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How Is E-commerce Cost-Effective For Retailers?

How Is E-Commerce Cost-Effective For Retailers

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Post Views: 28 Views

Posted on: Monday May 9, 2022

Reading Time: 22 minutes
Written by: Sanjali Das

It is no secret that when we move towards a future with minimal human dependency, we have severed livelihoods. Whether we term it automation or digitalization, the more we become independent of manual involvement or incline towards a virtual interface for carrying out commerce or trade, the existing physical course of such commerce or trade ceases to exist. Therefore, in the pace of evolution, adapting to rapid change is critical for survival at the most elemental level as well on the larger scale of operating business. In that parlance, the rise of E-commerce has endangered the typical brick mortar shop and there are several reasons that it will successfully push such physically transacting establishments off the cliff towards doom. There are two analytical sets that rule out E-commerce over traditional forms of business.

 

One set for the users, and the other being the retailers. From a user’s point of view, E-commerce provides the highest level of consumer satisfaction. The primary reason is, that it negates all the limitations posed by physical or geographical operations. A user can purchase goods and services from anywhere in the world, as per their comfort and convenience through any of their electronic devices like mobile, laptop, or tablet. They can view several products across vast categories by multiple brands, round the clock, thus saving time, money, and hassles in viewing all of this in-person interaction. On the other hand, for a retailer E-commerce business is cost-effective, and takes his business on a global scale, to a larger target audience base. In fact, when any E-commerce development company in Dubai is asked about the demand, it is positively asserted that E-commerce has motivated more people to start a business in the first place because it is a cost-effective and lucrative option. In this blog, we will delve into this latter analogy set, i.e how is E-commerce cost-effective for retailers? Simple, by reducing business transaction costs.

 

How Does E-commerce Reduce Business Transaction Costs?

 

(1) Reduced Overhead

 

When deliberating transaction costs, businesses have to consider expenses incurred in maintaining and processing the activities. In that pursuit, E-commerce is viable since it does not need labor like salespeople, cashiers, cleaner and physical stores. Though they are not free, all they need is a professional design, attractive layout, and maintenance, thus fewer resources when compared to a traditional store.

 

(2) Reduced Customer Cost

 

Since E-commerce transactions make shopping easy and cheap for the customer. They don’t have to travel all the way to the store for the limited time window of its opening hours. By reducing their inconvenience and expense, you are increasing your net revenues accordingly. Moreover, if you happen to offer them free shopping over a certain purchase value it encourages impulsive buying which reduces your cost of shipment.

 

(3) Integration

 

Entities having both E-commerce and a retail outlet are able to make more efficient orders by combining the two. Customers then usually make orders online and pick them up from the store. This way the retail operation of the store is able to prepare the products when in-store traffic is not busy, streamlining the process for customers. Moreover, having a small outlet or retail space for marketing the merchandise does the job since the site plays a similar role.

 

(4) Distribution And Inventory

 

An E-commerce website also reduces transaction costs by simplifying distribution and managing the supply chain. If a particular brand expands its product selection online, more orders are then shipped from the warehouse or wholesaler directly to the customer. The store is enabled to serve lucrative niche markets. It need not stock many hard-to-find products in its showroom, instead, the customers can shop online and it will be shipped to their doorstep directly.

 

(5) Quantity

 

When a brick-mortar shop calculates transaction costs, they have to account for several business expenditures along with the actual transaction. In the case of fewer transactions, the cost per transaction is high. On the other hand, transactions at high frequency can exhaust your personnel and distributors. However, in the paradigm of E-commerce, the transaction cost remains uniform across the board, whether there is one order or thousands.

 

(6) Brick And Mortar Expenses

 

A brick mortar shop has to pay for expenses such as staff, credit card fees, lease of premises, electricity, telephone, appliances, furniture, taxes, repairs, maintenance of the building, etc. On the contrary, an E-commerce store only has to pay for the item, web hosting, shopping cart software, distribution, and a few other things. Cumulatively, the overall cost of maintaining an E-commerce store is much less than compared of a brick-mortar shop.

 

(7) Other Costs Reduced

 

An E-commerce entity is able to save costs on several ends like labor, document preparation, reconciliation, mail preparation, telephone calls, data entry, overtime, and supervision expenses. Thus managing operating costs in multiple areas further reduce the cost of multiple transactions.

 

How To Set Up And Start An E-commerce Store In UAE?

 

At this juncture, if you wish to start your own E-commerce store too, then you must choose a complete end-to-end robust, and easy-to-manage platform like Shopify, Magento, BigCommerce, PrestaShop, etc. which enable you to start, grow and manage an online store.

 

To better understand how to set up and start an E-commerce store in UAE, let us take the example of Shopify, one of the leading E-commerce platforms at present.

 

(a) Choose The Right Kind Of Company

 

There are several options that UAE provides you with cut-stitched provisions as per your business needs. For example, you can register your company under a limited liability company, branch of a foreign parent company, or as a representative office. The plans you have for broadening your entity and the markets you possess access to determine which form of business you wish to register work optimally for you. Generally, limited liability Company Registration in UAE is preferred more by business owners since they can be established in the free zones, which offer industrial-specific features for growth.

