News publications often cover the benefits of online shopping or e-commerce from the perspective of the buyer.
But often, sellers are trapped by the perpetual-discount strategies of e-commerce marketplaces like Shopee. Their profit margins are squeezed, and many local companies can only just get by from e-commerce.
Below are the costs involved in operating an e-commerce business:
• Platform transaction fees: 2 per cent to 12 per cent of every sale (percentage depends on the platform);
• Marketing fees: 5 per cent of sales (depending on the individual seller’s budget);
• Shipping fees: $1.50 to $8 (depending on weight);
• Warehousing: $500 to $1,000;
• Headcount: $5,000 to $8,000 (staff such as e-commerce managers/executives and warehousing personnel).
Other intangible costs include resolving customer complaints, fulfilling orders seven days a week (unlike a retail store, which you can choose to close), attending to customer inquiries 24/7 and dealing with fraudulent activities.
In addition to costs, marketplaces will always favour buyers over sellers. This is evident in platform policies.
Below are a few struggles that sellers face:
• Third-party logistics: Platforms engage third-party logistic parties to fulfil orders. After sellers hand their items to these third parties, they have no control over delivery issues like delayed or failed delivery, lost parcels or damaged goods. In such cases, sellers will be left to bear the brunt of consumers’ complaints, and could receive negative ratings through no fault of their own.
• Dispute resolution system: While there is a dispute resolution system in place, it is tedious to submit evidence. In most cases, sellers still need to absorb the cost of damaged products and returned items.
• Copyright infringement: While platforms have invested heavily to detect copyright infringement, it is not uncommon to see duplicate listings by overseas sellers. In extreme cases, entire stores are duplicated.
All these lead to the question: Do sellers truly make money from e-commerce?