Coming from the internet marketing industry, when I think of the advantages of ecommerce I immediately think of how it compares to other online businesses such as affiliate marketing. The inclusion of offline business models and comparisons to brick and mortar stores doesn’t even cross my mind because those business, to me at least, are not even comparable. So let us delve into how an online store or e-commerce site is a more advantageous business model than many of the other “make money online” businesses. If you’re just interested in the advantages, then jump half-way down the page to the summary of advantages section.

I have to admit that for my first few years in online marketing I completely avoided anything to do with e-commerce. My reasoning for this was simple and typical of why we avoid many things in life – it looked like too much work. Even a simple drop ship store (one in which you do not carry any inventory, it is all shipped directly from your supplier’s warehouse) required that I check with suppliers and update my inventory daily to ensure nothing was out of stock. I also would need to constantly monitor pricing and submit my orders for shipment several times a day. And I’m not even going to get into the setup of an online store – finding a shopping cart system, finding suppliers, receiving reliable hosting, SSL certificates, store design, adding all your products, creating unique content, SEO, etc etc etc.

And if that wasn’t enough of a nightmare for any would-be internet entrepreneur to abandon their thoughts of creating an online store, there is still the inescapable fact that you will need to deal with CUSTOMERS on a daily basis. Yuck! For years that had been the final nail in the coffin for me when it came to considering starting an ecommerce site. Even when I came across several niches that were completely under-served and ripe for ecommerce, I still avoided it. From my standpoint, the trouble and effort wasn’t worth it. I mean hey, I was making good money with just affiliate marketing so why deviate from what was working?

But over time my views of ecommerce started to change. Or rather, my views of all the other types of online businesses began to become more clear. I started seeing some of the drawbacks and limitations of all the different types of online businesses; from affiliate marketing, CPA, Adsense, info products, etc. Each and every one had their own set of disadvantages, but they all shared the same major issue – Google and the other search engines were becoming harder and harder to game. That singular source of traffic that so many online marketers depended on for bringing visitors to their sites had gotten too smart for simple SEO techniques to affect. If you were in a niche that had a competition level higher than what most would consider “easy”, it was going to take more than just in-house linkbuilding to rank #1 in Google.

Like any good marketing I started researching additional methods for influencing the search results and my site’s rankings. There was social media, swapping or paying to be promoted on other people’s lists, PPC, display advertising, review sites, video marketing, press releases, and so on. But the more I looked at these other types of traffic generation, the more I realized they were more brand building strategies than just straight linkbuilding. Some, like social media marketing, were very dependent on other users syndicating your links as well. Which in turn meant the site you were promoting needed to be much more than just a simple lead capture or four page blog; you needed to have an actual resource or something of value to promote. Not to mention your site needed to be generating a lot of profit to make all the extra work worth it.

With all this in mind, I started thinking of what it would take to create a site that had enough “substance” to be effectively promoted in this manner. My original idea was to create large, community driven review sites that also had price comparisons and various promotions for products that I was affiliated with. But the more I planned out this idea, the more I realized just how much work would be involved in designing, maintaining and promoting such a site. As an affiliate site, it would only make at best 10-15% commissions on sales. And it would most likely take 6 months or longer to start seeing any profit since the site would need to build a community around it first. The last painful realization was that this site as well would have limitations on it that could have some devastating consequences with regards to its income generation. Most notably, since I don’t own the products I would be promoting or control the affiliate programs, I would never be in full control of my own earning potential with this site. That really sinks in when you think about how much time you invested.

If I was going to put that much work into a project, I wanted to make sure that it was an absolutely concrete business model with as few limitations as possible. Suddenly e-commerce made a lot more sense as a long term business model that could produce steady income and survive any “changes of the wind”. Additionally, all the seemingly negative aspects of creating, owning and maintaining an online store became some of the more important advantages of ecommerce.

Here is My Summation of the Advantages of E-commerce Over Other Online Businesses:

Better Profit Margins - This one is a no-brainer. Regardless of whether you intend to carry your own inventory or just drop ship from your supplier, your profit margins per sale are going to be much higher than you could make with an affiliate program or other incentive based model. Since you are making more money per sale than you would as an affiliate, this also opens the door up to more marketing and being able to compete in PPC bids.

eCommerce is Growing - Every year the number of people who said they did the majority of their shopping online grows and exceeds the previous year’s projections for dollar amount spent online by consumers. While this may not be a direct argument for e-Commerce over other business models, you can guarantee that more and more online services will cater to eCommerce sites due to the growing amount of money being spent in this sector.

You Don’t Control Other Business Models – Affiliate programs, CPA networks, etc., they can all end or remove you without notice, effectively killing a site’s income and throwing all your hard work down the drain. I’ve experienced this first hand when an affiliate disapproved of a product review I wrote. Their response… they removed me from their affiliate program and kept my $1,500 check for the month’s commissions. While the site wasn’t a total lose, that was still about 40% of the total profit generated from the site. Not cool man, not cool.

