eCommerce Costs: Calculate Total Ownership Cost for an Online Store

Online selling, with a steady growth worldwide, is constituted at 3535 billion USD, in the year 2019 to 4927 Billion USD, in the year 2021. eCommerce reduced people’s expenses when they had to leave their homes to buy something from the market. Now, with the ease of buying and exchanging products online, business commencement has become extremely easy. Ecommerce payment gateway services also play a part in making eCommerce more accessible to customers.

However, eCommerce stores can be a lot more expensive to set up. Quick and easy support from financial institutions in the form of loans with exclusive offers for eCommerce businesses is leading to the immense growth of the eCommerce sector. In the following article, we will look into what goes into setting up an online store and the costs associated with it.

Types of eCommerce Stores

Before starting an eCommerce store, you have to decide on the type of online/eCommerce store you want to set up. There are following types of online stores.

  • Online product-selling store
  • Online service-based store
  • Logistics services store
  • A combination of all the stores mentioned above

These stores can be set up with various options, allowing a predefined framework. The simple old business formula to calculate how much you spend and earn applies here.

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What is the Cost of Ownership of an Online Store?

One needs to be very clear about the kind of online services they want to provide to customers so that the costs for setting up the store can be calculated accurately. Starting with an understanding of the kind of products or services you want to sell online, your niche areas are to be clearly defined. Select a particular niche, identify the products or services that fall under it, and list the products for your business. The clarity of the points mentioned below is crucial for starting the business.

  • Locations & Languages: If you want to start a small store or even a big one, the locations you want to operate in have to be pre-defined. Establishing the required service hubs near the consolidated locations is paramount. If the language is different at different locations, you need the infrastructure, online software and websites to operate in that local language. The implied costs in duplicating information of your products, and descriptions in different languages, along with the eCommerce payment gateway charges, are to be considered as expenses.
  • Login Options: Many big eCommerce companies provide individual login services to customers, engaging them in business by giving them options of selecting products, wish lists, etc. This calls for more extensive data storage requirements and server maintainers with security and retrieval of the data whenever the customer logs in again. Fewer the options provided to the customers, the lesser the cost of implementation. The increase in the number of services requires larger operational setups.
  • Product & Vendor Development: If you are starting an online product-selling eCommerce store, identifying suppliers and developing products with good quality standards becomes mandatory. If product quality is not good, it can be returned, which should be the last option for an online store to consider. Providing the best possible quality product to customers is possible only by constantly scouting for reliable vendors with timely and quality supplies. Continuous improvement and cost monitoring play a significant role in the repeated traffic of customers to your online store. This aspect is unavoidable and takes its share of operating costs.
  • Inventory Management Set-ups: Expectation and promising fast deliveries for your online customers is a must. Delivery within a day or even sooner is a popular option in the market today. These challenges of on-time delivery depend upon the proper functioning of logistics partners and inventory management. Centralised hubs, based on the number of sales, are to be implemented in case of large business orders. The capital equipment and the inventory hub operating costs play a significant role if it is a product-selling online store.
  • Branding, Designing & Theme: These are the elements that become the face of your business. Right from your company logo to packaged material, the theme of your company has to be projected for making it a top brand. Branding is a necessary aspect. Branding services are to be taken from brand development companies that offer services, starting from design to implementation. Based on the reputation of the branding company, the costs vary and finding the best fit for your business is essential.
  • Infrastructure, Land & Buildings: Product-selling online stores require more infrastructure than service-based online selling. While most of the cost goes into virtual (soft services) software and data for service-based companies, product-selling company costs go into physical handling of materials, shipping, logistics movements, etc. The costs vary depending on the services and budget needed for a particular type of eCommerce store.
  • Logistics: The efficiency of an online store depends majorly on handling the logistics. On-time deliveries and product handling play a significant role in making a company efficient. Generally, logistics are outsourced by all eCommerce companies, and because of this, a part of the operating cost has to be calculated accordingly. 
  • Licenses & Certifications: Approvals for the local and international market where you want to operate the business requires the involvement of service agencies for necessary licensing and certifications. Based on the country and the type of license, the costs vary, which must be incorporated into the budgets. 
  • Software, Websites, Hosting, Storage & Data Security: These elements are the leading soul of an online store. Choosing the right technology and service company, which provides reliable data management, SEO, advanced features and analytics, User Interfaces (UI) and User Experience (UX), developer options and maximum security, is mandatory. The cost of these services depends entirely upon the service company and options opted for. When it comes to payment gateway security, few companies like Zaakpay can be considered as best in the industry, offering no payment gateway charges.
  • Banking, eCommerce Payment Gateway Charges & Networks: A customer interface to buy products on websites, mobile apps, and other web sources need a robust payment gateway service provider. Top technology, zero downtime and excellent security are essential features, and very few companies in India, like Zaakpay, provide them. These services require implementation cost, which is one of the significant expenses in setting up an online store.
  • Advertising & Affiliate Marketing: For online companies, this is the only way to take products to customers. Advertisement is mandatory in the current competitive world and is to be done through various available sources. Considerably, high costs are to be spent on advertising, as we need to face the competitors. These costs put added pressure on budgeting.

In conclusion, all the factors mentioned above contribute to the costs involved in starting an online store. Defining the required services accurately and choosing the service providers carefully is paramount. A strategic approach, by understanding the competition and budgeting expenses correctly, helps in the easy setting up of online stores.

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