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The marketplace has been a very influential social and economic construct for a very, very long time.
It has been a central concept to commerce all over the world since the dawn of man kind. In time, the marketplace has been refined and evolved to include ever more complex structures. During the past century it morphed from temporarily trade gatherings to large permanent structures such as shopping malls and eventually it evolved into what we now know as the online marketplace.
Ebay, Alibaba, Etsy, Amazon and others have one thing in common – they get sellers and buyers in one place. These online marketplaces are fueled by a business model that has seen a steep increase and proved excellent in the past years. But now, it's time for the next step:
I believe the times they are a-changin', like Dylan would chant. The Online Marketplace is not enough any more. The markets demand something more.
That something is the Functional Online Marketplace, a virtual hub that combines the features of a marketplace (buyers and sellers, reputation management, transaction handling) with functions that improve the lives of either sellers or buyers.
The Functional Online Marketplace goes beyond just letting sellers and buyers trade. It helps the seller run its business better and the buyer benefit more from the product purchased.
And some of the biggest tech companies we know have created this type of Functional Marketplaces. We've used them and most customers love them. We just didn't put a name on it. Have a look at some examples:
Steve Jobs envisioned the PC as a digital hub, a central unit that connects the user's digital activity. From email to web surfing, from music to pictures and more. It than proceeded to create this vision and along the way he built much more.
By launching the iPod and than the iPhone, Apple moved the digital hub inside the consumer's pocket. With such a valuable real-estate in the reach they've had to build a system that shipped music, video and applications from third parties to these devices.
The iTunes Store and the AppStore were born. Apple built the platform to consume apps, the place where customers could download these apps, empowered developers to build these apps but did something else too.
It built Xcode (the development tool for iOS developers), it launched Objective C and than Swift (the programming languages used to build apps) and helped developers create useful apps.
Apple went beyond the marketplace paradigm. Yes, it allowed media and software consumers to meet developers but it also created the platform where they could be consumed and the tools to build them. It built an extraordinarily effective Functional Marketplace.
But Apple is not the only one …
Uber is an extraordinary successful company that connects freelance drivers to those in need of their services. It connects buyers to sellers. It is technically a digital marketplace. And more.
First of all Uber empowered a set of freelancers that didn't know they've actually had a market. The driver app allows drivers to see potential riders and provides GPS-linked functionality inside a simple mobile device.
The functional side of Uber not only improves the way sellers (drivers) provide their services but actually it makes it possible.
For customers, the app makes hailing a driver an easy task, it allows direct payment on mobile phone and brings the comfort previously unattainable. The functional marketplace at its best.
Google is many things. Search giant, mail provider, mobile os developer and robot builder among others. But at its core, the business model is quite simple: Get people to pay for ads. Show ads to customers. Make people click on said ads.
Google ads revenue (billion $). Source
Advertising accounts for 89.5% of Google's total revenue so it's safe to say that ads are its bread and butter.
To achieve these levels of revenue Google has to place together "The Sellers" (Advertisers) and "The Buyers" (Customers clicking on ads). Though customers don't technically buy on Google, those that generate the company's revenue end up as leads or buyers on advertisers' websites.
To do this, Google built its ad market on top of its primarily function: Search. Users searching for information of interest are effectively buyers in the Google functional marketplace.
The marketplace, therefore provides functional support to buyers. The search, Gmail, Android – are all basically functions that lock in the ad-clicker and in turn generate revenue through these types of transactions.
These are just three functional marketplaces examples but they illustrate the concept. To be successful, a newly established marketplace has to provide more than just a connection between buyers and sellers. It needs to provide function beyond the commercial. By improving the lives of buyers and sellers beyond the commercial, Functional Marketplaces provide the type of lock-in and effectiveness previous models don't.
Here we are. The fifth and final part of the guide to starting your online store. It's been a fun ride for me and I hope it hase been fun and informative for you. Before we dive right in, let's take a moment and go through a quick recap of the steps we've covered so far.
As you remember, Part 1 covered planning and finding the right business model. Part 2 was focused on registering your business, finding and negotiating with suppliers. Fulfillment operations and making your back office work were the main subject of our third part and last week we've covered branding, ecommerce software and content in part 4.
Now … it's marketing and sales time!
During this section of the guide you'll discover how to expand your reach through additional sales channels, market your brand and products and finally – how to test the main areas in your online store.
