Last year wasn’t easy for nearly everyone on the planet. Pandemic, lockdowns, uncertainty. But 2020 brought something that hasn’t happened in the past…online revolution. Now we work online, learn online, meet online…AND…what’s most important for eCommerce owners…we shop online.
Based on different research, the increase in online shopping from 2019 to 2020 was huge. Based on McKinsey research we experienced 10 years’ growth in 3 months. This is great information for all those with online stores. But with higher demand there is higher competition. Many big players bet on online shopping and with their budgets everything is a bit easier for them.
Based on Shopify report.
So how do you, since you’re not Walmart, approach eCommerce strategy in 2021? In this article I’ll try to help you with current challenges like increased competition, iOS 14, the increasing costs of advertising and a few others. Let’s dive into it.
Table of Contents
- Knowing your numbers
- Standing out from the growing competition
- Being omnichannel
- Improving retention to improve revenue
- Being fast and customer centric
1. Knowing Your Numbers
It’s 2021 already and many, and I mean many eCommerce store owners don’t know their basic numbers. Knowing your KPIs is the foundation to all your future actions in gathering and retaining your customers. What are the metrics you should know?
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Breakeven ROAS: This indicates the return on investment that you need to obtain with advertising campaigns in order to cover your costs and when, once exceeded, allows you to generate profit. The formula is straightforward: campaign revenue/cost of campaign.
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Lifetime value of your customer: This is a prognostication of the net profit contributed to the whole future relationship with a customer. It helps you to know how much you can spend on a growth phase to acquire new customers.
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Taxes: This is all the money you have to pay back to the government. It depends on the place where your business is registered and where you run your business. It can vary from 0% income tax in Dubai to 39% in Denmark.
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Fixed costs of running your business: Fixed costs are those expenditures that do not change based on sales. They are the set expenses the business has committed to that are not tied to production volume like rent/lease payments, mortgage, salaries, insurance, and other factors.
2. Standing Out From the Growing Competition
The boom in eCommerce boosted the competition…period. There are many big players entering online shopping but we all know many small brands that have overtaken markets (do you remember Dollar Shave Club?) How do small brands disrupt the market?
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Build relationships: It’s hard to build relationships when you’re Nike, so this works great for smaller brands. You, as an eCommerce business owner can contact your customers directly, through phone or email. With scale, it’s getting harder and harder, but you can try to automate this by using marketing automation software, great customer service, and an awesome post-purchase experience. Building relationships also means understanding your customers—their triggers, fears, desires—and this can reduce your cost per acquisition significantly.
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Brand Positioning: This is the term populated by Marty Marion, a positioning expert, and if you wonder what it is, I can you tell it’s one of the most important things very often ignored by many eCommerce owners. Those who can apply this correctly will win in the long term. Brand positioning (or positioning) is controlling how consumers perceive your brand, how they describe your brand to their friends, and how they “feel” about your brand. You want to influence this. You want to modify their beliefs, actions, and decisions in favor of your brand and away from your competition and competitors.
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Have a purpose: With growing competition, building a brand has never been so important and so tough, but it’s worth it. Based on research, consumers are more and more conscious about brand impact on the planet, so they are willing to pay premium for brands with a purpose. Although it’s not valid for all categories, it’s valid for most popular ones like beauty or fashion. People no longer buy your product only, they also buy your vision of the world. Your beliefs should represent their beliefs of the world. To be clear about your purpose you need to have this ‘human touch.’ Share your values not only through your marketing, but also through your website, packaging, and customer service, and remember to be authentic in doing so.
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Be sustainable: This is another thing which you, as an eCommerce owner can do much better than the big brands. Currently, shoppers want great quality products, fast shipping, and human customer service, but they also want brands to be sustainable and responsible. What’s interesting is that many clients will pay a premium for a product from the brand that is sustainable, which is great for all of us. You can apply this approach by listening to your customers, reducing your environmental impact, contributing to local communities, and using recyclable packaging.
3. Being Omnichannel
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Omnichannel marketing: This consists of using a mix of digital and traditional marketing channels to send relevant message to your potential customers. With the rising cost of advertising on all channels you need to use both owned and paid channels to acquire new customers, but also to retain past customers. Omnichannel marketing isn’t a new approach but it provides your customers a seamless shopping experience from the first time to the last time they see your brand. Each channel works together to build awareness of your brand and move customers down the funnel to purchase. If you look at your last purchase, you may see your first touchpoint with a brand happens in social media. Then the product is remarketed again when you want to take a closer look and make a purchase on your desktop. Thanks to this approach you have a greater chance to present your brand and product, build trust, and finally convert users into paying customers.
