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Moving Online: Developing Your E-Commerce Business

Learning a New Language to Grow Your E-Commerce Business

Moving online for those of us used to operating in-store is a bit like learning a new language. Not only are the words different, but there are all kinds of cultural connotations and phrases with meaning. All of which we need to learn as we grow our e-commerce business.  Translating is required, proper translation.  My experience on marketplaces (specifically Amazon) taught me to speak the following language:

Why is it Different?

The code switch you need to make when is the difference between penetration and traffic.  Penetration assumes you are looking for a percentage of a fixed pie. However, thinking about traffic makes you think about an absolute number.  This is the biggest difference between an in-store environment and a marketplace. You go from competing for a percentage of the shoppers that the retailer has convinced to come to their store to convincing consumers to come to your store (for store read your e-commerce business’ landing page or product detail page).

Once you realise it’s not about competing for a piece of a pie but creating a whole new pie you’ll get the idea.

E-commerce business, Image of a whole pie

Useful Definitions

The following definitions will help clarify the terms that are often bounded around when discussing online businesses:

Spend

Basket spend per transaction, defined by the number of units x average price per unit.  This is the foundation of your e-commerce business.  If you don’t have a grip on your profitability and average spend there’s no point in looking at traffic or conversion. Simply put, you don’t have a viable business.  Changes in spend are important to monitor and understand.

Conversion

This is the measure of the % of people who arrive on your website who also purchase a product.

Traffic

The number of visits to your website (not necessarily unique visits).  Sometimes called “pageviews”.

 

Building Your E-Commerce Business Pie

As you build your e-commerce business, your strategy will revolve around taking actions to improve conversion and traffic while maintaining and monitoring spend.  Always start with spend; What is it now? Is it viable for you and the retailer? What is your profitability?

Conversion improvement focuses on two strings: Content and Promotions. By making changes to basket spend (e.g. lowering minimum basket spend, reducing shipping costs with higher basket spend, proving promotions and voucher etc.) you would look to reduce cart abandonment scores and long dwell-time no conversion scenarios.  Moreover, by improving content quality (images, descriptions, videos, reviews) you would look to improve dwell time and bounce rates.  Conversion improvement iterates around these key areas continuously through the growth cycle.

Key metrics to focus on are initially absolute conversion %; Cart abandonment rate; later Bounce rate; Average Cost of Sale (ACOS); and content-specific measures: number of reviews; average review rating; images per product; A+ content coverage (Amazon-specific); videos.

Developing the Strategy

Once improved, the strategy would move on to increasing the e-commerce business’ traffic.  Initially, traffic improvement is via organic methods. By understanding which metrics are “rewarded” by algorithms and by the inclusion of organic search terms in content.  Later, the strategy would move to paid and unpaid methods of increasing brand awareness within the target market.  Once at that stage use of social media, influencers, content creation and advertising strategies should be integrated.

Key metrics at this stage are traffic/pageviews; organic search rank; later SOV in search; likes; views; shares; etc. depending on traffic strategy.

At all times the impact on spend measures is key to ensuring a sustainable business model. So, keep an eye on those KPIs: Average Order Size; Average Order Profit; ASP.

As you develop and scale your e-commerce business you will need to keep iterating through these three levers. Change the spend through a promotion, what does it do to conversion? Does traffic increase organically when I do that? What does that do to my overall P&L? Do I drive traffic? How is that changing my conversion rates? And what has that done to my holistic P&L?

The Helix of Growth

I think of it as a constant helix of growth. Always start with spend. Then work up and down through conversion to traffic. Then back down to conversion and spend, constantly growing and maintaining my e-commerce business performance.


For further tips and information, you can take a look at our Ultimate Guide to Category Management and our Category Management YouTube Channel. Also, check out our award-winning blog to see more Category Management tips and articles.

Kate Tilbury

About Kate Tilbury

Having spent over 15 years working in Supply Chain, Account and Category Management, Kate is currently plying her Category expertise as director of Tilbury Ltd. Her Category Management knowledge and expertise spans multiple industries and platforms, with experience of working in leadership roles for Unilever, Johnson & Johnson, Somerfield & Co-Op, and Tesco.

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