Dec 21, 2020

Small businesses are getting a crash course in e-commerce

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There are so many options: Do you go to Shopify, Amazon, Facebook, Etsy or all of them?

The costs of this pandemic are staggering. Most importantly, in lives lost, and increasingly, in businesses lost or struggling to survive. Changing lockdown rules upended supply chains and a wary public. A lot of those businesses have been scrambling to get online, and as it happens, there are a lot of places online to list your goods beyond your own website — almost too many.

Do you go to Shopify, Amazon, Facebook or Etsy? I spoke with Sucharita Kodali, a retail analyst with Forrester. She says the options can be overwhelming. The following is an edited transcript of our conversation.

A photo of Sucharita Kodali, a retailer analyst with Forrester.
Sucharita Kodali (Photo courtesy of Forrester)

Sucharita Kodali: I don’t know that there’s an easy answer to that, unless you go hire an agency to go do that for you. And now increasingly, there’s a presence on Instagram, because Instagram offers Instagram Shops, and Facebook has Facebook Shops. If you’re in apparel, there are companies like Poshmark to put your stuff on. So there are a lot of different players out there to service these small businesses.

Molly Wood: Well, it’s interesting, because we actually just spoke with Intuit, because they’ve added a commerce product to QuickBooks to enable this omnichannel selling. Is that the inevitable outcome of having multiple channels to sell into, each of which has its own fees or management problems? That another player, like a QuickBooks, will come in and say, “Oh, OK, so we need to enable this dashboard”? How long before Salesforce builds a product for this?

Kodali: Probably not long, or they’ll acquire somebody. Companies like Shopify essentially already do have modules like that. There’s been a whole ecosystem for years of companies that have been Amazon seller optimization solutions, and as they look to grow, part of their growth is to try to get those Amazon sellers to put those same products on other marketplaces, too. So there are a lot of different players that I have no doubt are already tackling this space. And Intuit is another one that has decided to throw its hat into the ring.

Wood: That’s so interesting, because as you describe it, I can’t help but think of the small businesses who are being wooed to these platforms as the small business version of an Uber driver, who’s an independent contractor, and allows this other business model to stay afloat with maybe dubious benefits to themselves.

Kodali: I think it depends on what you’ve been asked to do, or what the long-term potential costs of these platforms are. In some cases, the platforms get so big that there may be thousands of people selling a category as narrow as toothpaste. And in that case, where people are really only probably going to go to the first or second search results page, how do you even surface? How does anyone even know that you’re there? And the only way that you do is you have to sometimes pay for advertising to be at the top of that search results page. So that is definitely something that many of these small merchants discover that over time, that these platforms can be useful for them in the beginning, but then over time, they’re less and less useful, because there’s more competition. There are more small businesses that they’re competing with.

Wood: It seems like there is a rush to woo small businesses, in some ways. But the reason that rush exists is because you kind of can’t survive if you’re small.

Kodali: Yeah, I think that some of this has absolutely been a result of the pandemic. You have these small businesses that, in many cases, if they’re physical, they’ve really, really struggled, and they’ve needed to quickly embrace digital. And even companies like eBay — eBay launched a program called Up & Running to basically get a lot of these small boutiques to get their inventory quickly onto eBay, so that they could at least sell their merchandise at least in one e-commerce platform relatively quickly. So I think that, yes, the pandemic has been a unique catalyst in 2020 for this group of customers. I think that over time, the small businesses are going to need to think about what’s the right approach. Is it just a storefront that they own? How do they best manage their own traffic, their own customers without essentially giving away the keys to their kingdom? That, I think, is going to be really the challenge — do you completely just lean in to these large marketplaces that may or may not have your best interests at heart? Or do you just go at it on your own and use the resources or paid media to try to gain a following and retain your customers?

Wood: Does it make money to be the middleman here, the platform?

Kodali: It can. These are kind of two-sided marketplaces. So you have to attract sellers and you have to attract buyers. And that’s hard to do, because you have to market twice, essentially. And some platforms, you take things like DoorDash, they have a three-sided marketplace, because then you also have to get drivers, too, and delivery people. So the more that you have, the more that you need to attract, the harder it certainly is. However, the good part about it is that if you are able to build an audience, that can be really, really powerful. You don’t have a lot of the costs associated with a traditional physical goods business. You don’t have to carry inventory, you don’t have a storefront, for instance. So the digital piece of it can be really, really attractive. And the fact that you are just simply taking a cut of the transaction makes it essentially a very, very high margin business. I mean, if you were to look at, to this day, eBay is a highly, highly lucrative business for exactly that reason. The biggest expense for these marketplaces is that they do have to find the buyers and the sellers, and there are marketing costs associated with that. But if you can get good momentum going, and you have a great reputation and you’re unique in your space, you don’t have to spend a lot in marketing over time, and you can just happily take a cut of all transactions. And it’s a beautiful, scalable model.

A photo of three phones with Instagram's shopping interface, featuring nine facial creams users can purchase on the app.
Instagram allows users to sell products by tagging a price on a post and checkout without leaving the app. (Photo courtesy of Instagram)

Related links: More insight from Molly Wood

Interestingly, Walmart partnered with Shopify earlier this year and added over 1,000 of the small- to medium-sized sellers from Shopify to the Walmart online marketplace. Just last week, unrelated to third-party sellers, but still kind of interesting, Walmart announced it would test livestream shopping on TikTok, something that’s super popular in China, but not that well known here. Walmart also seems to be betting that TikTok won’t be banned by the Biden administration, for what that’s worth.

Earlier this month, we talked about shipping and how difficult that’s been for shippers. USPS, of course, has its own mess that’s making Christmas this year more of a moving target than a specific day. But adding to the difficulties for small businesses, FedEx has been limiting the number of packages that small businesses can send each day. Business Insider reports that small companies say the quotas aren’t transparent and were put into place suddenly and are seriously hurting their ability to get packages sent this holiday season.

Seriously, the number of whammies small businesses are experiencing in this pandemic is really approaching infinite at this point. So, hey, do a local store a favor. If you ordered something and it hasn’t come, don’t yell at them or leave a bad review. It’s not their fault, and they’re doing the best they can. And really, isn’t the important thing that you are hopefully safe and happy and healthy, and the stuff is just stuff and it’ll get there when it gets there? I mean, hey, you can have a whole other party when it comes. Priorities, friends. Priorities.

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The team

Molly Wood Host
Michael Lipkin Senior Producer
Stephanie Hughes Producer
Jesus Alvarado Assistant Producer