E-commerce has been a lifeline for many Canadian companies during the COVID-19 crisis. But even before the upheaval began, the global trend toward online shopping and selling had been accelerating.
The pandemic has fuelled that growth even more. In May, according to a Statistics Canada analysis on retail e-commerce and COVID-19, domestic e-commerce sales hit a record $3.9 billion, representing a 2.3% increase over April and a 99.3% increase over February—as well as more than double the sales of May 2019. Many companies that were debating whether to set up an e-commerce platform, or upgrade an existing one, have now decided to act.
Types of platform
First, let’s look at the main types of e-commerce platforms now in widespread use. In brief, they are:
- Online marketplaces
You’ve likely heard of e-commerce marketplace environments such as eBay and Amazon. Others include Otto.de in Germany, Flipkart in India or Tmall in China. Some of these platforms are specialized for niche markets—Etsy, for example, is designed for arts and crafts vendors that want to sell both locally and across borders. Although these sites are popular, however, successfully selling on them can be a major undertaking. Be sure to choose one that provides good international sales support, such as payment mechanisms for different currencies.
- Online template-based storefronts
The vendors of these platforms provide you with pre-defined templates, add-ons and extensions that you can use to build a very capable e-commerce operation. Pricing varies according to the components you include, such as third-party payment gateways, foreign order handling, reporting capabilities, sales analytics and add-ons or extensions, etc.
These platforms can be a cost-effective way for many medium, small and micro enterprises to set up an international e-commerce platform. Shopify is a Canadian example of this kind of storefront vendor.
- Custom-built e-commerce platforms
If you need a platform that is beyond the capabilities of the storefront approach, you can hire a developer who specializes in custom-built e-commerce solutions. The company will work with you to fit the platform to your specific needs. This is the most expensive solution, but it can give your e-commerce operations exactly the look, feel and flexibility you want.
At the top end of this range, you’ll find the very costly enterprise-level platforms used by big e-commerce vendors. If you don’t expect to be doing huge volumes of business in multiple overseas markets, you don’t likely need the sophistication of such a platform.
- Do-it-yourself platforms
You could disregard all these approaches and build your platform from scratch. This is very unlikely to save you either time or money. Scratch building is expensive, takes a long time to market, is prone to design errors and requires the services of skilled developers and IT people.
Costing an e-commerce platform
Most companies will use one of the first three options described above: e-marketplace, storefront or custom build. The major costs will include the following, depending on the platform and options you select. This isn’t an exhaustive list, but it’ll give you an idea of what’s involved.
You pay for using the marketplace via fees of various kinds. For smaller businesses, with a limited product line, this solution can work well at minimal cost. To take eBay as an example, you pay an insertion fee when you create a listing for your item and a final fee when the item sells. Other fees may apply if you add options beyond the basics.
Costing for storefront vendors is more complex since you can choose from various templates, tools and functions to suit your needs. The options you select will determine how much you’ll pay for your platform. In most cases, you’ll pay for your package via a monthly subscription fee, plus other charges such as transaction fees or credit card fees.
Shopify’s offerings, for example, include the following:
- A drag-and-drop store builder with a wide range of visual themes.
- Support for branding, business name creation and finding a suitable domain name.
- A shopping cart and a range of payment gateways so you can accept credit card purchases easily and quickly.
- Maintenance of a synchronized inventory across all your sales channels.
- Logistics management, including tracking updates for customers, drop shipping and connections to fulfilment centres.
- Analytics to help you understand how and where your products are selling.
- Management of customer profiles and accounts.
- A consistent user experience across both mobile and non-mobile devices.
Fully customized designs are the most expensive. Here are some of the things you’ll pay for:
- Back-end and front-end web development and design.
- User interface and user experience design.
- Software development for e-commerce services such as order processing, product display, logistics/shipping and payment transaction processing.
- Software to allow buyers to use their mobile devices easily.
- Custom software development, such as add-ons or extensions.
- Platform security.
- Ongoing costs such as inventory management, email functions and data backups.
Sources of financing
There are various sources of financial help for e-commerce development. At present, the key ones are the following:
- Canadian Trade Commissioner Service (TCS)
Refer to the Government of Canada’s CanExport SMEs Program Applicant’s Guide. Money is available for marketing tools creation, adaptation and translation. The TCS also provides a Spotlight on E-Commerce guide that you may find generally useful.
- Business Development Bank of Canada (BDC)
BDC provides technology financing for hardware such as servers and networks, digital marketing including e-commerce and website building, software solutions and advisory services. Refer to BDC’s Technology Financing pages.
Shopify has a financing program, Shopify Capital, which offers cash advances to qualified Canadian Shopify clients.
- Export Development Canada (EDC)
EDC offers financial support for Canadian companies through the Business Credit Availability Program (BCAP) Guarantee. The program can provide a guarantee to your financial institution that will allow you to obtain new or increased lines of credit or loans in response to the COVID-19 pandemic.
The post-pandemic role of e-commerce
The advantages and disadvantages of e-commerce were well known before the onset of the pandemic. But successful e-commerce vendors have found ways to diminish the negatives and build up the positives in response to COVID-19. That’s reflected in the e-commerce growth rates we’ve been seeing.
That said, there’s no likelihood that brick-and-mortar stores will become extinct—they have special advantages of their own, and will continue to be a vibrant part of the retail mix. But there is little doubt that consumers will continue to propel steady e-commerce growth in the post-COVID economy. Companies that adapt quickly to this evolution and integrate e-commerce into their development will be the successes of the future. So if you aren’t already preparing to join them, this would be an excellent time to begin!
Learn more here: https://www.edc.ca/en/blog/costing-and-financing-ecommerce-platforms.html