How to achieve e-commerce success
Extra-terrestrial missions are unlikely to feature on strategic plans for most ecommerce companies, but news that Amazon’s founder plans deliveries to the moon are a reminder of the relentless pressure to innovate, win new customers and conquer new frontiers.
The prize for those that create valuable ecommerce brands by growing market share, outmaneuvering rivals and launching successfully in new territories can be substantial. By 2020 worldwide retail ecommerce sales are forecast to exceed $4 trillion, according to eMarketer, and the ecommerce element of total retail spend is forecast to climb from 8.7% to 14.6%.
Corporates have demonstrated they will pay lofty prices to acquire ecommerce leaders. The attractions include acquiring new customers, bringing on board online expertise and revitalising multi-channel sales.
Recent billion dollar plus deals include Walmart’s $3.3 billion acquisition of jet.com, Unilever’s $1 billion purchase of online razor business Dollar Shave Club, and Ctrip’s acquisition of SEP backed global travel search business Skyscanner for approximately £1.4 billion. Before buying jet.com, Walmart’s online sales growth had declined for five straight quarters: the deal turned that around.
Becoming an ecommerce leader
There is no cookie-cutter formula to guarantee success for ecommerce businesses – largely because of the diversity of ecommerce activity which spans marketplaces such as Etsy, on-demand firms like Deliveroo, services companies such as Uber or Babbel (online language learning) and those selling physical products such as luxury fashion retailer Matchesfashion.com (the latter two are SEP portfolio companies).
Growth strategies can vary but over two decades of investing, we have identified some key factors which can help an ecommerce business to scale successfully.
Logistics & fulfillment
If you ship physical products, invest in superior systems to track shipments and consider optimum locations for warehousing as you expand. Even if your product is top class, your brand and ultimately your business are at risk if you fail to provide first class service. You can do it in-house or select specialist partners. Online shoe retailer Zappos purposely built its headquarters next to Federal Express to facilitate overnight deliveries.
Ecommerce leaders are as much technology firms as retailers – Matchesfashion.com is as savvy about technology as it is about fashion. We helped it transform from traditional retailer to fully integrated global omni-channel business and it is now an online fashion heavyweight shipping to 176 countries.
Be all over your business metrics. The cost of acquiring customers is fundamental, along with lifetime value of a customer. Strategies to acquire customers vary and can include channel partners, referrals, social media, advertising and search engine marketing. The latter can be complex as algorithms change frequently so invest in data analysis to optimise your spend.
Innovative low-budget ad campaigns can gain major traction if they resonate with your customer demographic. Dollar Shave Club acquired 12,000 new customers in 48 hours when a humorous ad went viral – it only cost $4,500 to make. You need to strike the right balance between the cost of campaigns and quality and quantity of customers they attract.
Understand your customer
Gain an in-depth understanding of what appeals to your customers, why they buy certain items or why they don’t complete a purchase. Factors can include product range, price and the customer journey. Building an engaged customer community can boost sales and loyalty and detailed customer profiling can be highly beneficial. Human media is more relevant than ever: likes, shares and trends on social media can help build or break a brand.
Hackers are a serious risk to commerce companies. Threats can be internal or external and keeping customer data safe is of paramount importance. In addition to reputational damage and loss of revenues, there is a growing risk of customer class actions against companies who have not taken adequate steps to protect customer data against a cyber-attack. A recent study found the average consolidated total cost of a data breach is $4 million but it can be higher if you lose customers’ trust. TalkTalk admitted last year to losing £60m and over 100,000 customers following its high-profile hack.
If you invest sensibly in the talent and infrastructure needed to scale up and take a disciplined approach to prioritising new markets, rapid progress is achievable. SportPursuit which holds flash sales of branded sports and outdoor gear has made major strides towards becoming the pan-European leader in the premium sports clearance market. It now has more than two million ‘members’ in 40 countries and international sales have grown substantially over the last year. Regional logistics hubs and local language sites can ease expansion into new territories.
Sharing knowledge is invaluable for entrepreneurs managing rapid growth so learn from networking with companies that have been on similar journeys. An investor with a like-minded portfolio will help you do that. The right strategy and a supportive backer can ensure your ecommerce business stays grounded but on an upward trajectory.