Tag: University of Mumbai BMS Notes

There are two basic methods of labour remuneration, i.e., time rate and piece rate system of wage payment. In modern days a number of incentive plans to induce workers to work hard so as to produce more and earn more are being used.

Method 1. Time Rate System:

Under this system of wage payment, workers are paid according to the time for which they work. Payment may be on hourly basis, daily basis, weakly basis, or monthly basis. In this system, no consideration is given to the quantity and quality of work done.

When payment is made on hourly basis, total wages payable are calculated as follows:

Wages = No. of hours worked x Rate per hour

For example – if a worker is paid at the rate of Rs. 7.50 per hour, his wages for a day of 8 hours will be 7.5 × 8 = Rs. 60.

Though this is the oldest system of wage payment, yet it is commonly used these days.

Suitability:

This method of wage payment is suitable under the following type of situations:

1. Where quality of work is more important than quantity of work (i.e., high class tailoring)
2. Where output cannot be measured in quantitative terms, e.g., in the case of indirect workers like watch man, cleaners and sweepers, etc.
3. Where output is beyond the control of the worker, e.g., in process industries, where the work of a worker is dependent on the work of other workers.
4. Where work is being done on a small scale so that close supervision is possible.
5. Where the worker is a learner or an apprentice.

Advantages:

Following are the main advantages of this method:

1. Simplicity:

The system is simple and calculation of wages is easily understood by the workers.

2. Security to Workers:

Under this method, workers are assured of a certain amount of wages payable even if there is stoppage of work due to power failure, machine break-down etc. This gives a sense of security to workers.

3. Quality of Work:

As this method does not give weight to the quantity of work done, workers can concentrate on the quality of goods produced. Thus, the quality of work under this method is better.

4. Economical:

Under this method, no detailed records are required to be maintained regarding the work done by workers. This results in saving of clerical costs. Moreover, workers avoid over-speeding and causeless damage to Plant and Machinery and also materials. This also results in economy.

5. Accepted by Trade Unions:

This method is favoured by trade unions because it treats all workers alike and no distinction is made between efficient and inefficient workers.

6. Unity in Labour:

No hard line of distinction is drawn between an efficient and inefficient worker on the basis of production. This promotes a feeling of unity among the workers.

Disadvantages:

The main disadvantages of this method are:

1. Lack of Incentive:

This method of wage payment offers no positive inducement to workers to improve performance as it does not distinguish between an efficient and inefficient workers.

2. Lower Production:

As workers are paid on time basis, they tend to be slow in work. This results in lower production quantity.

3. More Supervision:

Under this method, more supervision is required, so that workers may not waste time. Appointment of additional supervisors increases supervision costs.

4. Idle Time:

Under this method of wage payment, workers waste a lot of time resulting in increasing in idle time.

5. Costing Difficulties:

From costing point of view, it creates difficulties in the calculation of labour cost per unit because the output is quite fluctuating.

6. It Makes Workers Lazy and Dull:

Due to the adoption of this method, workers become lazy and dull and try to avoid work, and thus production suffers.

Method 2. Piece Wage System:

Under this method, workers are paid in proportion to the work done by them. The rate is fixed per unit of output, per article, per commodity, etc. The worker is paid for the total units manufactured. The system is thus is result oriented. For example, if the rate per unit is Rs. 5 and the worker manufacturers 100 units in a week, his week’s wages shall be Rs. 500 (i.e., 100 x 5).

It may be expressed in the form of the following formula:

Total earnings = Units Manufactured x Rate per unit

Suitability:

Conditions under which piece rate method of wage payment may be usefully employed are:

1. Where the output of workers can be measured.
2. Where production is standardised and repetitive in nature.
3. When the aim is continuous maximum production.
4. Where workers continue at the same job for a long period.
5. Where the standard time required to complete a job can be measured accurately.

Advantages:

Piece rate system has the following advantages:

1. Incentive to Efficient Workers:

Under this method, as remuneration is paid in proportion to the worker’s effort, the method provides a strong incentive to work move.

2. Increase in Production:

Under this method, each worker tries his best to produce more to earn higher wages. This results in increase in production.

3. Decrease in Supervision:

Under this method of wage payment, strict supervision is not required because the workers are themselves interested in maximising their earnings through the maximisation of output.

4. Equitable Wages:

This system is more equitable in comparison to time rate system because wages are paid according to the efficiency of each worker.

5. Simple and Easy:

This method is simple and easily understood by the workers.

6. Simplifies Costing:

As, under this method, wages are paid at a rate per unit, it simplifies cost ascertainment because labour cost per unit is known in advance.

7. Decreased Cost:

On account of increase in production, fixed cost per unit is reduced resulting in higher profit.

Disadvantages:

Piece rate system of wage payment suffers from the following demerits:

1. Lack of Secured Wages:

This system does not guarantee of minimum wage to a worker. If a worker is not able to complete his allotted work in a day, due to any reason, he is paid less amount of wages. Thus, under this method, earnings of workers are uncertain.

2. Inferior Quality of the Product:

Under this method, much emphasis is given on quantity of production and ignores quality of the product. In order to maximise their wages, workers try to produce more and more without caring for the quality of production.

3. Injurious to Health of Workers:

In an effort to earn more wages, workers try to work excessively with greater speed. This proves to injurious to health of workers.

4. Misuse of Equipment and Materials:

In the greed to produce more, workers cause extra wastage of material and damage plant and machinery.

5. Unsuitable in Certain Cases:

This method does not suit where work is of artistic and refined nature.

6. Difficulties in Fixing Piece Rate:

Fixing equitable piece rate is quite a difficult task and may require considerable amount of work in the form of time studies.

7. Opposed by Trade Unions:

Price rate system is generally opposed by trade unions because it creates inequality in the wages of workers. Slow and inefficient workers feel jealous of the higher of their follow workers.

Incentive Plans:

Both time rate system and piece rate system discussed above have their merits and demerits. Incentive plans attempt to combine the good points of both the systems.

The primary purpose of an incentive plan is to induce a worker to produce more to earn a higher wage. Naturally, producing more in the same period of time should result in higher wages for the workers. Because of greater number of units produced, it should also result in a lower cost per unit for fixed factory cost and also for labour cost.

Objectives of Incentive Plans:

The main objectives of incentives wage plans are:

1. To induce the workers to increase their productivity.
2. To provide additional remuneration to the workers to their efforts and efficiency.
3. To have a contented labour force, and to reduce the labour turnover.
4. To keep the morale of the workers high.
5. To have increased production from the improved productivity of the workers.
6. To have reduction in the fixed overhead cost per unit through increased production.

Suitability of the Plan:

Incentive wage plans are suitable in the following cases:

1. Those industries where proper time and motion studies can be undertaken and proper standards of time and output can be fixed.
2. Those industries where overhead charges are considerable and which can be reduced through increased production resulting from incentive schemes.

Essentials of a Good Incentive Plan:

A good incentive plan should contain certain essentials.