Business Liquidity – If someone asks you what it is that you do for a living and you tell them that you have an online store or an ecommerce site, they immediately know what you are talking about. If you tell the same person that you have an affiliate site, cpa site, adsense, etc, most people will look at your puzzled and have no clue how it is that you make money. That is another huge benefit of ecommerce sites in the fact that they are an immediately recognized business entity by everyone. This translates into something that has value and if you wanted to, you could easily sell an online store to an investor or stay at home mom that wants a side job.

Business as an Asset - From a banking and lending aspect, an online store is a much simpler asset to prove the value of. Your books are usually simple; Profit = Sales – ( COGS + Marketing + Overhead ). Pretty easy to keep track of and calculate for any banker. With an asset like this, you can easily walk into a bank and walk out with a new line of credit or business loan. That is something that you are going to have a much harder time achieving with other online business models.

More Avenues for Marketing and Promotion – With an online store there are a ton of new ways you can promote your site and get your name in front of people. Some of these include merchant review and product review sites, price comparison sites, running contests, vendor “dealers” pages, product search sites, listing your products for sale on 3rd party sites like Amazon and sponsoring events or people with your products. And these are just a few ideas of the top of my head. And don’t forget you can run your own affiliate program and have others promote your products and site for you.

Analytics, Customer Tracking & Segmentation – If you follow any of my marketing advice you will know that I’m a big advocate for properly tracking and segmenting customers based on their buying behavior. I’m also a huge fan of really digging through your site analytics to mine out important information regarding anything you can imagine from buying trends to market area penetration.

These are simply things you cannot do when you are not the party actually making the sale. Imagine the power you now have when your email list can be broken into segments based on where the customer lives, how much they’ve spent, what they bought, average order size, etc. Your marketing to these customers can now become so targeted that it will be as if you know them personally. Which brings me to the next advantage.

Building Relationships - While you can certainly build a relationship with a list creating through affiliate marketing, they are never YOUR customer. And make no mistake about it, the relationship between someone who tells you what and where to buy and the company you actually purchased from is very different. As an online store owner, the people on your list are actually your own customers which brings a new level of trust and openness to any conversation you have with them.

And not be forgotten are your vendors and suppliers. Relationship building with those that provide your goods for sale is a key component of running an online store and can benefit you in many ways including better prices, better support service, and depending on the relationship, you may even get perks. I actually had a vendor fly me to Maine to check out their operation and spend the weekend sail boating. Pretty wild!

You’re Automatically a Resource – While most internet marketers strive to have their sites be seen as an actual resource within a community, online stores are already perceived as such simply by the fact that they are the source for the products people are talking about. When people start a discussion on a blog or forum about a specific product that you may carry, and someone who has purchased from you joins the conversation and provides a link back to your site, that is a simple demonstration of your store as a resource. If you want to become even more useful, include product reviews, product videos, unique product descriptions, user submitted photos, product demonstrations, articles and anything that helps inform potential customers and existing owners about the product.

Forecasting and Historical Data – You can get much more in-depth historical data from sales and traffic generated by your store then you could as an affiliate. This type of data allows you to plan ahead for changes in sales patterns or push promotions for specific products at key times when you knowing their buying season is heating up.

You can also get this type of historical data from your vendors or suppliers. They may also be keen to let you know ahead of time about new product launches, changes to current products and other insider information that can put you ahead of the curve when it comes to marketing.

Longtail Searches – People use some odd queries when searching online. It’s for this very reason that about 50% of the traffic that most sites receive come from longtail search terms. Because your store will likely have hundreds, if not thousands of product pages, you will receive tons of traffic just by way of these long tail searches. While any site can benefit from these searches, ecommerce sites get a boost due to the fact that most of these searchers are looking to buy; that is why they are searching for a specific product. Add to that the fact that there are now a lot of Shopping Portals which are just product based search engines and you have the potential to gain a lot of traffic without needed to do much SEO.

Customers Become Promoters – If you provide a customer a good experience, then you can likely find a way to encourage them to be a cheerleader for your store. Simply asking for a review after the purchase is usually good enough to get small percentage of buyers to leave comments about your company. Remember that presence = presence; the more people that see you the more traffic you can expect to get.

Brand Building Becomes Easy – Probably my most loved aspect of online stores is the fact that it is much easier to build a brand around a store. Granted it takes work and dedication to the store, it can be a seriously rewarding accomplishment both personally and financially. This is the type of marketing that makes you a household name to everyone within your market. It can consist of one major marketing push using a single method such as video marketing or link together many to create a huge campaign that utilizes every method available to you. Which methods you choose ultimately depends on your market but being active in related forums or blogs, video promotion and keeping an updated blog are a few of the most potent strategies when first starting out.

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