So what are the ever awaited conclusions of the craziest year in eCommerce?
Whatever the answer is, you better get ready for Q1 2021. Or let your competitors do it first…
We’ve prepared the key conclusions of 2020 and predictions for the 2021 eCommerce market for you.
Use them to craft a bulletproof 2021 strategy that will secure your business and let you scale it big time.
All of the learnings are based on $30,000,000 of agency marketing revenue in 2020, across 25 different eCom businesses, and more than 40 marketing industry experts that work in SalesGenomics.
You can never predict the Black Swans and which side you’ll land on COVID hit and despite its undeniable tragedy, it turned out it was the best thing that could happen to eCommerce.
And we happened to be on the right side of the crisis and most of our partners had their most profitable months ever at that time. But no one would have predicted that. We might as well have gone out of business. There’s two lessons we drew from this:
- Always have a backup. What would your plan B be if you lost it all today? Have you stacked up on enough cash to survive at least 3 months with no income? You might have a different approach to risk, but to me no business opportunity justifies reducing your savings below a 3 month expenses level.
- Change is opportunity. At first when COVID came, we thought we would be hurt badly, so we optimised our cost structure, trimmed the fat and reduced excess team capacity.
Timing is key
When the pandemic hit, we decided to try something different than the agency model and launch our own mask store. Transferring our marketing knowledge onto our own product proved very successful and we made $1.6mln in 56 days.
Then our results started getting bad, our Facebook account kept getting banned and competitors creeped in, so we decided the payouts were not worth the logistical effort anymore.
This experience made me realise that finding a business or product idea that’s right for a given moment is probably even more important than your marketing skills. A great product at the right time with average marketing will always beat an average product or a product launched too late even with best marketing skills.
It’s ok to launch a me-too product if you just want to hit 7 figures. Just pick a niche that’s broad enough.
But, if you want to make 8 figures, launch a product that’s first in your category. Or create a new category and be the first there. Or launch it via channels unexplored by my competitors.
Great book on the topic: 22 Immutable Laws of Marketing.
Make price irrelevant
Plenty of businesses that come to us entered an existing market and captured some share of it, but without a clear unique advantage, scaling beyond 7 figures is hard.
Because if you’re trying to compete with other brands that look the same, you’ll end up in a price war down to the bottom.
In fact if you want to dominate a market, you need to be able to charge more than anyone else can. And get away with it.
Here’s what few people know: YOU DON’T NECESSARILY NEED A BETTER PRODUCT to charge more. Because marketing is a game of perceptions, not products. You just need to get into the mind of your customers first or leave a stronger emotional memory than your competition.
There’s more than one way to do it. A few examples:
- Reposition your product for a different market segment (e.g. fitness product for sports fans -> make it a solution to back pain for regular home office workers). This way you’ll be the first and can position yourself as “the original”.
- Curve your own market by educating new unaware customers through advertorials. One of our own stores scaled from 0 to $120k per month in 2 months using this strategy.
- Dominate an acquisition channel where your competitors are weak. Most companies still only focus on Facebook ads. Why not build a brand based on strong influencer marketing, or Native ads, or Snapchat ads, or YouTube ads?
- Really nail the creative game. Grab attention with shock, connect, educate, use plenty of social proof better than your competition. Video is the name of the game. Get better at conceptualising and analysing your creative tests on a meta level: what pain points, or desires or objectives am I hitting in my ads and how these ads’ results compare to the other ads hitting a different angle. Very few people have good systems for analysing creatives this way
- Expand to countries with less competition. Logistics, legal and language barriers will play in your favor. If you’re going against a big competitor that’s focused on the US market, the chances are they’ll put very little attention to small EU markets. This is your opportunity.
Work your LTV or run to diversify channels
There is a thing called GOLDEN RATIO in marketing.
This golden ratio is LTV/CPM.
To be profitable, your LTV needs to be greater than your Cost of Acquisition.
A given niche and country and ad platform will have a particular average CPM.
Assuming an average conversion rate of 2% and CTR of 1%, your business needs to hit a minimum LTV of 5x CPM or LTV will be lower than CAC and you won’t be able to profit on this market.
That’s a heuristic I’m using now when assessing new business ideas or planning whether a business can enter a particular country with their current numbers.
CPMs on Facebook grow, and LTV needs to keep growing as well.
