In 2013 Indian e-commerce market grew at a staggering 88 per cent rate and reached $ 16 billion. There are several grounds such as the convenience of shopping, large number of products, product comparison options etc. for this booming. But Cheaper rate is the one of the most significant items that attracts many customers towards online shopping, even though they fear about transferring online. But how these e-commerce companies selling in cheaper rate than a physical retail shop. We have already discussed about the Benefits of Online shopping than Offline store. Some of the strategies applied by online retailer to sell products in lesser price are discussed below.
Less profit margin:
Among all the schemes applied by e-commerce websites less profit margin is the supreme one. In order to attract large number of customers to their website e-commerce companies are selling products in less profit margin and their by they are getting a large number of sales. Almost all the e-commerce websites sell their most selling products at an attractive price and their by a large number of sales will happen and thereby revenue will increase. For instance, suppose you are selling products in 6% profit margin then you will bring more sales and your receipts will increase than selling a lesser number of products in 20% profit margin.
No middle man:
Many of the retail shops gets products through a middle man or marketing agencies, which catch a sure sum of money. Since online retailers are selling wares in large amount many of them are buying products directly from manufacturers and their by middleman cost can be averted. Some of the manufacturers like Samsung and Sony has their own online shop and these shops can sell at lesser cost than other retail stores.
Lesser establishment and running cost:
Compared to the physical store establishment cost of an online store is very less, many of the online stores works in warehouse model where all the products will be stored in a single warehouse and dispatched them according to the order. This model helps to save expenses such as rent, electricity, taxes and shrinkage cost. Number of employees needed to mange online store are less compared to physical store and companies can acquire a substantial sum of money from payroll also. Altogether, these agents are promoting e-commerce websites to sell merchandise in less net income margin.
24 / 7 sale:
Unlike physical store online stores can receive orders at any time and thus increase the quantity in sales per day. So they can sell merchandise at a cheaper rate against the number of orders per day.
Large geographical coverage:
Unlike physical store the online store is accessible from any geographical area. They can sell products in any country or region from a single online portal. This will increase the number of sales and they can sell merchandise at cheaper rates.
Lesser advertisement cost:
Many of the physical store add a few parts of advertising cost to the product cost. Online shops are advertising their merchandise online, and online advertisement is targeted advertisement, which is available at cheaper rate. So online shops can bring through a significant sum of money against advertisement and no need to bring it out from the product price.