Choose Variable Cost instead of Fixed Cost

If you have the choice, always go for variable cost over fixed cost. There are many opinions on this one but I strongly believe choosing variable cost has many advantages. You can read more about variable cost and fixed cost here.

There are many eCommerce systems out there with different ways of charging you their fees. Some lean towards fixed cost (a high monthly fee but low transaction fee) and others lean towards variable cost (a high transaction fee but low monthly fee). So which one should you choose? Always go for those that lean towards variable costs. At least at the early stages of your business.

Here’s why:

You can price it into your product. The biggest benefit of choosing variable cost is all the fees can be added into your products. In effect, it is your customers who will be paying for the fees, not you.

You don’t have a monthly headache (stress). We all hate our monthly bills. So why add one more to your headaches? With a high monthly fee, you are stressed to sell as much as you can just to meet the monthly fee. After a while, you’ll notice you no longer focus on your business, but just to sell just to make ends meet while sacrificing your long term goals of your business.

It doesn’t matter if you sell a lot or little. As long as you add the variable cost into your products, you no longer worry if you sell a lot or little that month. Each sale pays for itself and you can focus on your business such as marketing, product improvement, expansion to different countries.

Only pay when you are profitable. And pay little when you are not. Nothing is fairer than that. When choosing a business partner (in this case, the eCommerce system). You want one that only charges you when you are profitable and not the one that charges you regardless how successful your business is.

As mentioned earlier, there are many opinions on this matter and I would like to hear them from you. Please pour your thoughts to the comments below.

Components of an E-commence

For those of you who thinks online commerce is a difficult business to get into, do not worry. Like all businesses, it is can be broken down into smaller and simpler components. Once you list down the components, you’ll soon realise that it is not as complex as it seems.

Let’s get to it!

1. The Products/Services. Goes without saying, without products or services, there will be nothing to sell and therefore, no reason for an online commerce.
2. The Engine. The core of the business. An online platform where the products are displayed, manages and maintained.
3. The Payment Gateway. The engine where money are transacted from the Buyer to the Seller.
4. The Shipping. Products has to be shipped to your customer’s hands. This component is not required if you are offering a service where your customer has to come to your shop to receive it.
5. Customer Satisfaction. Closing the commerce loop. Tracking your customer’s level of satisfaction for all your products/services gives you an idea what to improve.

And that’s it. Just 5 components to get your e-commerce up and running. What do you think? It really isn’t that difficult right?

In the coming weeks, we’ll delve deeper into each of these components. Stay tuned!