How to Fund and Grow an E-commerce Platform?

📖 Learning

Preeti Karna

Jun 22, 2022 — 4 min read

Prateek Ruhail, CEO and Co-Founder of Vanity Wagon

The article is contributed By Prateek Ruhail, CEO and Co-Founder of Vanity Wagon.

In the recent past, a lot of businesses have gone digital incalculably. This was accelerated by the pandemic which curtailed individuals’ ability to visit physical marketplaces, and they were instead forced to shop from e-commerce websites. And now, the shoppers include individuals from all walks of life, a medley of cities and different income statuses. A report revealed that from April-May 2020, there was an 11% increase in first-time online shoppers. The e-commerce market in the country is exploding and is set to grow at a 30% compound annual growth rate in the next 5 years, serving 300-350 million shoppers in the next 3 years. This growth in e-commerce businesses has warranted a deeper understanding of how to fund and grow such a platform.

ECommerce Funding

Financials and cash-flow is the toughest problem to navigate when starting your own e-commerce business. It’s extremely pertinent to clearly chalk out a plan and figure out exactly what you need the funds for. This money is usually used to grow, cover expenses (marketing and operational) and for inventory costs.

How to Get Funds for Your ECommerce Business?

There are numerous ways to fund your business. The most common of these are using your personal savings, bootstrapping- asking family and friends for help, and crowdfunding - collecting funds from the public. There are also grants- obtaining money from a public body, equity financing- giving up equity for a cash investment, debt financing- selling debt instruments like bonds to investors, revenue-share financing- in the form of royalties, and bank loans. Each company has its own unique business model due to which some of these methods might work better as compared to others. Even at different stages of the business’ growth- different methods might be appropriate.

Investors' Alignment to Your Business Objectives

Not every investor fits perfectly into the puzzle. If you have an investor that doesn’t understand the overall vision of the company, and does not agree on a strategy, it can actually be counterproductive to have them on board. Thus, it is extremely important that you and your investors align on the objectives and plans of action for the company.

Growing Your ECommerce Platform

After starting the business and getting the infrastructure in place, the funds are used to grow the company. There are several growth strategies that can be implemented to maximise profits-

Affiliate marketing - Affiliate marketing is a business strategy whereby you can increase your business reach by allowing social media accounts and websites to market your products and show advertisements for a specific percentage of your sales. This exposes your brand to a larger audience, thereby growing it.
Target audience - Identifying your target audience is pertinent to understanding the demographics and trends among those you are selling to and modify your marketing and operational strategy accordingly. If your product or marketing is irrelevant to your target, there is no point.
Repeated business - Usually, the customer acquisition cost is extremely high, but converting an existing customer into a repeated buyer is easier and also increases sales. Luring customers back in using tactics like offers, discounts, bundles, customised coupons, and maintaining a good relationship with them is likely to grow your business.
Market basket analysis - Enticing customers to purchase commodities that are linked to one another through market basket analysis is an excellent way to grow your business. For example, if a customer is buying clothes, there can be options of accessories that go with the whole look. Or, if a customer is buying chips, there should be a bundled with different recommended dips etc.
Upselling products - Upselling refers to getting customers to purchase high-end and more expensive products instead of their cheaper alternatives. This can be done through things like ‘Amazon’s choice’ or even comparing different products so that the advantages are easily recognisable.
Creating awareness - If your e-commerce business can solve problems, then it is extremely important to create awareness and use appropriate marketing tools to do so. In today’s day and age, customers do extensive research before settling on a purchase hence, it is important that they are aware of the product you have and the problem you solve with the product.
Influencers - A good way to create awareness in the present day is through influencers. These influencers usually have thousands of followers who look up to them for advice and recommendations. The sales you get from these influencers should make up for the fee you pay them.