The essentials of a good incentive plan are:

1. For the successful implementation of an incentive plan, proper and accurate time and motion studies should be conducted and proper standards should be fixed.
2. The standard set for production should be such that any worker of normal efficiency can attain them.
3. The standards, on set, should not be changed unless there is a change in the method of production.
4. Job analysis and standardisation must be made on scientific and equitable basis.
5. Tools, equipment and machines must be maintained in efficient working condition.
6. Proper and comfortable working conditions should be provided to workers.
7. Uniform working conditions should be provided to all the workers.
8. Regular flow of materials and other supplies should be ensured.
9. Every worker should be given equal opportunity to earn.
10. The workers should be taught the proper way of doing the work.
11. The workers should not suffer on account of factors beyond their control, such as – break-down of machines, power failure, etc.
12. The incentive plan should be permanent and not temporary.
13. The plant should be flexible enough to permit changes to suit the changes in the method of work.
14. The plan should be easy for the workers to understand.
15. The workers should be properly educated about the scheme and motivated to improve their efficiency and earn more.
16. It should be economical to operate.
17. The plan should be acceptable to both employer and the employees.
18. The incentive provided should be sufficiently attractive.
19. There should be no maximum limit on the amount of earnings of the workers.
20. Indirect workers should also be included under the incentive scheme.
21. The scheme should have the approval of workers and the union.

Advantages of Incentive Plan:

Incentive wage schemes have the following advantages:

1. The workers are assured of their time rates or day rates of wages, whether they attain the standard or not.
2. In-efficiency is not penalised, as the workers are assured of their day rates of wages, whether they attain the standard or not.
3. Efficiency is rewarded, as the workers of higher efficiency are given bonus in addition to their time wages.
4. Incentive is given to workers to increase their productivity.
5. Opportunity is given to workers to increase their earnings by efficient work.
6. It keeps the labour force contented, and thereby, helps to reduce labour turnover.
7. The increase in production leads to reduction in cost per unit.
8. The gain or losses arising from the efficiency of the workers are shared by both the employer and the employees.

Disadvantages of Incentive Plan:

The incentive schemes are not without drawbacks. They suffer from several drawbacks.

Their main drawbacks are:

1. The incentive schemes cannot be gain-fully employed in concerns where the overheads are less.
2. These schemes cannot be adopted in undertakings where proper standards cannot be fixed.
3. It is difficult to calculate indirect labour under the common incentive schemes.
4. These schemes require careful determination of standard time and standard output which involves additional work and expenditure.
5. The bonus paid to workers under these schemes may not be proportionate to the improved efforts or productivity of the workers.
6. The quality of the product may suffer, because of their eagerness to save time and earn more.
7. Once an incentive scheme is introduced, it will be very difficult to withdraw that scheme later, it becomes uneconomical.

Cost Accounting is a business practice in which we record, examine, summarize, and study the company’s cost spent on any process, service, product or anything else in the organization. This helps the organization in cost controlling and making strategic planning and decision on improving cost efficiency. Such financial statements and ledgers give the management visibility on their cost information. Management gets the idea where they have to control the cost and where they have to increase more, which helps in creating a vision and future plan. There are different types of cost accounting such as marginal costing, activity-based costing, standard cost accounting, lean accounting. In this article, we will discuss more objectives, advantages, costing and meaning of costs.

Features of Cost Accounting

• It is a sub-field in accounting. It is the process of accounting for costs
• Provides data to management for decision making and budgeting for the future
• It helps to establish certain standard costs and budgets.
• provides costing data that helps in fixing prices of goods and services
• Is also a great tool to figure out the efficiency of a unit or a process. It can disclose wastage of time and resources

Types and Classification of Cost Accounting

• Activity Based Costing
• Lean Accounting
• Standard Accounting
• Marginal Costing

Standard Accounting

Standard costing is a technique where the firm compares the costs that were incurred for the production of the goods and the costs that should have been incurred for the same.

Marginal Costing

This type of costing is based on the principle of dividing all costs into fixed cost and variable cost.

Fixed costs are unrelated to the levels of production. As the name suggests these costs remain the same irrespective of the production quantities.

Variable costs change in relation to production levels. They are directly proportionate. The variable cost per unit, however, remains the same.

Importance and Objectives of Cost Accounting

• Classification of Cost
• Cost Control
• Price Determination
• Fixing of Standards

Advantages

• Measuring and Improving Efficiency
• Identification of Unprofitable Activities
• Fixing Prices
• Price Reduction
• Control over Stock
• Evaluates the Reasons for Losses
• Aids Future Planning

Nature

Helps in Decision Making: Cost accounting helps in decision making. It provides vital information necessary for decision making. For instance, cost accounting helps in deciding:

1. Whether to make a product buy a product?
2. Whether to accept or reject an export order?
3. How to utilize the scarce materials profitably?

Helps in fixing prices: Cost accounting helps in fixing prices. It provides detailed cost data of each product (both on the aggregate and unit basis) which enables fixation of selling price. Cost accounting provides basis information for the preparation of tenders, estimates and quotations.

Formulation of future plans: Cost accounting is not a post-mortem examination. It is a system of foresight. On the basis of past experience, it helps in the formulation of definite future plans in quantitative terms. Budgets are prepared and they give direction to the enterprise.

Avoidance of wastage: Cost accounting reveals the sources of losses or inefficiencies such as spoilage, leakage, pilferage, inadequate utilization of plant etc. By appropriate control measures, these wastages can be avoided or minimized.

Highlights causes: The exact cause of an increase or decrease in profit or loss can be found with the aid of cost accounting. For instance, it is possible for the management to know whether the profits have decreased due to an increase in labour cost or material cost or both.

Reward to efficiency: Cost accounting introduces bonus plans and incentive wage systems to suit the needs of the organization. These plans and systems reward efficient workers and improve productivity as well improve the morale of the work -force.

Prevention of frauds: Cost accounting envisages sound systems of inventory control, budgetary control and standard costing. Scope for manipulation and fraud is minimized.

Improvement in profitability: Cost accounting reveals unprofitable products and activities. Management can drop those products and eliminate unprofitable activities. The resources released from unprofitable products can be used to improve the profitability of the business.

Preparation of final accounts: Cost accounting provides for perpetual inventory system. It helps in the preparation of interim profit and loss account and balance sheet without physical stock verification.

Facilitates control: Cost accounting includes effective tools such as inventory control, budgetary control and variance analysis. By adopting them, the management can notice the deviation from the plans. Remedial action can be taken quickly.

 Scope

The term scope here refers to field of activity. Cost accounting refers to the process of determining the cost of a particular product or activity. It provides useful data both for internal and external reports reporting. Internal reporting presents details of cost data in a summarized and aggregate form. For instance, in case a company manufacturing electrical goods cost of each product.

In order that cost accounting satisfies the requirements of both internal and external reporting, the following are the different activities which are undertaken under cost accounting system:

Cost Determination: This is the first step in the cost accounting system. It refers to determining the cost for a specific product or activity. This is a critical activity since the other three activities, explained below, depend on it.

Cost Recording: It is concerned with recording of costs in the cost journal and their subsequent posting to the ledger. Cost recording may be done according to integral or non-integral system a separate set of books is maintained for costing and financial transactions.

Cost Analyzing: It is concerned with critical evaluation of cost information to assist the management in planning and controlling the business activates. Meaningful cost analysis depends largely upon the clear understanding of the cost finding methods used in cost accounting.

Cost Reporting: It is concerned with reporting cost data both for internal and external reporting purpose. In order to use cost information intelligently it is necessary for the managers to have good understanding of different cost accounting concepts.

