Challenges of e-tailing

Selling online brings real advantages, but e-tailing also creates challenges that a business must plan for and pay for.

You may still need premises

An e-tailer may avoid the cost of customer-facing shops, but it often still needs premises for storage, packing and distribution. Stock has to be kept somewhere dry and secure, orders have to be picked and packed, and parcels have to be collected by carriers. That means rent or mortgage payments on a warehouse or unit, shelving and equipment, insurance, and staff to pack orders. These costs do not disappear just because nobody walks in off the street to buy.

More competition to deal with

E-commerce can increase competition, because customers can compare prices, delivery times and reviews from many sellers within seconds and then buy from whichever suits them. A small shop that was the only place nearby to buy gardening gloves now competes with sellers across the country. To hold on to customers, an e-tailer often has to keep prices keen, offer fast delivery and build up good reviews.

Service, delivery and returns

E-tailers must provide customer service without face-to-face contact. Questions and complaints arrive by email, web chat or social media, so problems can take longer to sort out and misunderstandings are easier, which can damage a business's reputation through poor reviews.

They must also manage delivery and returns, which adds cost and complexity: posting items out costs money for packaging and courier charges, and returns mean refunds, paying for return postage and checking goods before they go back into stock.

For example, a small online swimwear business selling 500 orders a week may find that one in four customers orders two sizes and sends one back. Each return costs return postage and staff time to inspect and repack the item, while the warehouse rent is still paid. These costs have to be weighed against the wider reach that online selling brings.