Downsize to Scale Up

It might sound contradictory that downsizing an online business could lead to it upscaling but is some cases this is very true. Businesses that sell online traditionally follow a "bricks and mortar" approach i.e. they buy stock, warehouse it and sell it but with the sale taking place online.

Downsize to Scale Up

The subject may have indeed surprised you. It most definitely sounds like an oxymoron. Nonetheless, as contradictory as it may sound, downsizing an online business could lead to it up-scaling in many a case.

Businesses that sell online, traditionally follow a "bricks and mortar" approach. That traditionally means they tend to they buy stock, warehouse it and sell it through a variety of platforms, resellers or vendors with the sale usually taking place online. However, as the Online World of E-Commerce grows exponentially, so does the need for more stock, a bigger warehouse, rent, business rates, people, electricity, gas, security etc. you get the picture. The bigger you get online, the bigger the business's physical footprint offline becomes.

This is great if the business continues to grow, however if there is a downturn (for example due to adverse economic conditions like a pandemic) the size will quickly become a lead weight which will drag down or even bankrupt this once successful business.

It's time to downsize to scale-up.

For eCommerce businesses one of the biggest operational costs is attributed to logistics. The cost of housing products securely is high but also contributes to the limits a business can scale, the capacity of a warehouse could be the artificial boundary stopping a business from growing.

In recent years, the concept of online marketplaces, has really taken hold. Places like Amazon, Farfetch or Etsy allow third-party sellers to sell their wares to the platform's customers, whilst offering assortments of products which they haven't pre-bought or hold stock for.

The real challenge then is clear. Whilst the "Big Boys" with extremely successful marketplaces have built sophisticated tech, how does any other business enter this lucrative market and how do they compete, get sellers, build a community of loyal customers and thrive.

In fact the model is very simple. Marketplaces charge a commission or a fee for for each sale, - that is forwarded on to the seller for a percentage, e.g. 20% - which generally the seller ships to the end customer. The real game-changer however is that the marketplace still owns the customer hence all future business.  

Moving to an "on-demand" fulfilment model i.e. passing on an order to a vendor to fulfil directly, negates the need for any localised warehousing holding unsold stock; a huge cost saving for any business. The more sellers added to the marketplace, the better the product choice and variety for the customers, which ultimately leads to more sales.

It is easier and more accessible than ever. Sign up to MarketCube today, and give your business the chance to thrive with minimal overheads and full control of your choices, vendors and products.

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