Limitations

In spite of the various advantages claimed by cost accounting, the discipline suffers from the following limitations:

Cost Accounting is costly to operate: It involves heavy expenditure to operate. The benefits derived by operating the system are more than the cost.

Cost Accounting involves many forms and statements: It involves usage of many forms and statements which leads to increase of paper work.

Costing may not be applicable in all types of Industries: Existing methods of cost accounting may not be applicable in all types of industries. Cost accounting methods can be devised for all types of industries, and services.

It is based on Estimations: Costing system relies on predetermined data and therefore it is not reliable. Costing system estimates costs scientifically based on past and present situations and with suitable modifications for the future. This leads to accurate cost figures based on which management can initiate decisions. But for the predetermined costs, cost accounting also becomes another ‘Historical Accounting’.

It is not an exact science: Like any others accounting system, it is not an exact science but an art that has developed through theories and practices.

Bias Judgments: Many judgments are biased and depend on individual discretion.

Difference in opinion: Different views are held by different cost accounts about the items to be includes in cost.

Material Losses:

Material losses may take the form of waste, scrap, defectives and spoilage. Problems of spoilage, waste, defective units and scrap are bound to arise in almost all manufacturing concerns, so there is usually a difference between the quantity of the output and the input.

Usually the quantity of the output is less than that of the input because of waste, scrap or spoilage. Efforts should be made to reduce the difference between the quantities of the output and the input so that cost of production may be reduced.

Methods of treatment of spoilage, waste etc. and the interpretations given to these terms vary considerably from one industrial concern to another because of different situations arising in different concerns. The terms are also loosely used; for example, waste and scrap may be taken to have the same meaning.

1. Waste:

Waste is defined as discarded substances having no values. In many industries, some waste is inevitable. Such waste may arise due to the inherent nature of materials, chemical reaction, evaporation, drying, sublimation of goods etc. Waste can also be in the form of smoke, gas, slag or dust which arises in the course of a manufacturing process.

Waste may be invisible or visible. The former type of waste (i.e., waste due to drying, evaporation etc.) is invisible whereas the latter type of waste (i.e., gas, smoke, slag etc.) is visible. Waste has practically no measureable value. Rather in some industries, the waste instead of realising any value creates a problem for its disposal incurring further costs. The waste may be normal and abnormal from the point of view of treatment in costing.

Normal Waste:

It is the loss which is unavoidable on account of inherent nature of material. Some materials such as liquid materials lose their weight due to evaporation. Similarly, there are some materials (i.e. coal) which are wasted due to loading and unloading. Materials may be wasted due to breaking the bulk into smaller parts.

Normal waste is unavoidable and as such may be reduced to some extent if there is strict control but cannot be totally eliminated. Such loss can be estimated in advance on the basis of past experience or chemical data. As waste has practically no value, its treatment in costing is relatively simple. The normal process loss is recorded only in terms of quantity.

Abnormal Waste:

Any loss caused by unexpected or abnormal conditions such as sub-standard materials, carelessness, accident etc. or loss in excess of the margin anticipated for normal process loss should be regarded as abnormal waste.

All cases of abnormal waste should be thoroughly investigated and steps taken to prevent their recurrence in future. Responsibility for abnormal wastage should be fixed on purchasing, storage, production and inspection staff to maintain standards. Abnormal waste should not be allowed to affect the cost of production as it is caused by abnormal or unexpected conditions.

Such loss representing the cost of materials, labour and overhead incurred on the wastage should he transferred to Profit and Loss Account (Costing Profit and Loss Account where no integral system of accounting is maintained) and not added to the cost of production so as to make meaningful comparison of costs of production of different periods.

2. Scrap:

Scrap is discarded material having some values. It represents fragments or remnants of material that are left from certain type of manufacture. It is a material loss but has small value without further processing. Examples of scrap are available in operations like turning, boring, punching, sawing, shavings, moulding, etc. from metals on which machine operations are carried out; saw dust and trimmings in the timber industry; dead heads and bottom ends in foundries; and cuttings, pieces and splits in leather industry.

Such scrap can be solid because it can be used by other industries by melting in furnaces. Scrap is always physically available unlike waste which may or may not be physically present in the form of a residue. Thus scrap is always visible whereas waste may or may not be visible. Further, waste may not have any value whereas scrap must necessarily have a value.

There are three types of scrap, namely:

(a) Legitimate scrap,

(b) Administrative scrap,

(c) Defective scrap.

Legitimate scrap arises due to the nature of operation like turning, boring, punching etc. as discussed above. This type of scrap can be pre-determined and efforts should be made that it should not be more than the pre-determined quantity. Administrative scrap arises due to administrative action, such as, a change in the method of production.

Defective scrap arises because of use of inferior quality of material or bad workmanship or defective machines. Such type of scrap is abnormal because it arises due to abnormal reasons.

Treatment of Scrap:

The useful methods for the treatment of scrap are as follows:

1. If realisable value of normal scrap is insignificant (i.e., legitimate scrap and administrative scrap) it may be credited to Profit and Loss Account like other income. This method of treatment of scrap is suitable when the scrap is of very little value and when the market for it is uncertain. This method is known as treatment by neglect.

This method is not suitable for effective control over scrap because detailed records of scrap are not kept and scrap cost is not shown as an element of cost in the cost sheet. Scrap which is not sold and is in stock is valued at nil for balance sheet purposes and thus vitiates the valuation of closing stock.

Accounting of scrap by this method is also inaccurate as there is a time lag between the sales and the production. There is also a possibility that scrap may arise in one period but may be accounted (i.e., sold) in another period and thus distorts the profits of two periods.

2. The sale value of scrap may be deducted from the cost of materials consumed or factory overhead. This method is suitable when several production orders are commenced at a time and it is not possible to find scrap for each other. This method is, however, not effective in controlling scrap arising in different processes, jobs or orders.

When overheads are absorbed on the basis of pre-determined rates, it is more appropriate to credit an estimated allowance for the scrap instead of the amount of actual scrap.

The journal entries for recording the scrap are:

(i) Dr. Scrap Account (with an estimated allowance) Cr. Factory Overhead Control Account

(ii) Dr. Cash/Debtors (Amount realised on sale) Cr. Scrap Account.

Profit or loss on sale of scrap may be transferred to the Profit and Loss Account at the end of the year. When scrap is sold on a day-to-day basis and no stock is maintained, the journal entry is: Dr. Cash/Debtors Account (with realisable value) Cr. Factory Overhead Control Account

3. The scrap may be assigned a cost if it can be related to the job which yielded the scrap. It will help in giving reasonable credit to the jobs which yielded scraps. This method of treatment is suitable when scraps from the various jobs widely differ in nature.
4. It is possible that scrap arising in one job may be used in another job. In such a case material transfer note for transfer of scrap from one job to another job should be prepared and credit should be given to the job where scrap arises and debit should be given to the job for the amount of scrap transferred to it.

Sometimes, scrap may be returned to stores when some further processing has to be done before that can be utilised for other jobs. Job returning the scrap is credited with the value of the scrap returned to stores.

