COM 125 Entry #3

Apologies for the lack of blog postings as of late, i have been very distracted with outside matters till I realised that i have a back log of 2 undone blog entries from the previous 2 weeks. That being said, let's get one of the two entries out of the way: e-Commerce.

E commerce

This topic actually resonates deeply with me as I had tried to start a business revolving around E-commerce after reading about it 2-3 years back.

In a nutshell, the said business of mine revolved around peddling 2nd hand goods through online channels. i made extensive use of social media portals such as facebook and online forums to move my goods (which were in turn obtained from various other people).

The idea was novel at first; random items available for sale at rock bottom prices using the internet as a marketing tool. Well ideas always look good on paper but differs greatly in practise, as i found out later.

Business was brisk at first, with alot of people buying and selling through me. I had to be present physically for the buying of the 2nd hands good and the selling. I enjoyed it at first running back and forth in locations throughout singapore but I started to face a few problems which never went away. I eventually wound down the business in about a few months after starting it up as my school grades were also taking a beating.

So what went wrong with this E-commerce, or psuedo e-commerce?

A helpful analysis of the sitaution would include "Micheal Porter's 5 forces" [of a business].

The first force would be the supplier bargaining; people would contact me with goods they would want to sell and i would post an advertisement on the said online mediums. Now more often than not people tell me, "i want to sell this item at $XXX, you can mark it up to $YYY and you can earn the rest." Most of the time, their quotes for prices are outrages and ridiculous, and i when i tell them this item can't be sold, they would reluctantly lower it, eating into my $YYY - $XXX profit margin. It came to a point when i only earned $1 or $2 off a sale of an item. That represented the "suppliers" bargaining power. They keep throwing me bones to eat instead of meat.

Next comes customer bargaining power, this does not require much thought. When a customer sees something he or she likes, they would make contact with me to view the product. And when they arrive, and they like the product, they would bargain with me over the price. My margin is already so low, and i deal mostly with friends and family, how can i refuse their request for a lower price? Now even my bone is taken away as i have to sell at cost or at a loss.

The threat of new entrants is very great as the online media allows any net savvy individual to set up shop at virtually (no pun intended) no or low cost (which i did). Hence my business model is not very unique as i am considered to have entered the market rather late.

Better substitutes to my service exist in the form of physical brick and mortar locations such as cash converters and sungei road theives market. Online substitutes also include websites such as e-bay. All these services provide a much better service than my small start up and i find it hard to entrench myself against such major players.

In summary, my e commerce business model was not sustainable in the long run.

However, i have learnt some valuable lessons and made useful contacts during the time spent doing this. I eventually wish to come back to this again at some point of time when i have more time and resources to devote to it. For now, my studies have the first priority.