New York Times, a man named Phil Brandenberger logged into his work computer and purchased Ten Summoners' Tales by Sting for $12.48 using his credit card. It was the first ever secure online retail transaction, made possible by the advent of Secure Socket Layer (SSL) technology earlier that year. 

In the 24 years since, e-commerce has developed into a multibillion-dollar industry anchored by giant marketplaces such as Amazon and eBay. Competition between these marketplaces has existed since the early days of e-commerce, and smart retail businesses have used this to their advantage—by selling on multiple sites simultaneously. Numerous retailers also operate their own online shops hosted on their websites, and many maintain offline sales presences through brick-and-mortar stores. Additionally, some sell through Facebook and other social media platforms

Why Should I Consider Getting Into Multichannel E-commerce?

From increased product visibility and broader brand awareness, to reduced risk through diversification, there are a number of obvious reasons to consider expanding your retail business into more channels. In a nutshell, more channels mean more potential customers, which means more potential sales.

But here are five more reasons you may not have considered:

  1. Building a multichannel e-commerce business is easier and cheaper than ever. Our friends at BigCommerce estimate that the cost of entry for a new online retail business is as low as $30 per month, and that businesses can launch in a matter of days.
  2. More and more consumers are shopping across multiple channels. Approximately 73% of shoppers visit online and offline stores, and the average consumer uses two or more touchpoints when evaluating and buying a product. What's more, industry analysts believe these multichannel shoppers (sometimes called "omnichannel" shoppers) spend more money than people who shop exclusively online or in stores.
  3. Multichannel e-commerce is attracting massive, international investments. Companies such as Amazon and Walmart are investing billions of dollars in their e-commerce platforms in an effort to continue scaling on a global level. This means immense opportunity for retail businesses, as these companies can't grow without third-party sellers.
  4. E-commerce technology is improving every day. Today's sellers have a wide range of digital solutions and tools to choose from. If you haven't taken a recent look at e-commerce software, the available features may surprise you. With SellerActive, for instance, you can set up dynamic, algorithmic repricing, so your listings automatically adapt to market conditions in real time. This software can also provide you with detailed reports about your products and inventory, so you can make strategic decisions informed by trends and gaps in your sales.
  5. The market isn't saturated—yet. E-commerce is still a young industry ripe for disruption and innovative ideas. In contrast to offline retail, sellers of all sizes can find a niche and start generating profit relatively fast. In fact, we've found that, in many cases, small companies may have a competitive advantage over large-scale stores unable to quickly shift their strategy and product focus. And the more channels you can compete on, the sharper your edge.

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What Do I Need to Do to Get Started?

If this all sounds like an unbelievable economic opportunity to you, you're right. There's a reason for the multitude of articles, videos, podcasts, and seminars offering lessons and insights on how to launch an e-commerce operation. Indeed, e-commerce business coaching has developed into an industry of its own, with plenty of self-appointed "gurus" selling exclusive services and courses with the promise of making tens of thousands of dollars from home. These programs are legitimate but exorbitant at best, and thinly-veiled pyramid schemes at worst.

With that in mind, we're not going to tell you there's no pain involved in launching an online retail business, or that multichannel e-commerce is always the right choice. Every business is unique. Your company may be best suited for one or two channels, or as many as possible. Some sellers do well on eBay, but find it difficult to consistently win the Buy Box on Amazon, for instance. Others, due to their particular niche, generate 80–90% of sales through their online stores, only using other marketplaces to supplement their income.

Whatever route you take, the ideal approach is to start with your business and customer base, and build your strategy around your audience. Here are a few questions to ask yourself, adapted from a recent .STORE interview, featuring SellerActive's own Tom Pittman: 

Consider Whether Your Business Can Handle Multiple Channels

Take stock of your business infrastructure, and ask yourself: 

  • Will your current infrastructure be able to support selling on multiple sales channels? 
  • How will you source products in time to meet the demand? 
  • What mix of technology and personnel will you employ to operate your critical business operations, such as shipping, order management, picking and packing, and inventory management?

Evaluate Your Channel Options

Channel evaluation is critical. Before expanding into a new channel, be sure to evaluate whether that channel makes fiscal sense for your company, and whether or not it’s a good fit for your products, business and fulfillment model, and go-to-market strategy.

  • What channels will you sell on? 
  • What are their fee structures, and what types of products make the best fit? 
  • Will you be able to efficiently fulfill orders on these sales channels?  

Develop a Selling and Fulfillment Approach

Think about your fulfillment model, and ask: 

  • Does expanding to multiple sales channel make sense with your fulfillment model? 
  • To what extent will you able to effectively fulfill your orders, on time? 
  • What percentage of your inventory will you fulfill yourself or drop-ship? Will you leverage a third-party service, such as Fulfillment by Amazon (FBA)?

Choose the Right Partners and Tools

You don't need to build a multichannel e-commerce business alone. With the right seller software and fulfillment and management partners, you can boost your sales, increase your profits, streamline your operations, maximize your business's chances of success in this exciting market—with or without yodeling pickles and Sting CDs. To see how SellerActive can help you get started, schedule a demo with us today.

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