5. When the actual scrap is in excess of the pre-determined quantity (i.e., normal quantity), the cost of the excess scrap is transferred to Costing Profit and Loss Account after deducting there-from the sale proceeds of such excess scrap. The valuation of excess scrap is done in the same way as the valuation of abnormal waste is done.
6. The cost of defective scraps after deduction there-from the sale a proceeds of such scrap is transferred to Costing Profit and Loss Account because it is an abnormal loss.

3. Defectives:

Defective products or units are those which do not meet with dimensional or quality standards and are reworked for rectification of defects by application of material, labour and/or processing and salvaged to the point of either standard product or sub­standard product to be sold as seconds. Therefore, defectives are that portion which can be rectified at some extra cost of re-operation.

Defectives may arise due to the following reasons:

1. Sub-standard materials.
2. Poor workmanship.
3. Poor maintenance of machines.
4. Wrong tool setting.
5. Faulty design of products.
6. Bad supervision.
7. Careless inspection.
8. Poor working conditions.
9. Lack of control, such as humidity, furnace temperature etc.
10. Excessive short runs.

Defectives are bad products which are not totally spoiled and can be rectified or restored to original or near-original condition at some extra cost of re-operation. The additional cost of rectifying the defectives is added to the total cost and the quantity of defectives rectified is added to the quantity of good output because defective units rectified can be sold as “seconds”. Rectification of defective units is advisable only when the cost of rectification is low and more profitable than to sell as spoil 3d units.

Treatment of Cost of Rectification of Defectives:

Following methods may be adopted for the treatment of this cost:

1. If the defective production is identified with a specific job or department, the cost of rectification is charged to that specific job or department.
2. If the defective production is not identified with a particular job or department, the cost of rectification is added to general factory overhead.
3. If the defective production is due to abnormal reasons, the rectification cost is transferred to Costing Profit and Loss Account.

Every possible effort should be made to reduce the number of defectives because they increase the cost of production. Control of defectives is an operational correction, so steps should be taken to eliminate the reasons responsible for defectives. Right from the design stage to the output of the final product stage, each one should be looked into carefully for avoiding defectives.

Standardisation of products and operations, comparison of actual performance with standards laid down in regard to defectives, feedback and reporting and incentive scheme for minimising defectives will go a long way in reducing the quantity of defectives.

4. Spoilage:

Spoilage refers to production that does not meet with dimensional or quality standards in such a way that it cannot be rectified economically and is junked and sold for a disposal value. So it occurs when goods are so damaged in course of manufacturing process as to become not rectifiable with some additional cost.

Material used in spoiled units can be used again as material by the same or another process or product. Spoilage cost is the difference between the cost incurred upto the point of rejection less salvage value or cost of material used.

Spoilage arises due to sub-standard materials, poor workmanship, faulty tool setting, poor maintenance of machines, bad supervision and careless inspection.

Spoilage should not be confused with scrap. Scrap arises at the initial stages of production operations whereas spoilage takes place more towards the finishing production stages with larger loss of added value to the cost of material used.

Spoilage can be of two types:

(1) Normal spoilage and

(2) Abnormal spoilage.

According to Charles T. Horngren, “Normal spoilage is what arises under efficient operating conditions; it is an inherent result of the particular process and is thus uncontrollable in the short run.

Abnormal spoilage is spoilage that is not expected to arise under efficient operating conditions; it is not an inherent part of the selected production process”. Abnormal spoilage can be controlled because it arises as a result of inefficient operating conditions.

Normal spoilage is planned spoilage that management is willing to accept and is controllable by higher level of management which determines the nature of products and processes. On the other hand, abnormal spoilage can be controlled by first-line supervision which can exert influence over inefficiency.

Treatment of Cost of Spoilage:

The treatment of cost of spoilage depends upon the nature of spoilage. If the spoilage is normal, the cost is borne by good units of output. In case of abnormal spoilage, cost of spoilage is transferred to Costing Profit and Loss Account. When, however, the normal spoiled units are used again as raw material in the same manufacturing process, no separate treatment becomes necessary.

If they are used for another process, job or order, a proper credit should be given to the process job or order giving rise to the spoilage keeping in view the utility value of the spoilage to the process, job or order for which the same is used.

Control of Wastage, Scrap, Defectives and Spoilage:

Every effort should be made to reduce the cost of production by exercising control on wastage, scrap, defectives and spoilage.

Following steps may be taken in this direction:

1. Reports relating to the wastage, scrap, defectives and spoilage should be prepared in time to locate the reason responsible for the wastage etc. An immediate corrective action should be taken on the basis of the reasons responsible for the loss.
2. Wastage, scrap, defectives and spoilage should be standardised by following standard costing system. It should be seen that actual wastage, scrap, etc. should be within normal limits allowed.
3. Good quality of materials should be used. Better the quality of materials less is the wastage, scrap and spoilage.
4. Control of wastage, scrap, defectives and spoilage should start with the designing of the products. The type of materials that will result in the minimum wastage, scrap, defectives and spoilage are decided at the designing stage. Better quality of equipment should be used to get better return, so type and shape of equipments to be used for manufacturing process should be decided at the designing stage.
5. Properly trained personnel should be employed to reduce the quantum of wastage, scrap, defectives and spoilage.

One of the most popular activities on the Web is shopping. It has much allure in it  you can shop at your leisure, anytime, and in your pajamas. Literally anyone can have their pages built to display their specific goods and services.

History of ecommerce dates back to the invention of the very old notion of “sell and buy”, electricity, cables, computers, modems, and the Internet. Ecommerce became possible in 1991 when the Internet was opened to commercial use. Since that date thousands of businesses have taken up residence at web sites.

At first, the term ecommerce meant the process of execution of commercial transactions electronically with the help of the leading technologies such as Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT) which gave an opportunity for users to exchange business information and do electronic transactions. The ability to use these technologies appeared in the late 1970s and allowed business companies and organizations to send commercial documentation electronically.

Although the Internet began to advance in popularity among the general public in 1994, it took approximately four years to develop the security protocols (for example, HTTP) and DSL which allowed rapid access and a persistent connection to the Internet. In 2000 a great number of business companies in the United States and Western Europe represented their services in the World Wide Web. At this time the meaning of the word ecommerce was changed. People began to define the term ecommerce as the process of purchasing of available goods and services over the Internet using secure connections and electronic payment services. Although the dot-com collapse in 2000 led to unfortunate results and many of ecommerce companies disappeared, the “brick and mortar” retailers recognized the advantages of electronic commerce and began to add such capabilities to their web sites (e.g., after the online grocery store Webvan came to ruin, two supermarket chains, Albertsons and Safeway, began to use ecommerce to enable their customers to buy groceries online). By the end of 2001, the largest form of ecommerce, Business-to-Business (B2B) model, had around $700 billion in transactions.

According to all available data, ecommerce sales continued to grow in the next few years and, by the end of 2007, ecommerce sales accounted for 3.4 percent of total sales.

Ecommerce has a great deal of advantages over “brick and mortar” stores and mail order catalogs. Consumers can easily search through a large database of products and services. They can see actual prices, build an order over several days and email it as a “wish list” hoping that someone will pay for their selected goods. Customers can compare prices with a click of the mouse and buy the selected product at best prices.

Online vendors, in their turn, also get distinct advantages. The web and its search engines provide a way to be found by customers without expensive advertising campaign. Even small online shops can reach global markets. Web technology also allows to track customer preferences and to deliver individually-tailored marketing.

