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The decision to enter the ecommerce market, just like entering any market, must be made with a long term view in mind. Too often people approach internet based businesses with a very short term view, hoping to achieve success in a short time span, at a low investment of capital and time. Just like in the “brick and mortar” business world, this is a recipe for failure.
Let’s take a look at someone opening a shop in a small shopping complex. This requires thorough planning, and a secure capital base to ensure the survival of the enterprise during the difficult start-up phase. A significant amount of capital must also be budgeted for initial marketing. Depending on the type of enterprise, it can take anything from 2 to 5 years for the shop to start showing significant profit.
While ecommerce presents the opportunity of investing significantly lower capital, the time investment is still necessary, and the initial start-up period of low cash flow will be similar to that of a “brick and mortar” store. Taking into account that ecommerce is a very young market, the start-up period might even be longer than for traditional businesses.
It is predicted that online sales will grow by between 20% and 25% this year, with growth accelerating in the future, as people become more comfortable with the idea of shopping online, and the security challenges are addressed completely. Businesses who establish themselves early in the ecommerce field will have an advantage over the late entrants, with increased brand recognition and better developed online infrastructure, operations and supply chains. Search engines also rank older domains higher than younger ones, thus online shops that are 5 to 10 years old will rank better on the search engines. Starting early also presents the opportunity of generating large amounts of information and unique content on your particular product, thereby potentially building numerous backlinks to your site, and thus creating increased ranking of your site by search engines.
I would predict that in time most “brick and mortar” stores will also venture into the ecommerce market, combining their well developed supply chains and logistics with the automation and scalability of ecommerce. However, the chances are that most will enter the market relatively late, with much of the market share already taken by the early entrants. Signs of this can already be seen by the fact that the top online book shop isn’t Barnes & Noble.com, but amazon.com, a completely online based book store.
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South Africa Online
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