 

(b) Decide The Location

 

While deciding upon the location, you have two options. You can register your E-commerce business under free zones or outside the free zone. Now each form offers its own set of services and limitations. While a company registered under the Free Zone can operate its activities inside the Free Zone solely or outside UAE, experiencing neither restriction in import and export of goods nor import/export duties; a Mainland company is an inland company that can conduct its business activities in the local market of UAE and outside UAE. Therefore, this is a highly calculative decision one has to make to analyze all the terms and conditions of all the forms of business registered in the UAE.

 

(c) Register The Name Of The E-commerce Company

 

Before getting the license, you must also register the company’s name, which must be relatable and easy to remember for your target audience.

 

(d) Choose A Physical Office In UAE

 

Now you must wonder when online stores needed a physical premise? You are halfway right. An online store does not need a traditional brick-mortar shop for operation. However, as per legal compliance administered by the authorities in UAE, one does need a legal address (office).

 

(e) Register For The E-commerce License

 

Similar to any other form of business, one needs a business license for selling goods online with Shopify in UAE. For the same, you must have the following licenses: –

 

(i) E-commerce Activities License

 

This allows you to sell local products (the ones registered in UAE) through your online store.

 

(ii) Trading Activities License

 

This permits you to export and import goods from and to other countries, i.e., it enables you to sell global products on your Shopify store.

 

Therefore, if one wishes to sell international products in the UAE, they need both licenses. If one decides to sell only local goods, there is no need to seek the latter license; the former E-commerce activities license is enough. However, it must be noted that if your E-commerce business is operating under an E-commerce activities license, then you are restricted from selling your products in the local market of UAE through local distributors and agents. You cannot sell products directly to the consumers in the UAE Mainland.

 

(f) Approving License

 

Once you have completed and submitted your application after meeting all the requisites, it will take around 5-7 business days to get your license approved.

 

(g) Bank Account and Payment Gateways for E-commerce

 

Like any company, you will need a bank account and therefore will have to open one. The local banks offer good opportunities for opening accounts for offshore companies. Although you will be operating online, you will have to set up credible gateways for your E-commerce website in UAE. It includes features like cash on delivery (COD), credit cards, wallets, and other payment gateway systems such as Paypal, Stripe, CC Avenue, Tap, Telr, Payfort, Skrill, and many more.

 

(h) Choose A Plan

 

Shopify has a well-structured pricing plan that caters to different merchants’ needs at an affordable price; therefore, you can easily decide which Shopify plan is best for your business.

 

table of shopify plan and pricing

 

  • Basic Shopify Plan

 

The basic plan costs USD 29/month inclusive of services like unlimited storage, listing for products, two admin accounts, a website, a blog, 24/7 complete support, SSL certificate, an abandoned cart recovery feature, up to 4 recovery stores, up to 4 retail stores, warehouses, pop-ups, gift card, and manual order creation perfect for new business.

 

  • Shopify Plan

 

It is targeted specifically for growing businesses at USD 79/month. It offers all the features under the basic plan and 5 admin accounts, 5 inventory locations, and a comprehensive operations report.

 

  • Advanced Shopify Plan

 

In addition to all the necessary features that scale a growing business at the cost of USD 299/month, it offers 15 admin accounts, an advanced report builder, 8 inventory locations, and charges minimal transaction fees on using a third-party payment gateway.

 

  • Shopify Plus Plan

 

The ideal preference of large-scale businesses for managing much more than the regular Shopify is the Shopify Plus Plan at USD 2000/month minimum (the price varies for higher volume business). For example, Shopify Plus can handle 10,000 transactions per minute. Sounds impressive, right? It provides unlimited staff accounts, too, with dedicated and more personalized help support, script editing, and analytics.

 

  • Shopify Lite

 

Shopify has recently developed a plan for merchants wishing to sell in person or add a buy button to their existing website. It offers reports for viewing, issuing gift cards, splitting bills, and many other features. However, one cannot build an online store with Shopify Lite. It costs USD 9/month and is available for 14 days free trial like all other plans of Shopify.

 

Congratulations! Once you have chosen the appropriate plan, you can choose a theme that fits your business and build your basic Shopify store. Alternatively, you may get in touch with us for your custom requirements including payment and shipping gateway integration & ERP Integration.

 

A lot of people agonizingly ponder how to start an online store with Shopify in UAE, and as daunting as it may seem, there lies an ever-growing pool of opportunities for your business.

 

PRO TIP

An E-commerce business does not encounter lackadaisical accounting, since it is automated and does not accrue human involvement and thus errors. Therefore, it saves time wasted in resolving issues and invoice problems. Though inaccuracies do not amount to fees or penalties, they still save considerable employee time and energy.

 

Concluding thoughts

Starting your own E-commerce retail seems overwhelming. We know you must be excited and anxious at the same time. In fact, running an E-commerce business is thrilling, and challenging, and when the foundations are set right, then fruitful. As cost-effective as E-commerce is, reducing overhead, customer cost, and other wearable costs, opens a sea of opportunities for you to grow and thrive.

Written by: Sanjali Das @proweb.ae

Sanjali Das is a Content Writer at Pro Web. She is pursuing Law and is an ardent writer and reader. She interests in writing blogs, articles, snippets and commentaries in diverse topics.