History of ecommerce is unthinkable without Amazon and Ebay which were among the first Internet companies to allow electronic transactions. Thanks to their founders we now have a handsome ecommerce sector and enjoy the buying and selling advantages of the Internet. Currently there are 5 largest and most famous worldwide Internet retailers: Amazon, Dell, Staples, Office Depot and Hewlett Packard. According to statistics, the most popular categories of products sold in the World Wide Web are music, books, computers, office supplies and other consumer electronics.

Amazon.com, Inc. is one of the most famous ecommerce companies and is located in Seattle, Washington (USA). It was founded in 1994 by Jeff Bezos and was one of the first American ecommerce companies to sell products over the Internet. After the dot-com collapse Amazon lost its position as a successful business model, however, in 2003 the company made its first annual profit which was the first step to the further development.

At the outset Amazon.com was considered as an online bookstore, but in time it extended a variety of goods by adding electronics, software, DVDs, video games, music CDs, MP3s, apparel, footwear, health products, etc. The original name of the company was Cadabra.com, but shortly after it become popular in the Internet Bezos decided to rename his business “Amazon” after the world’s most voluminous river. In 1999 Jeff Bezos was entitled as the Person of the Year by Time Magazine in recognition of the company’s success. Although the company’s main headquarters is located in the USA, WA, Amazon has set up separate websites in other economically developed countries such as the United Kingdom, Canada, France, Germany, Japan, and China. The company supports and operates retail web sites for many famous businesses, including Marks & Spencer, Lacoste, the NBA, Bebe Stores, Target, etc.

Amazon is one of the first ecommerce businesses to establish an affiliate marketing program, and nowadays the company gets about 40% of its sales from affiliates and third party sellers who list and sell goods on the web site. In 2008 Amazon penetrated into the cinema and is currently sponsoring the film “The Stolen Child” with 20th Century Fox.

According to the research conducted in 2008, the domain Amazon.com attracted about 615 million customers every year. The most popular feature of the web site is the review system, i.e. the ability for visitors to submit their reviews and rate any product on a rating scale from one to five stars. Amazon.com is also well-known for its clear and user-friendly advanced search facility which enables visitors to search for keywords in the full text of many books in the database.

One more company which has contributed much to the process of ecommerce development is Dell Inc., an American company located in Texas, which stands third in computer sales within the industry behind Hewlett-Packard and Acer.

Launched in 1994 as a static page, Dell.com has made rapid strides, and by the end of 1997 was the first company to record a million dollars in online sales. The company’s unique strategy of selling goods over the World Wide Web with no retail outlets and no middlemen has been admired by a lot of customers and imitated by a great number of ecommerce businesses. The key factor of Dell’s success is that Dell.com enables customers to choose and to control, i.e. visitors can browse the site and assemble PCs piece by piece choosing each single component based on their budget and requirements. According to statistics, approximately half of the company’s profit comes from the web site.

In 2007, Fortune magazine ranked Dell as the 34th-largest company in the Fortune 500 list and 8th on its annual Top 20 list of the most successful and admired companies in the USA in recognition of the company’s business model.

History of ecommerce is a history of a new, virtual world which is evolving according to the customer advantage. It is a world which we are all building together brick by brick, laying a secure foundation for the future generations.

Selling online has become easily possible nowadays. In fact, it has become one of the most popular platforms people prefer buying from.

If you plan to start a business of your own, and wondering how to go about it, then this post will help you learn the complete e-Commerce Selling Process.

Follow the steps as mentioned, and to the end, you’ll be done.

Step #1: Give your business a name – Register it

The first and foremost requirement is to give your business an identity in terms of a name. The name is something your audience will recognize your business with. Thus, choosing a good name is imperative.

Once you select a name, make sure you register it.

Why is registration important?

This is because if someday someone else comes up in the market with the same name, you will stand nowhere since you do not have proof that you own that title.

Moreover, one needs to comply with the registration as mandatory per law. Thus, it is essential to get your business registered. Each state may have its own policies; therefore, you may refer to your respective state policies for registration.

Step #2: Create a domain name and a website – Register as a seller

Once you are registered, either create your own website using a hosting platform or register as a seller. There are two different possibilities you might want to opt, i.e.

Register as a seller on popular websites like Amazon, and eBay OR start your own e-commerce business by buying space at popular sites such as Shopify, BigCommerce, etc.

The other possibility that arises when you want to set your own e-commerce store is to build a website using web hosting platforms and register your domain.

For example, buy a domain for the e-commerce platform through WordPress and install plugins that help you set up your business and sell online.

Registering as a seller on e-commerce platforms is the easiest way to start selling.

The complexity level increases when you opt for platforms to open up your own store. However, the primary benefit here is that you have your own store where you can sell unlike being just a seller on other e-commerce platforms.

You actually tend to build your own brand here. The most complicated method is to create a new website altogether to start a business.

However, if you plan to do business on a massive scale, it is the optimum choice to make.

Step #3: Upload Products

Once you’ve chosen where you want to sell and have a space to upload your stock, you may now start uploading high-quality images of your products.

Give them a name and mention their price.

If you are into selling various categories of products, make sure to categorize them. This makes the website look neater and easy to use for the customer.

Give the products a suitable description that is easy to understand and explains each and every feature of the product.

When doing business online, your interaction with customers is not direct. The customer cannot touch and feel the product physically. Thus, in order to succeed despite the demerit, it is important to explain each and everything about the product through descriptions.

Step #4: Use SEO

In order to get your website or listed products to rank on top of the Google search results, it is essential to have relevant keywords in the content.

For example, if a person is looking out for a juicer, and you have it as one of your products, then make sure your product title has the word juicer. This will help the search engines identify that you have the same thing that the buyer is looking for and will list your products on the top.

Similarly, make sure that the description along with being informative and easy to read, is also SEO optimized.

Step #5: Choose your shipping method

The next and most important thing is to choose a shipping strategy. Make sure you connect with only famous shipping companies who can make sure that they will deliver your product timely without any damage.

Final words

You are all set to start selling. You have an e-commerce store, have your shipping planned and the products are listed.

Now the buyers will simply have to click on the buy now option, make payments through the payment gateway you’ve opted for and buy your product.

In order to attract more customers, use all the digital marketing tactics and take your business to greater heights.

Following are the key drivers of e-commerce:-

1. Make sure your e-commerce efforts are in sync with corporate goals

• Have a clear understanding of company’s overall growth objectives.
• Have a clear understanding of company’s branding and marketing objectives.
• Have a clear understanding of company’s target customers and demographics.
• Have a clear understanding of company’s products/margins which product sales move the bottom line needle the most.
• Have a clear understanding of company’s financial targets (revenues, margins, ROI).

2. Omni-channel design/customer of one

• You are not building a website in isolation from other customer channels break down divisional silos.
• All decisions should be made with a customer-centric mindset.
• Allow customers to shop where, how and when they choose, anytime and anyplace.
• This means integrating all website, mobile, store, call center systems, etc.
• This means tailoring offering and messaging down to the person-by-person basis.

