Development Costs: This applies broadly to startups. It has become substantially cheaper to test new models and get up and running. This is thanks to a lot of the ecommerce software, various SaaS tools, and AWS . Testing using current tools and infrastructure enables more models and approaches to be easily tested with limited initial investment. . You also have much better tools to facilitate ecommerce. Shopify , Bigcommerce , & Magento among many other companies are making online storefronts much more engaging and exciting. The cost to get this built and have a beautiful design is inexpensive relative to preceding tools. Additionally, they’ve created marketplaces and communities around their products. So, accessing new tools, and tool vendors distributing those tools are more cost effective for everyone . Thus, leveraging APIs has made a huge difference in integration both in time and money. While not limited to ecommerce obviously , Software-as-a-Service (SaaS), has enabled people to cheaply build and test their stores with limited commitment and get the benefits of updates and new features that are automatically pushed to their site . Integrating these various tools and data sources is actually extremely important in ecommerce more so than for other types of online businesses because of the supply chain. There are so many moving pieces from POS all the way back through the ERP to vendors/suppliers and then the vendors/suppliers to their manufacturers and warehouses. This looks different since supply chains can have many different parties and stakeholders involved in many different combinations.
Decreased Inventory/Merchandising Risk: Newer models such as the aforementioned flash sale sites are providing ways to mitigate the inventory risk. This is either through pop-up shops, shorter selling windows, deals, etc.. Beyond just the deal mentality, subscription services add an element of personalization to hopefully only show and even send a subscriber relevant items. This decreases inventory risk because you understand the tastes of your buyer much better , there is a decreased likelihood of returning an item because it’s just a pain in the ass for us lazy folk, or because you are seeing an item in person. . Additionally, sites are getting product or merchandising feedback from consumers prior to buying large lots of the item. This offers better insight into what will actually sell. Rather than relying on ‘buyers’ who edit the assortment for their consumers, these new sites are creating larger breadth of products to preview before making those selections. Quirky (company), Made.com, Moxsie, ModCloth, etc…. actually leverage voting and feedback via their sites, twitter, facebook, tumblr, etc… before producing or buying items. Even collaborative consumption and rental models (while the latter initially capital intensive) offer new ways to either not hold inventory or create different economic models.
Better CAC: You can get viral before you even launch. Getting distribution is much more cost efficient than previously due to all the various ways to share and engage with people. Thanks Facebook. Thanks Twitter. Thanks all the other Social Media channels. Below, you can see broadly that referral economics are extremely valuable. Fab.com has an amazing referral program and was able to just completely kill it within their first month because they were able to get people signed up before launch . These guys are quite Fab 🙂 ! Nice work, Jason Goldberg and the Fab.com team!!! Also see: Startup Traction: How did Fab.com get 200,000 signups before launch?
Supply Chain: Innovations are happening to decrease capital costs , but I get into this in more detail later.