Building a profitable B2C store with Shopware's low TCO advantage

“My ecommerce sales are great, but I’m still not happy with the ROI.” - This is a clear example of the total cost of ownership (TCO) catching up with your bottom line. TCO is inevitable but is optimizable.

If you are a B2C ecommerce brand looking to start or want to minimize your TCO, it is paramount to properly understand what it is and how optimizing it will benefit your business in the long run.

This blog will help in understanding:

• What is TCO?

• Breakdown of TCO for B2C ecommerce

• Factors that add to your TCO on the go

• How platforms like Shopware help you minimize TCO

Let's also examine the success story of a German brand, Hela, that launched its B2C store on Shopware. They carefully evaluated different platforms to understand their total cost of ownership, enabling them to establish a strong online presence with a significant return on investment. This case study demonstrates the strategic benefits of selecting the right platform for business growth.

What is TCO in ecommerce?

TCO determines the overall cost required to provide a product or service. For a B2C ecommerce business the total cost of ownership includes the online store’s setup, maintenance, support, integrations, customer acquisition, customization and new feature development over time.

Breakdown of TCO in ecommerce

License cost: License cost includes the license fee for the ecommerce platforms you choose. If you choose an open-source platform, the cost of hiring developers or building an in-house development team will add to your TCO.

Resources: The cost of resources includes your staffing for operational and technical teams and the training provided.

Third-party systems: Your ecommerce store might require third-party services like fulfillment partners, payment processors, personalization, and automation tools. Third-party service providers' costs include license costs, upgrades, and so on.

Transactions: Transaction costs comprise fees for securely processing transactions, handling customer service, and returns. Transaction costs are levied based on the following scenarios:

• Processing fees levied by a third-party payment service provider

• Fees levied by the platform for facilitating third-party payments

• Commissions for processing credit card payments per transaction

• Transaction and credit card processing fees differ based on region

GMV Commissions: Some ecommerce platforms demand commissions based on gross merchandise value and average order value (AOV). As your GMV and AOV increases, a higher percentage of commissions is added to your TCO.

Auto Upgrades: Auto upgrades add a hidden cost to your overall TCO by setting a limit for annual revenue. As your brand crosses the maximum mark, the current plan you’ve signed up for gets automatically upgraded to the next higher-priced plan.

Factors that add to your TCO

Apart from the platform costs, your B2C store needs several features and functionalities to make a sale. From discovery to in-store experiences like the site search, personalization, support, marketing, and customer retention features, all add to your total cost of ownership. Stores can categorize these features into customer experience and marketing features to acquire customers.

A study from SimplicityDX says that the average customer acquisition cost (CAC) for most merchants is $29. The survey also highlights that 57% of the survey respondents pinpointed rising CAC as the #1 biggest challenge facing ecommerce retailers in 2024.

The prerequisite features mentioned above for customer acquisition are quite long. However, we’ll narrow it down, sticking to our context. Now, let’s look at those that you’ll have to buy as an app, add-on, or extension, apart from the license cost.

Site Search

Search is the first place that a potential customer goes after reaching your store. Whether a consumer has a clear idea of what to buy or a buyer is looking to research a little to reach a conclusion, both start with a site search.

According to a study from Nosto, 69% of consumers go straight to the search box when they visit an online store. The report also suggests that the percentage is higher for returning customers. That’s how important site search is.

Providing an advanced search system that includes spell check, autocorrect, relevant suggestions, accurate results, and alternate suggestions (if no results are found) helps improve the experience and conversions. Such advanced search would not be available out of the box and add to your TCO.

Personalization

Personalization is the key towards improving conversions and customer retention. 62% of shoppers think companies could do a better job tailoring their customer experiences. 70% of consumers spend more with companies that offer personalized customer experiences.

Features like product recommendations render suggestions based on consumer’s past purchase history, orders, and buying frequency. Guided selling is another handy feature that improves the chances of converting to a new potential customer. By quizzing users about their purpose of purchase, brands, or preferences, guided selling mechanisms identify the intent and direct them toward products in their buying arc.

As an ecommerce store owner, you’ll have to use third-party providers or pay additional costs for add-ons to integrate product recommendations and guided selling features.

Customer Retention

Turning new buyers into loyal customers is key for B2C e-commerce brands. Why? The average order value or the cost of a single product purchased is often much less than that of a B2B brand. So, customers coming back to buy more is paramount for any B2C brand. Improving customer retention by 5% can increase profits by up to 95%.

How to achieve this? Loyalty programs can help. 68% of Gen Z and 70% of Millennial consumers will maintain loyalty to a brand with a robust loyalty program. Considering the longevity of this demographic’s buying capability, your store needs a solid loyalty management system.

Loyalty management yields 23% of customer spending for global brands in the B2C industry. Loyalty and rewards mechanisms are offered as add-ons in entry-level SaaS ecommerce subscription plans and open-source platforms. You should spend more dollars to add an extension or develop your own.

Marketing

Apart from SEO, emails and content management you need more marketing features like promotions, cross-selling, social shopping and provisions to leverage user-generated content.

Reviews increase around 18% of ecommerce sales. User-generated content like product reviews which earn customers' trust and improve brand credibility are often paid add-ons.

Support

Support, like marketing, is a never-ending process. It starts right from the moment shoppers click on your website to post-sales. In the initial stages of a buying journey, support includes live assistance from your team to guide them in making a purchase decision. At the post-purchase stage, support includes:

• Order tracking

• Facilitating quick and easy returns process

• Live assistance to clarify queries on purchased products

As support spans most phases of a buying journey, the queries from thousands of existing and new customers come in at high frequency and volume. Managing them through live human assistance can cost heavily to your brand. Moreover, as you expand your support team, they will soon be overwhelmed with queries as your business grows. In simple words, it’ll never be enough.

