I started thinking about all of the e-commerce platforms that are out there, and it’s led me to wondering a few questions as to how they are built, and the considerations that went into building them that make them scalable for not only the user, but the creator as well. For now, I’ll rattle off a list of questions I have that would be coming from the POV of the creator of the platform. Any comments on these questions or links is highly appreciated!
- Risks associated with maintaining an e-commerce store for physical goods vs digital goods.
I assume that running an e-commerce store that sells physical (or physical+digital goods) assumes more risk than a purely digital e-commerce store, correct? My thinking here is that for a e-commerce store that provides physical goods, they would need to do a lot of work to provide customers and sellers a way to resolve disputes. I see disputes coming up much more frequently with physical goods, as a package could get lost, get stolen, the customer could falsely report a stolen package, etc. Is this assumption correct? How would most e-commerce platforms handle this hurdle, is it typically just handled through a partnership with PayPal or others to handle disputes? I’m assuming that partnership costs money to the e-commerce provider.
I see it as less of a threat for a digital commerce platform. There would still be disputes, ie failure to start download after purchase, but I feel they would be fewer in number.
- What are the major costs to an e-commerce platform?
For e-commerce platforms that handle digital goods or digital+physical goods, I would assume a major cost incurred by the owner would be hosting all of the digital goods for download. Is this assumption correct? Is the a standard way platforms typically handle this? I imagine there would be 3rd party companies interested in filling that niche of hosting these digital goods for download, is that an option as well?
- There are so many e-commerce platforms out there, are they all competing on roughly the same grounds when it comes to their cut of a sale?
I see some e-commerce platforms are actually monthly subscriptions while others may be “we take x% of your sales revenue as payment”. Which is more popular in the industry, and why? Coming back to question 2, if it will cost an expanding amount of money to host the digital goods of more and more people, it may make sense to bill a monthly subscription, right? My thought is that even if you had some free tier, that allowed a customer to list a few items and get going for free, for the owner of the platform that free user would still cost a bit of money to host his or her digital goods, correct? On the other hand, I don’t know if e-commerce sites that take a cut of each sale (Like Apple does on its App Store, for example) are seen as less desirable in the market when compared to monthly subscriptions. The one thing I can think of is users who aren’t sure they’ll sell a lot of volume would be interested in a platform that only takes a % cut of sales vs a monthly subscription, as a % cut of sales would likely amount to less than a monthly subscription. Large volume sellers, in my mind, would then be more likely to prefer a subscription based model.
Any thoughts are appreciated!