3. Driving new users to the site

• Determine the proper marketing plan that works within your budgets.
• Bias online marketing as most trackable and one-click away from your site.
• Constantly test and iterate all offers and creative strategies used to maximize engagement.
• Drive traffic to specific product landing pages, which should be unique and tested.
• Have a clear understanding of the keywords that matter most for your business and optimize your site for SEO and PPC efforts.
• Cross-promote e-commerce capabilities across all channels of your business.
• Cross-promote e-commerce links across within all other channel marketing.
• Leverage the power of social media maintain and promote your own profile pages on major social networks (e.g., Facebook, Twitter, Pinterest) and allow for social sharing from all product pages and conversational communications/viral marketing therefrom.

4. Getting existing users more engaged

• Continually optimize and fine-tune the product/pricing offering to match demand.
• Maintain consistent communication with customers via monthly newsletters or other means.
• Create loyalty programs that reward increased spending with increased rewards.
• Allow customers to create wishlists that they can send to their friends and family.
• Tailor product offers to specific customer profile data.
• Optimize upselling and cross-selling techniques (e.g., promote related items and “people who bought this, also bought that” functionality).
• Use machine learning techniques to keep a “memory” of user behaviors in session and over time to allow for behavioral targeting.
• Use targeted pull back ads after a user leaves the site without buying
• Employ automated repurchase reminders for things that need to be replaced over time
• Opt customers into company newsletters during the time of e-commerce purchases.

5. Website Design/Functionality

• It needs a clear and simple way to navigate the site (e.g., think “one click” away).
• Constantly test page layouts to increase user engagement, using eye pattern heat maps, user mouse tracking or otherwise.
• Constantly test shopping cart flow to limit abandon rates.
• Study all abandon rates to figure out why customers end up not buying—and address such concerns.
• Leverage video where you can, as it is much more effective than static images and text in terms of driving engagement.
• Leverage the reviews and feedback of other customers who bought same items.

6. Fulfillment/customer service

• Offer two-way free shipping for orders over a certain size (e.g., $50) don’t give users any reason not to buy.
• Offer no-hassle customer satisfaction guarantees for a full refund if they are not satisfied for any reason.
• Provide clear communication on all shipping-related issues (e.g., time to ship, expected arrival dates) with opportunities to get overnight, if needed.
• Provide the ability to check inventory online for items available in the stores for same day pickup.
• Simple credit card processing online and the ability to collect payment information via phone.
• Allow returns either via mail or direct to the stores.
• Consider kiosk or tablet-based opportunities and services within the stores.

7. CRM/BIG DATA

• Invest in customer CRMs as a central repository to track all client profile, preferences, sales and social media history behavior.
• Invest in big data analytics technology to make sense of the fire hose of data available.
• The future of marketing is moving toward person-by-person targeting of products, offers and messaging based on their past behaviors and profile preferences. It is no longer mass-marketing of the same messaging to all.
• Study cross-channel behaviors to learn how customers prefer to engage with the company (e.g., they researched first online but bought in the store, or vice versa).
• Test, test and retest all marketing activities and look to sharpen efforts with each iteration.

8. Mobility

• The PC market is actually declining, while the mobile market is exploding—you need to have native mobile apps built for each major platform (e.g., Apple, Android), or a mobile friendly touch site.
• Take advantage of mobile locations of your customers with targeted offers and services related to their exact location (e.g., “Check out our new store near your location,” “here are local restaurant deals to go with your recent movie tickets purchase,” “here is our mobile mapping app to go with your new car”).

Online shopping is mainstream. Everyone does it and in lieu of recent in-store credit card security issues, it’s often viewed as more secure than going to a retail store or giving your credit card to a random customer service rep on the phone.

Trust in online shopping is not an issue anymore. The issue is getting your visitors to shop on your website over a competitor’s. In order to capture your audience and make the sales, your e-commerce website needs to be current and implement several very important elements.

Here are seven things to consider when developing or restructuring your e-commerce site:

1. User Friendly

If your store is easy to navigate, you will have a greater chance of making a sale from the start. The homepage should be inviting and encourage visitors to click on products or categories of items they are looking to purchase. Categories should be self-explanatory and should be broken down into subcategories so visitors can quickly find what they are looking for.

The search bar should be easy to find and quickly list all applicable items that are currently available for sale once the user types in their query.

2. Shopping Cart and Checkout Process

Adding items to the shopping cart should be simple. Color choices or style preferences should be easy to view and select. Customers like to view what they have in their cart while continuing to shop, so make sure you have a design and functionality that makes it easy.

Don’t confuse users during checkout. Keep things basic and value your customer’s time. The shopper should feel confident shopping on your website.

3. Mobile Compatibility

80% of all online adults own a smartphone. Mobile visits, in many cases now, outrank desktop use. Your e-commerce site needs to be designed and built for all devices, not just a personal computer or laptops.

4. Calls to Action (CTA)

Make sure to lead your customers through your site with calls to action that are specific to what you want them to do. For example, if you have a sale, your CTA button could be “Click Here to Save 20%!” It may be obvious to you and even to most people, but there are still a lot of people out there that have lives, raised kids or are raising kids, own or run businesses that don’t spend much time on the web. Adding that extra help builds confidence in your business, shows that you care about your customers and helps to make things less frustrating. Always avoid making your customer feel stupid because they not. If they are going to your website they must be smart enough to buy from the best company out there.

5. Images and Descriptions

When people are searching for a product to buy, they want to know all the details about it before making their purchase.

Shopping online can have it’s drawbacks because one cannot physically see or touch the items they are looking at. Because of this, it’s important to have professional quality images of your products and when applicable images from multiple angles, views, and even context.

It is also important to thoroughly describe the items in detail. Cover all aspects, including size, texture, uses, benefits, colors available, etc. You want your potential customer to feel confident that they know enough about your product to purchase it, instead of going elsewhere.

6. Customer Support

Some sort of customer support needs to be available in case of any problems or questions. There are several different types of customer support, such as 800 numbers, email support, and online chat. Decide which is the best choice for your budget and type of business. Keep in mind to always be friendly and respond in a timely manner to resolve any issues to keep your customers happy.

7. Security and Privacy

Last but not least is security. Make sure you have an SSL certificate installed to encrypt data coming and going to the browser. Today every website, e-commerce or not, should have one. Also, have a transparent privacy policy that tells your customers how their information is used on your site and by your company.

An e-commerce site needs to not only pleasing to the eye but a stress-free shopping experience as well. By developing an online store that is easy to navigate along with a seamless checkout process on any device, you will retain your customers and expand your business by acquiring new ones.

When you read the following list of advantages of e-commerce for businesses and customers, you will get the sense that e-commerce is the holy grail of retail.

1. Overcome Geographical Limitations

If you have a physical store, you are limited by the geographical area that you can service. With an e-commerce website, the whole world is your playground. Additionally, the advent of m-commerce, i.e., e-commerce on mobile devices, has dissolved every remaining limitation of geography.

2. Gain New Customers with Search Engine Visibility

Physical retail is driven by branding and relationships. In addition to these two drivers, online retail is also driven by traffic from search engines. It is not unusual for customers to follow a link in search engine results and land on an e-commerce website that they have never heard of. This additional source of traffic can be the tipping point for some e-commerce businesses.

