eCommerce Startup Modelling

At Anup N. Amatya & Associates, professional Financial, Business & Management Consultants, we help our clients to develop appropriate eCommerce Startup models.

eCommerce-Overview

eCommerce denotes commercial transactions of good & services conducted over the internet. At present, it’s more of the convergence of online and offline retail.

Examples

  • Business-to-business (B to B)
  • Retail sales – direct to costumers
  • Online marketplaces, (third-party Business-to-Customer, e.g., Amazon, or Customer-to-Consumer, e.g., e-bay)

Key drivers behind the e-Commerce evolution

Demographics:

  • Ageing population
  • Dual earners (Husband/Wife) in a household
  • Urbanization
  • Smaller households

Consumption Patterns:

  • Need for Convenience
  • Health & wellness
  • Sharing economy
  • Hassle-free shopping experience
  • Customization
  • Simplification of buying behaviour

Technology Availability:

  • Proliferation of Mobile devices 
  • Advanced Analytics (Data Mining & Warehousing)
  • Social media penetration
  • Advancement in the field of ‘Internet of Things’

Structural Shifts:

  • Direct to consumer (no Middlemen)
  • Consolidation to achieve Economies of Scale

Key Terms used in eCommerce business

Site Traffic: 

The number of visitors to a site

Conversion Rate: 

The percentage of customers who place an order relative to the total number of site traffic

Bounce Rate:

The percentage of visitors who enter the site and then leave (“bounce”), rather than continuing to view other pages

Order:

A single checkout which may consist of multiple items

Organic Search:

Traffic from search engines that are not paid for

Paid Search:

Traffic from search engines that is paid for

Affiliates:

Paid traffic from other sites

Active Customers:

Number of customers who ordered in the last 12 months

Churn Rate:

Per cent of customers who are no longer active at the end of 12 months

Average Order Value (AOV):

Number of items per order multiplied by the price per item

Life-Time Value (LTV): 

Net Present Value, NPV, of Contribution Margin per customer

Customer Acquisition Cost (CAC): 

Cost to acquire new customers

Total Addressable Market (TAM):

The annual value of all goods/services in the market

Average Revenue Per User (ARPU):

Total revenue divided by the number of users

Net Promoter Score (NPS):

Survey of how likely customer is to refer someone

Order build-up

Email

Organic search

Paid search

Affiliates

Conversion rates (number of orders per 100 visits):

  • Number of orders placed (by channel)
  • Number of items per order
  • Item value 

Customers

Opening balance + New Customers – Churned customers = Closing balance

eCommerce Startup Modelling Illustration!

Anup N. Amatya & Associatesprofessional Financial, Business & Management Consultants

Author: Anup Narsingh Amatya