7 habits of highly effective online retailer

Ecommerce is the way future of shopping is going to be.  A Forrester reports (Forrester research : US online retail sales, 2008-2013) that by next year close to $230 billion worth of stuff will be sold through 2013 in US alone (not including travel, auto). In India this get pegged at closer to a billion, but growing rapidly, in just last three years close to 360 online retailers have sprouted up. But this pales in comparison to almost half a million ecommerce stores that are there in a market like US.  Another research points out that 81% of internet users research products online. This research further influences 40% of offline sales. So as such e-commerce is going to be an important part any retail strategy.

From a consumer’s perspective, it’s even more compelling, he can shop from anywhere, anytime and store timings don’t matter. Further, stuff like 30 day return policy and payment on delivery are just sweetening the deal.

But building a sustainable ecommerce business requires more than just enthusiastic VCs or customers. It’s about paying close attention to how business needs to be run. So these 7 habits are worth following on,

1. Tracking customer life cycle value

While low cost of setting up ecommerce stores, lowers the capital required to start an ecommerce stores. It also lowers the barrier to entry, meaning there can be many retailers fighting for the same set of customers. As such cost of customer acquisition online remains quite high. In Indian scenario, this gets pegged around btw 750-1200 INR. So if you have online store that is not able to pare this cost into atleast 15 transactions from the same customer than you are actually blowing money that is not going to come back. So its critical to track your per customer acquisition cost, operation costs and also retaining cost. And see which one is critical to your category and focus on making sure that you have a way to track and drive life cycle value higher. It takes time to build it, but if you are focused on it, you will arrive there.

2. Build and focus on core value proposition

There are great stories on how great entrepreneurs are able to build scale and value while focusing on their core value proposition. Take a look at how succeeded and built a business worth $16 mn, completely bootstrapped. So there is clearly a future even in not trying to be Amazon. In-fact there can be only one Amazon, but there will be half a million others, who will be building viable businesses focusing on their core value proposition. There is a reason why a customer remembers your site and visits it often, don’t destroy that reason by adding too many “me too” categories. Always remember, the biggest cost in ecommerce is not marketing or customer service, but inventory.

 3. Choosing your play wisely

You can choose your site to focus on various points of customer value chain, you can be best in

a. Helping customer choose their best need to product fit, or

b. You can be best in super quick ordering process, or

c. You can be best in delivering it in shortest time to consumer.

Great niche ecommerce retailers chose their play. So may be Amazon or Flipkart is a winner in order delivery or may be all three, but you can choose to be a winner in others, based on your funding capability, your category and also your customers.  And your play will determine if you are able to drive differentiation to survive.

4. Focus on engagement rather than on just traffic acquisition

Great retailers whether physical or online thrive on engagement. A case in point is Apple stores, where focus on engagement ensures that they have highest number of salesperson per visitor. And they also have the most sales per sq. foot of any store. Great sales guys can look like costs, but they are the reason, people will buy stuff and keep coming back. For all the technology combined, can’t replace the human need of reassurance while buying stuff.

You can deploy online chat, and make it proactive without making it intrusive and you will see your order value rise. Look beyond just bringing traffic in. Look at bringing more engagement during need to product fit, during buying process and even further, post sales. More engagement means higher sales. If your margins don’t permit, you can focus live chat on categories that have margins.

5. Use analytics to track what visitors aren’t saying

One of the benefits that you have as an online retailer that it’s fairly easy to track the footprints of visitors across your wares and even figure out why they are buying something or why they are not buying something. You can tweak Google analytics to get at least basic idea about it, but if you are looking at getting more value of this analytics, invest beyond in tools like omniture or build your own, if you can afford it. It might look like cost, but it is worth the effort, as it provides a great feedback channel to your products, categories and even promotions.

6. Integrating marketing with sales

Gone are the days, when you would run a TV ad and then wait for people to flock your physical stores. Now, you can put up a social media or Google Adwords campaign and you will see visitor’s streams clicking on those ads and flocking in almost in an instant. So while you are focusing your efforts on online marketing and some lucky ones(with enough help from backers) on IPL ads, integrating sales will yield you exponential returns by getting more juice out of marketing. So it is beyond just creating a simple landing page and grabbing his email id at the first instant. It is about how you are able to get his intent, and match that intent with the stuff you have on your store, and how convenient you make it for him to buy that stuff from you. How much hand holding you can provide to the customers, it can be form of reviews, it can be systems like live chat or a process like express shopping. It may look like costs upfront, but you will be amazed how much sales you will drive through.

7. Baking recommendations in buying cycle

Recent report on “Digitalshoppingrelevancy” released by Capgemini, talks about how more than 73% of shoppers are interested in personalized recommendations while they shop. Which bring into point that Achilles heel of online store remains the need to product fitment. So if you can help a customer which is buying laptop to also buy the accessories (which might have higher margins for you), which will complete his experience when he uses the product, he would not only love you, but will make sure that he comes back next time.

The more personalized and more closely your recommendations are linked to what’s in the cart, higher will be the chances that you can raise your order value.

While these 7 attributes are above and beyond the basics of online retailing, these are the ones that will separate the winners from losers.

(Umakant is a passionate thinker, entrepreneur and futurist. He worked across technology, consulting, sales and strategy in retail, finance and telecom vertical with one of the leading IT services company. Alumnus of IIT Kanpur, he is currently the CEO of vimagino, the builder of vHelp ( the next generation of live chat.   His linkedin profile is can be viewed from here)

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  1. 1

    Although largely the article speaks the generic stuff, what I find interesting is the mention of marketing. Just the way creating ads does not work for a physical store business, it does not work for retail businesses as well.

    Focused understanding of consumer mindset, crafting a value proposition that is in sync with your business, and then communicating that to your customers/potential customers is what will distinguish an effective e-tailer from run-of-the-mill e-tailers.

    There is something that calls for intense thinking here.

  2. 2

    Great article Umakant. Thanks for sharing.

    How did you come up with 15 transactions number? This number will be different for each ecommerce site depending on the margins it generates. INR750 could be completely justified for a single transaction for a site with high margin and for low margin sites even 20 transactions wouldn’t justify. Just my two cents 🙂

    • 3

      Hi Hadi,

      15 number is there based on the general margins that typical ecommerc retailers enjoy in India. Obviously niche vendors with a very differentiated product or unique brand may be able to generate higher, in that case it can go lower, but not much. But the point I am making is that until, you are able to make him come back on your site 10 times or more, there is no business to be had, beyond the VC money.
      May be I sound harsh, but the world is filled with ecommerce ghost towns, where no one goes now, once the money ran out. So if you are running an online business, and spending money on ads, make sure that you design the customer experience in a way that hooks him.

      Cheers and best of luck,

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    Excellent stuff…..just need to know one thing… point 1 is there a timeline for 15 transactions. I feel 15 transactions is too high and even a super heavy online spender (whose number is obviously very less) would be able to do that many number of transactions in an year. In India there are too many light spenders….. and as per BCG it takes almost 4 years for light spender to convert into heavy spender. So these 15 transactions might take 2-3 years as well…….

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    Good points. But 5th habit is hard to implement and pursue. But may be thats what separate men from the boys. Although I think in India, people are just finishing the basics, may be top 5 are thinking about these 7.

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