3. Lower Costs

One of the most tangible positives of e-commerce is the lowered cost. A part of these lowered costs could be passed on to customers in the form of discounted prices. Here are some of the ways that costs can be reduced with e-commerce:

• Advertising and marketing: Organic search engine traffic, pay-per-click, and social media traffic are some of the advertising channels that can be cost-effective.
• Personnel: The automation of checkout, billing, payments, inventory management, and other operational processes lowers the number of employees required to run an e-commerce setup.
• Real estate: This one is a no-brainer. An e-commerce merchant does not need a prominent physical location.

4. Locate the Product Quicker

It is no longer about pushing a shopping cart to the correct aisle or scouting for the desired product. On an e-commerce website, customers can click through intuitive navigation or use a search box to narrow down their product search immediately. Some websites remember customer preferences and shopping lists to facilitate repeat purchase.

5. Eliminate Travel Time and Cost

It is not unusual for customers to travel long distances to reach their preferred physical store. E-commerce allows them to visit the same store virtually, with just a few mouse clicks.

6. Provide Comparison Shopping

E-commerce facilitates comparison shopping. There are several online services that allow customers to browse multiple e-commerce merchants and find the best prices.

7. Enable Deals, Bargains, Coupons, and Group Buying

Though there are physical equivalents to deals, bargains, coupons, and group buying, online shopping makes it much more convenient. For instance, if a customer has a deep discount coupon for turkey at one physical store and toilet paper at another, she may find it infeasible to avail of both discounts. But the customer could do that online with a few mouse-clicks.

8. Provide Abundant Information

There are limitations to the amount of information that can be displayed in a physical store. It is difficult to equip employees to respond to customers who require information across product lines. E-commerce websites can make additional information easily available to customers. Most of this information is provided by vendors and does not cost anything to create or maintain.

9. Create Targeted Communication

Using the information that a customer provides in the registration form, and by placing cookies on the customer’s computer, an e-commerce merchant can access a lot of information about its customers. It, in turn, can be used to communicate relevant messages. An example: If you are searching for a certain product on Amazon.com, you will automatically be shown listings of other similar products. Also, Amazon.com may email you about related products.

10. Remain Open All the Time

Store timings are now 24/7/365. E-commerce websites can run all the time. From the merchant’s point of view, this increases the number of orders they receive. From the customer’s point of view, an “always open” store is more convenient.

11. Create Markets for Niche Products

Buyers and sellers of niche products can find it difficult to locate each other in the physical world. Online, it is only a matter of the customer searching for the product in a search engine. One example could be the purchase of obsolete parts. Instead of trashing older equipment for lack of spares, today we can locate parts online with great ease.

E-Commerce advantages can be broadly classified in three major categories:

• Advantages to Organizations
• Advantages to Consumers
• Advantages to Society

Advantages to Organizations

• Using e-commerce, organizations can expand their market to national and international markets with minimum capital investment. An organization can easily locate more customers, best suppliers, and suitable business partners across the globe.
• E-commerce helps organizations to reduce the cost to create process, distribute, retrieve and manage the paper based information by digitizing the information.
• E-commerce improves the brand image of the company.
• E-commerce helps organization to provide better customer services.
• E-commerce helps to simplify the business processes and makes them faster and efficient.
• E-commerce reduces the paper work.
• E-commerce increases the productivity of organizations. It supports “pull” type supply management. In “pull” type supply management, a business process starts when a request comes from a customer and it uses just-in-time manufacturing way.

Advantages to Customers

• It provides 24×7 support. Customers can enquire about a product or service and place orders anytime, anywhere from any location.
• E-commerce application provides users with more options and quicker delivery of products.
• E-commerce application provides users with more options to compare and select the cheaper and better options.
• A customer can put review comments about a product and can see what others are buying, or see the review comments of other customers before making a final purchase.
• E-commerce provides options of virtual auctions.
• It provides readily available information. A customer can see the relevant detailed information within seconds, rather than waiting for days or weeks.
• E-Commerce increases the competition among organizations and as a result, organizations provides substantial discounts to customers.

Advantages to Society

• Customers need not travel to shop a product, thus less traffic on road and low air pollution.
• E-commerce helps in reducing the cost of products, so less affluent people can also afford the products.
• E-commerce has enabled rural areas to access services and products, which are otherwise not available to them.
• E-commerce helps the government to deliver public services such as healthcare, education, social services at a reduced cost and in an improved manner.

Technological advancements have had a huge impact on the ecommerce world, transforming the way consumers connect with brands and empowering them to shop more cost effectively. Driven by the convenience of getting products delivered to your doorstep, ecommerce has now become an integral part of everyday life.

Strategic plans, competitive marketing, and a skilled workforce aside, ecommerce organizations are expected to remain up to date with the latest technologies. These technological advancements have enabled people to meet their purchasing needs with ease, and as a result, the ecommerce sector continues to go from strength to strength.

Ecommerce is faster than ever and customers can get anything at the click of a button, all thanks to the latest available technology. Now customers can track their orders, find the best deals and much more besides. With all this progress, new business opportunities are inevitably emerging.

1. Omni-channel presence/support

Modern shopping habits involve a process of cross-channel research, consideration, and purchase. Indeed the statistics show that 90% of customers expect smooth interactions across multiple channels and devices, highlighting the importance of omnichannel readiness for today’s businesses.

Making use of the right technology means providing customers with not only what they want when they want it, but where they want it too.

• Video Chat: Allows your business to interact face-to-face with customers creating a personalized, cross-channel, visually demonstrative and consultative experience.
• Cobrowsing: A visual engagement system bringing your agents and customers together on the same page, at the same time, allowing agents to seamlessly guide your customers through complex procedures.
• Screen Sharing: A method of interacting where your customers share their screen with your agents to effortlessly resolve difficulties filling forms, completing transactions, etc.
• Document Interaction: Provides a platform for your agents to interact with your customers’ documents safely and includes e-signature technologies for enhanced security.

These methods all help to ensure an interconnected customer journey all the way through to purchase.

2. Extensive personalization

“The customer journey is changing. Consumers want everything, and they want it immediately. Experience matters than anything else and the technology at our fingertips enable such amazing experiences, only desired in today’s fast-paced world.” :Sam Hurley

Personalization is the biggest trend in ecommerce right now. Consumers have come to expect a relevant shopping experience based on their personal preferences.

The statistics show more than 78% of customers ignore offers that aren’t personalized or based on their previous engagement with the brand. This shows just how important personalization in marketing and customer support has become.

Effective personalization comes from understanding customers’ preferences and behavior. Fortunately, technology has now evolved to provide precisely that level of insight. The potential impact of ecommerce technology on your company is huge. Nearly every user action online is captured and stored, creating a vast pool of information known as big data.

Artificial Intelligence (AI) and machine learning analytics drive customer behavior patterns, whilst simultaneously interpreting this data, meaning businesses are provided with a cycle of desires and expectations, creating endless possibilities.

Big data, machine learning, and AI have made personalization the norm, with businesses catering their support and services to reflect this.

3. The shift to mobile

Mobile platforms have increased in importance, so much so that m-commerce has emerged as a concept in its own right.