This means, only the businesses that innovate constantly on increasing their LTV by expanding product ranges or building subscription models into their businesses will thrive on Facebook soon, just like only super expensive SaaS products can advertise on LinkedIn now.
This gradual CPM increase (which is a natural thing happening to all platforms over time as more companies start advertising) also forces brands to search for cheaper acquisition channels.
This is why we’ve built an R&D team and we test Snapchat, YouTube, TikTok ads (and planning to test Hulu ads too next year).
This leads us to…
DIVERSIFY YOUR TRAFFIC CHANNELS
Doing omnichannel marketing is something most brands hesitate to do, because of the complexity it brings. However, even if they do start it, they usually do it wrong. Their channels are not connected with one another, the campaign structures have no logic in them, and tracking is imperfect, so no data-based decisions can be made.
You need to target your customers where they’re at, and look for the ones that are in your target audience, but are not on the platform you currently advertise on. It may also be the case that one channel is good for getting people to interact with your brand for the first time, but another channel is better for making them buy from you. If you want to stay effective, you need to have these things figured out.
FOCUS ON VIDEO-FIRST EXPERIENCE
This is something we’ve been talking about for months now, and this is why SalesGenomics has established a production house. Everything goes to video.
On one hand, video-oriented platforms, such as TikTok and YouTube have become more and more like shopping platforms, and the other platforms such as AliExpress and Amazon are turning more and more to video. The same is true for Facebook and Instagram.
Literally every major player bets on video-first experience and that means that if you want to win the market, you should think about how you can test and reiterate your offer AND creative as quickly as possible, while ensuring the highest quality possible.
Think about how you can outdo your competition on the creative side, because this is what will differentiate your brand and bring you the $ you’re looking for.
Ideally, you’ll have both in-house teams to record UGC like videos, plus a production house contract to produce high-end TV-like ads.
If your product has enough wide-market appeal, you should test TV ads, too.
What we are also noticing?
MORE INTERNET USERS ENTERING THE MARKET
On one hand, platforms like TikTok are attracting more and more young internet users, whose purchasing power, although low, increases every year.
It is important to keep an eye on these users, and especially their interaction habits, as they’ll slowly become an increasingly important market segment.
On the other hand, the pandemic has forced many new users to use technology. For example, people over 60 who live in the US tend to use online shopping quite a lot, however, this isn’t the case for many European countries, not to mention emerging markets.
Not only are there a lot more people over 60 who shop online, but their buying habits are changing. People are less and less afraid of online payments, and there are a decreasing number of payments by collection.
This means many European and emerging markets are becoming increasingly interested in US-based eCommerce businesses, which may be an interesting growth and revenue diversification venue.
INTEGRATED SHOPPING EXPERIENCE
As mentioned earlier, platforms are introducing their own versions of the shopping experience.
We’ve heard rumors about YouTube letting some creators sell products directly on the platform, potentially in partnership with Shopify.
Instagram has introduced shopping for good, and TikTok is working on the same.
Even Facebook is planning on introducing Shopify-like stores on the platform, which will improve tracking and customer data collection massively, by the way.
If you are one of the early adopters, you can try and utilize these channels to gain a bigger share of the market.
Yet again, big players are driving the change. We’re used to Insta and YouTube influencers collaborating with brands to sell their products, but what’s new is so-called livestreamed shopping.
The way it works is that Influencers promote products on the live stream, which comes out as a mix of entertainment TV and TV shopping channels.
TikTok was the first platform to introduce it, but another big player, Alibaba, followed immediately by introducing a similar feature in AliExpress.
We expect that collaboration between brands and influencers will continue to rise, while the landscape of collaboration will keep evolving throughout 2021. Therefore, it is hard to provide any recommendations here, but looking over the trend may be a good idea.
The eCommerce market is evolving in an expected direction. The most important keywords for 2021 are professionalization, brand, complexity, and creativity.
Companies that will be able to handle increased complexity will be rewarded with more sustainable growth, while the ones that are effective in quick-test iteration for their offers and creatives will scale fast.
Those who won’t implement effective procedures will struggle.
P.S. Along with the new year we opened our doors again. And now we are looking for 1-2 new businesses that we can focus on and help scale. If you would like to talk about potential partnership, you can book a Free Discovery Session with one of our strategists here who will assess if we are the
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