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Case Study

Case Study: Points to Watch When Considering an EC Site

2020.10.30

Written by: Tomohiro Koizumi, Representative Director, tentus inc.

It's been only a little over a decade since the days when mail order meant catalog shopping or TV shopping gave way to an age where EC sites are used as a matter of course.

In fiscal 2019, Rakuten (No. 1) and Amazon (No. 2) each exceeded 3 trillion yen in domestic transaction volume, and EC will likely keep functioning ever more as one of society's infrastructures going forward.

Now, at our company too we've helped with many EC sites.

We've handled Shibuya 109-style apparel companies, a fragrance site as our own business, the site of an Akihabara PC retailer, and — a bit unusual — a trading-card site, among others.

For that mail order, there are several points you need to consider when getting started, so this time I'll introduce them.

1. Grasping detailed costs at the planning stage

You may lump it together as "opening an EC site," but beyond the system cost of opening the EC site, there are costs that normally aren't visible yet are unavoidable in mail order:

• Packing-material costs, such as cardboard and cushioning
• Warehouse costs for storing products
• Card and other commissions (these are surprisingly big!)
• The portion of shipping fees the business bears
• Costs at the time of returns And so on — costs arise at all sorts of points.

So if you do a rough gross-margin calculation using the figure of sales minus cost of goods, you'll end up, once you actually start mail order, with the result: "Hmm, we're not really making much money, are we?"

When starting mail order, I think it's best to consider it with these hidden costs also factored into your business plan.

2. Deciding the promotion direction at the planning stage

For a mail-order site, where you bring customers in from is the most important thing.

Simply launching an EC site brings no customers at all, so you need a plan: whether to open a store on a marketplace like Rakuten or Amazon and sell to the customers who visit there; whether to draw your existing customers into mail order; or whether to bring in completely new customers through advertising.

In my experience so far, the highest cost-effectiveness is, without a doubt, promotion centered on existing customers. There are very many merits to switching people who were buying in-store over to mail order, and this switch does not lead to lowering store sales.

For businesses with no existing customers, I think it's good to consider acquiring new customers by using highly compatible media, fans who are close to the business, or a community favorably disposed to your own brand formed through SNS and the like — putting effort into building a mechanism that continuously delivers high cost-effectiveness, rather than plain advertising.

3. Considering the EC-site system

This part is very difficult, but if you try to fit EC-site operations into your existing business flow, the system cost keeps ballooning.

An EC site can, at minimum, be started for around 100,000 yen.

But requests will inevitably come up: 【we want it linked with existing customer data】【we want to link inventory management with the physical side】【we want to link with accounting data】【we want to link with POS data】【we want to link with the DM data we send users】【we want vouchers output automatically】, and so on.

The requests above are ones I actually experienced, and to solve them required an enormous amount of effort — grasping the existing workflow, customizing the system, and more.

A lot of effort means project costs keep growing larger, which makes it one of the points where balancing income and expenditure on the business plan becomes very difficult.

So, in balance with the business flow, it's also important to include, as one option, starting with a system that is "a little inconvenient, but not impossible to work with."

4. Considering running costs

This is another viewpoint when considering points 1 and 3, but you also need to consider the costs after the EC site has actually launched.

As sales rise, operational labor costs also rise.

If you have to request fixes from an outside production company every time you update a product, unexpected costs arise.

By keeping these running costs low, you can minimize business risk.

However, keeping these costs down requires an initial investment in the system, so I think it's best to firmly simulate initial and running costs at the planning stage before starting your EC site.

In this way, we don't simply build EC sites — we provide all sorts of help to make them succeed as a business.

If you have anything you'd like to consult us about, please get in touch anytime.