Features like chatbot-aided assistance can help. Chatbots, deployed 24/7, can handle any query in any preferred language. For complex queries, chatbots can be merged with human intervention to enable a smooth completion of the support ticket, ensuring a great customer experience. By doing so, chatbots can free up the workload for your support staff and release talents to focus on more important areas.

Implementing a chatbot through a third-party provider might demand hundreds to thousands of dollars per month depending upon the capabilities it offers.

How platforms like Shopware help you minimize TCO

Shopware is a flexible platform that offers essential and advanced ecommerce capabilities, focusing on keeping the total cost of ownership at the bare minimum.

Unlimited sales channel

Apart from your online store, the competitive ecommerce landscape demands B2C brands to sell across multiple sales channels. By enabling you to sell across sales channels like POS, social media, and marketplace stores within the license cost, Shopware helps reduce your TCO while enabling multiple sales channels. Shopware also provides multi-language support, enabling brands to localize their content while selling across borders.

Reduced dependency on third-party plugins

Your ecommerce store needs a long list of features and functionalities to successfully deliver memorable shopping experiences. Shopware provides features like inventory, order management, multiple product support, and more. By doing so, you spend less time signing up with third-party plugins and save on maintenance costs.

Ecommerce models

You might have to choose the ecommerce model based on your products or services and other business considerations. Most ecommerce platforms offer either a PaaS (platform as a service), self-hosted, or SaaS model. Shopware is available in all ecommerce models, providing B2C brands the flexibility to choose based on their requirements.

Save migration cost

With business growth and changes in product or service offerings, you may opt for a different ecommerce model and innovate on the go. Shopware offers a PaaS, self-hosted, and SaaS model, so you can opt for a different ecommerce model within Shopware, saving migration costs to another platform.

Lower development costs

Shopware is an open platform. Its open-source nature enables complete customizability, enabling users to build new features and functionalities.

The platform provides transparent documentation and a user-friendly interface for developers to build faster. Owing to its open-source nature, the platform has a large developer community available at competitive prices.

Advanced features of Shopware that reduce your TCO

Shopware’s premium version offers advanced features often found as additional add-ons, plugins, or third-party integration with other platforms. Usually, these advanced features add additional expenses apart from the license cost.

Spatial Commerce: The augmented reality and 3D features of Shopware enable brands to create product overlays, providing a clear preview for customers of how they will look in the physical locations. This drives purchase decisions. More convinced decisions reduce product returns significantly and minimize the cost, time, and effort spent on returns processing.

Digital Sales Room: Connect with customers in a virtual sales room. Shopware's digital sales rooms enables brands to engage face-to-face with customers, improving the chance of conversions. Moreover, direct interactions shorten the sales cycle, build brand trust, provide opportunities to convince better, and enable customers to make informed decisions. Customers making informed decisions reduce cart abandonment and the cost spent on returns processing.

AI Copilot: Shopware’s AI Copilot is the native AI capability that benefits businesses in areas like data management, customer segmentation, content creation, and search. The best part is that AI Copilot is compatible with all ecommerce offerings. If you are considering Shopware as your platform, contact a Shopware partner to integrate Shopware AI services into your store.

Native Subscription Feature: If you are a brand in the CPG industry selling daily-use commodities, Shopware's subscription feature is the go-to option. The platform's native subscription capability enables B2C brands to set recurring payments for their products and services, saving development costs. The platform includes features like order automation, personalizing order intervals, setting rules for subscriptions, running discount campaigns, and more.

AI Content Generation and Search: Shopware’s AI Copilot enables brands to generate product descriptions highlighting their unique selling points. AI also generates relevant metadata for images, which serve as alt tags, boosting their SEO quotient.

The AI-powered site search enables users to search based on context, like “I’m planning a Ski trip,” and generate relevant product suggestions. Also, image search allows users to upload images and buy the same or related products.

Flow Builder: Simplify complex workflows across your operational teams. With Shopware’s Flow Builder, create and manage access permission within teams, create rules and automate complex processes.

How Shopware’s low TCO advantage added value to a B2C store: a case study

About the brand:

Hela is a German brand leading in the manufacture of ketchup and spice mixes. The brand has an export market of over 65 countries and caters to 27,000 customers through its operational centers across 10 locations.

The challenge:

• The brand was looking to build its B2C ecommerce presence.

• To build its online store, the brand needed a sturdy ecommerce system and started evaluating multiple ecommerce platforms.

How did Shopware provide value for the brand?

Among the platforms evaluated, Hela zeroed in on Shopware. Shopware 6 enabled the brand to choose from a long list of plugins to incorporate features and functionalities across the store.

The platform provided access to built-in advanced features like Flow Builder, Rule builder, and Shopping Experiences. These features helped the brand in several functional and customer experience areas like:

• Simplifying complex workflows

• Defining rules and access permissions within and across teams

• Leveraging content to drive conversions

• Enhancing staff efficiency and productivity

• Enabling teams to operate without dependency on the IT team

The out-of-the-box features offered by Shopware enabled the brand to experience great value for the cost.

Conclusion

For every B2C ecommerce brand, the total cost of ownership is an essential factor in determining ROI. Keeping the TCO in check is a daunting task as you have many areas like sales, marketing, and customer experience that demand a lot as your business grows. The choice of platform can help overcome this challenge.

Considering the factors discussed in our blog, keep track of the factors that add to your total cost of ownership and choose your ecommerce platform and model wisely. Such an approach will ensure your business is technically sturdy and on par with your competitors, keeping the TCO at a bare minimum.

If you are interested in evaluating Shopware to start with, look for experts who offer end-to-end Shopware development services.

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