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Omnichannel experience: Omnichannel is a customer-centric experience. Imagine it like a universe. The sun is your customer, and all the planets are places where you can purchase your product. At the end of the day it doesn’t really matter when the purchase happens, but it does matter that it happens. The future of DTC brands is omnichannel. You want to be in every place where your potential customers are looking for your product or a product similar to yours. Being in a variety of marketplaces gives you the chance to present your brand to the people actively looking for your product, even while having less control over your relationship with the client. If your post-purchase experience is seamless it will bring them to your store the next time they want to make a purchase. Having presence in social media is great for building trust and building brand awareness on scale. Having Google Ads running is one of the easiest ways to get a purchase. People who are looking on Google for your product are 5 times more likely to purchase. And last, but not least, having a great email marketing campaign is the easiest and cheapest way to win customers back. For many many DTC brands, email marketing is the biggest revenue generator.
4. Improve Retention to Improve Revenue
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Retention becomes a top priority as acquisition costs rise: It’s rather certain that advertising costs won’t go down. With high competition, the number of ad placement CPMs is rising each year. As you constantly need “fresh blood” in your store, it’s actually more and more expensive to reach customers. That’s why taking care of your retention is one of the best moves you can make to generate more revenue. To make it, you have to know your customer’s journey really well. Why do they make a second (or third) purchase? What stops them from doing so? How much time does it take to make repeated purchases? Knowing the answers to these questions will help you tailor correct and timely messaging to accelerate those purchases. Knowing your customer’s journey is not the only thing that can improve retention. Another method is loyalty points which can increase repeated purchases significantly. Make collecting and using points as easy as possible and give points for everything: from purchases and subscriptions to newsletters and referrals.
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Due to big tech regulations, reaching new customers might get harder: Lawmakers and regulators across the world are fighting with big tech companies over access to personalized information, advanced tracking, and personalized marketing, which forces these companies to change their approach to advertising. In 2020 Apple announced ATT in iOS 14 which will impact all advertising channels. Google did the same by announcing phase cookie tracking in Chrome beginning in 2022. This is another thing which will make reaching new clients harder, and unfortunately much more expensive. That’s why having a long-term vision and a ready-to-go plan for retaining clients is so crucial.
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Accelerate retention if you can’t wait a lifetime for LTV: A lifetime is far too long to wait especially when you’re running an eCommerce business. As I mentioned before, LTV is a really important metric but you shouldn’t wait a lifetime to get LTV. That’s why you should know your customers—the way they purchase, why they purchase, and why they don’t. All this information is useful when you’re going to retain them. Imagine if you could speed up repeated purchases and you didn’t have to wait 6 months to get LTV. This gives you much better cash flow to operate and grow.
5. Be Fast and Customer Centric
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The foundation of customer retention is great customer service…period. Besides a good quality product and great purchase and post-purchase experience, customer service is responsible for bringing back around 30% of clients who wouldn’t purchase without proper assistance. Being there for customers whenever they need you will help you build a much stronger brand and will improve your conversion and retention rates. Based on the survey run in 2020, retention rates are usually around 10-50% better when customers can reach support and get answers to their objections immediately.
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Gather feedback and optimize on it: A customer’s feedback is one of the best things you can gather. It can help with such simple things like improving your website (based on reported issues) and product description (based on customer’s objections), to more advanced things like product improvement or post-purchase experience improvement. Work on each problem separately, and try to focus on the most important ones at the beginning. If you have a product market fit but your website doesn’t sell, ask people why they don’t purchase while visiting your website. You can use this information to improve the flow and product description in the creative part of your store. You can gather feedback using email marketing and pop-ups on your website (with Hotjar) or just by simply calling clients and asking them about the whole experience. This will teach you a lot!
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Offer AR & live customer support: AR is still something new and not adopted widely, but the first indications are that it has great impact on conversion rates and overall brand experience. Mostly used in the furniture and cosmetics industry, it’s slowly being adopted in more stores. Letting customers “test” how a sofa or a deck will look in their living room, or letting someone “test” a lipstick is a breakthrough in online shopping that literally breaks the wall of objections your website visitors may have. When applying AR, many brands see a great spike in conversion rates and lower return rates. Another breakthrough technology which is slowly adopting in online stores is live product presentation or consultation. This lets customers ask questions (it helps to go over their objections), and also presents a product in real life, under every angle. It’s also a great technology which will boost conversion rates and drop return rates as people will be more aware of what they are buying, how it looks, and how it works.
6. Summary
Running an eCommerce store has never been easier…and harder. On one hand you have increasing demand due to changes in people’s behavior, but on the other hand you have increased competition. I hope, thanks to this article, you will start digging more and most importantly, start implementing more of the solutions I mentioned in these 5 points. Knowing your numbers will let you plan how much you can spend and how much you need to earn. Being creative and customer centric will help you to stand out from the competition and make people fall in love with your brand. Improving retention and adopting new technologies will help you bring back past customers and improve conversion rates, which will help you to get stable cash flow to grow and scale your business.