• Failing to provide a mobile-oriented shopping experience will lose your brand potential customers. Equipping yourself with mobile-friendly technology is therefore crucial in maximizing your chances of future success.
• Ecommerce mobile apps: Apps offer customers continuous engagement with your brand and the chance for your customers to familiarize themselves with new and relevant purchasing opportunities.
• Location-based marketing: Use your customers’ geographical whereabouts to market products relevant to their specific location.
• VR/AR guidance: Integrating VR and AR technologies provides an immersive mobile shopping experience for your customers, connecting them with your brand in a deeper and more meaningful way.
• Internet of Things (IoT): The IoT stems from the desire to better understand consumer trends across a range of connected devices. The scope it provides for delivering personalized mobile shopping experiences to your customers is almost limitless.

4. Conversational Marketing

Traditional marketing channels flow in only one direction. The new concept of conversational marketing has opened up two-way communication, creating numerous opportunities for ecommerce success.

Getting information directly from customers makes more sense than attempting to predict it. You can establish a personalized, real-time, one-on-one conversation on the back of this, safe in the knowledge you truly understand your customers’ needs.

Below are some of the most efficient technologies for nurturing customer conversations:

• Chatbots: Chatbots are excellent conversational marketing tools, capable of handling multiple conversations at any one time. They provide your customers with answers, drawing on knowledge pooled from multiple channels, whilst maintaining a consistent tone for your brand.
• Live chat: Live chat allows your support teams to communicate with customers through live messaging. You can initiate a preemptive chat invitation to particular customers based on their behavior.
• Mobile messaging: Smartphones are another way for your business to reach out to customers. With potential fatigue from the onslaught of promotional emails, talk with them through mobile messaging apps instead.

5. AI and chatbots for customer communications

Artificial Intelligence plays an important role in everyday life, having a major impact on how we live and work. There are several examples of AI and automation tools with customer service applications for your business, including voice-powered assistants such as Apple’s Siri, Google’s home and Amazon Echo. Research shows that 45% of millennials are already using this type of voice activated search for online shopping.

Chatbots and virtual assistants represent the future for businesses. Some are already integrating chatbots in their systems to improve their customers’ experience and boost brand image.

With the help of Chatbots you can order food, check in luggage at the airport, book a hotel room, schedule your flight, and get recommendations for almost anything you can think of. The Starbucks chatbot for example gives customers details regarding their order status, payment details etc.

6. Image search

Ecommerce businesses are integrating image search technology on their websites so customers can easily photograph products they are interested in and find similar examples on other sites that may be offering better deals.

Imagine someone sees a beautiful couch, but it costs too much for them. If your business offers similar products at a more reasonable price, integrating image search into your website will allow you to potentially pick up on this sale, creating an extra revenue stream.

7. Quick and easy checkout processes

Cart abandonment is the most frustrating reason for losing a sale because it means a user was considering buying your product, only to change their mind at the last minute. The latest data shows a 79.17% global rate of cart abandonment, highlighting how big a problem it is.

One of the main reasons customers abandon their carts is the checkout procedure itself. No matter how well the lead has been nurtured, inefficient checkout processes raise the chances your users will abandon their cart.

Therefore, if you want your ecommerce company to be successful, embrace technology that provides quick and efficient checkout solutions, such as:

• Speedy mobile payment solutions, including Apple Pay and Android Pay.
• Enabling your customers to save card details, streamlining repeat purchases.
• Providing one-page, hassle-free checkouts.
• Offering a range of payment options.

Equipped with this technology, your business can alleviate any potential difficulties customers may encounter at checkout.

Back in the day, you can sell just about anything and make crazy money.  Competition was minimal, technology wasn’t as affordable as it is now and access to product was limited.

Now, Amazon is a major competitor to everyone.  China is opening up to the world and technology is now affordable.

Here are the top 10 most common challenges faced by eCommerce businesses of all sizes.

1. Finding the right products to sell

Shopping cart platforms like Shopify have eliminated many barriers of entry.  Anyone can launch an online store within days and start selling all sorts of products.

Amazon is taking over the eCommerce world with their massive online product catalog.  Their marketplace and fulfillment services have enabled sellers from all over the world to easily reach paying customers.

Let’s not forget about Aliexpress. They’ve simplified product sourcing by giving access to Chinese manufacturers within a couple of clicks.

All of this has made it very difficult for retailers to source unique products unless you they decide to manufacture your own.

2. Attracting the perfect customer

Online shoppers don’t shop the same way as they used to back in the day.  They use Amazon to search for products (not just Google).  They ask for recommendations on Social Media. hey use their smartphones to read product reviews while in-store and pay for purchases using all sorts of payment methods.

Lots has changed including the way they consume content and communicate online. They get easily distracted with technology and social media.

Retailers must figure out where their audience is and how to attract them efficiently without killing their marketing budget.

3. Generating targeted traffic

Digital marketing channels are evolving. Retailers can no longer rely one type of channel to drive traffic to their online store.

They must effectively leverage SEO, PPC, email, social, display ads, retargeting, mobile, shopping engines and affiliates to help drive qualified traffic to their online store. They must be visible where their audience is paying attention.

4. Capturing quality leads

Online retailers are spending a significant amount of money driving traffic to their online store. With conversion rates ranging between 1% to 3%, they must put a lot of effort in generating leads in order to get the most out of their marketing efforts.

The money is in the list. Building an email subscribers list is key for long term success. Not only will help you communicate your message, but it will also allow you to prospect better using tools such as Facebook Custom Audiences.

Not all leads are created equally. Retailers must craft the right message for the right audience in order to convert them into leads with hopes of turning them into customers.

5. Nurturing the ideal prospects

Having a large email list is worthless if you’re not actively engaging with subscribers.

A small percentage of your email list will actually convert into paying customers. Nonetheless, retailers must always deliver value with their email marketing efforts.

Online retailers put a lot of focus on communicating product offering as well as promotions, but prospects need more than that.  Value and entertainment goes a long way but that requires more work.

6. Converting shoppers into paying customers

Driving quality traffic and nurturing leads is key if you want to close the sale.  At a certain point, you need to convert those leads in order to pay for your marketing campaigns.

Retailers must constantly optimize their efforts in converting both email leads as well as website visitors into customers.  Conversion optimization is a continuous process.

7. Retaining customers

Attracting new customers is more expensive than retaining the current ones you already have.

Retailers must implement tactics to help them get the most out of their customer base in increase customer lifetime value.

8. Achieving profitable long-term growth

Increasing sales is one way to grow the business but in the end, what matters most is profitability.

Online retailers must always find ways to cut inventory costs, improve marketing efficiency, reduce overhead, reduce shipping costs and control order returns.

9. Choosing the right technology & partners

Some online retailers may face growth challenges because their techonology is limiting them or they’ve hired the wrong partners/agencies to help them manage their projects.

Retailers wanting to achieve growth must be built on a good technology foundation. They must choose the right shopping cart solution, inventory management software, email software, CRM systems, analytics and so much more.

In addition, hiring the wrong partners or agencies to help you implement projects or oversee marketing campaigns may also limit your growth.  Online retailers must choose carefully who to work with.

10. Attracting and hiring the right people to make it all happen

Let’s face it, online retailers may have visions and aspirations but one true fact remains, they need the right people to help them carry out their desires.

Attracting the right talent is key in order to achieve desirable online growth. Also, having the right leader plays an even bigger role.

Retailers should be out there getting their name out within the online community by attending eCommerce conferences, speaking at events and networking. Employees want to work for companies that care about them and their future.  Having a sense of purpose is key.