So let's go ahead and have a look at…
First of all – what is a sales channel? The answer is quite simple: any method of getting products to the market so customers can purchase them. For example, your online store (the actual web store) is a sales channel. It showcases products, it tells their price and allows customers to purchase these products.
Let's assume that by now you have already started your online shop. The web store is up and running and customers start showing up. But the web store should not be your only sales channel. Your customers are complex and their habits diverse. One day they're browsing your store, the next they're hanging out on Facebook and meanwhile they search product info on their mobile phone. You should be there also.
You could have your products lined up in a Facebook store. You could build a mobile app that engages customers outside your store and collects orders.
It's not just online, either. Offline engagement shouldn't be a taboo either. Maybe a brick and mortar showroom for your main products is not cost – effective. But you could set up a pop-up shop occasionally.
There are numerous ways you can add sales channels to increase your market reach and some are really easy to set up. Others are a bit more complicated but in the end it's mostly about your product, your brand and of course your budget. Let's see which are the most popular sales channels and how you could benefit from them.
Out of all the sales channels you may choose, one really complements the online store. The call center can be a simple line you for customers to demand information on products.
(Zappos' call center is legendary and effective. It's both a sales and suppor channel.)
It can just as well be a full fledged call center with operators answering calls and helping customer choose the right product, handling orders and managing complaints. It can also mean people calling prospects or indecisive potential customers or just plain cold calling sales leads. No matter the choices you will be making, the phone is a great connection to the customer and you should build a smooth phone support operation.
You could ask – isn't social media more about marketing and communication, connecting and understanding your customer? Yes it is but it can work just as great as a sales channel.
For example – Twitter is testing purchase options (right now with just a few high profile retailers such as Amazon) and ways to drive targeted traffic to stores through offers. Pinterest is also testing options to drive targeted customers to your online store and they do that through their ads. That is great news as Pinterest is more efficient into turning views to sales than any other social network. It works awesome for industries such as travel, home-deco and fashion.
And let's not forget Facebook. Being the largest social network in the world it is a place you should be digging into. For a while, the network was so popular with retailers that a term was coined to split Facebook commerce from everything else: f-commerce. Recently, the company lead by Mark Zuckerberg has focused more on advertising revenues than helping retailers get close to their customers but it is a great channel to study, nevertheless.
There are some companies that will make selling on Facebook as easy as it gets. And if a Facebook store may look like a great option for your store, this involves apps connecting your store to Facebook.
(Shopify, among others, built options for users to connect their stores to their fan pages and sell directly on Facebook.)
On the previous chapter we've discussed the most popular ecommerce software choices. Turns out most of them get some sort of support for a Facebook store by third party apps. Here are some of them:
There you have it – these applications are easy to set up and you can start selling directly on Facebook thus adding a new sales channel. And once you start adding sales channels, you now you have to look into …
What is the device you think customers use the most throughout the day? It's the smartphone. Mobile usage has gone through the roof lately and its bound to continue.
(Number of smartphone users in the US (millions). Source)
So you want to be close to your customers. Mobile apps provide a special sales channel, one that's personal and it makes impulse buying all the more attractive.
How do you add a mobile sales channel?
There's an app for that. Actually more:
Give mobile apps for your store a try. The more smartphones become a part of our daily lives, the more we will use them. Your store can benefit from users that are not strapped to their desktop or notebook. And speaking of that, a great way to interact with customers are the …
Pop up shops are temporarily stores, in the real world, where online store owners can showcase their products and interact with their customers. The pop-up shop sales channel has really taken off recently and store owners have started adopting this online-offline connection.
(Adidas pop-up shop. Not exactly low-budget but hey – one can dream, right?)
Setting up a pop-up shop is a personal choice but works great if it's posted either in a high-traffic area (such as a popular shopping center) or at an industry event. For example you could set up a pop-up shop at a home-deco event if you are a store selling home decorations. It is a great way to interact with customers and get feedback on your merchandise.
Companies such as Storefront help shop owners find retail space temporarily by connecting them with retail space owners. To help online stores they've put together an ebook that is free for download. I encourage you to have a look at it as it explains the main steps in setting up (pup-up) shop.
Last but definitely not least – the marketplaces. Amazon, Ebay, Etsy, Sears, Buy.Com, NewEgg.com and more. You name them. They provide lots of options to lots of users and chances are your next customers are there shopping right now.
( Ebay – the original online marketplace )
The reason marketplaces are the last on potential sales channels is because I want to emphasize just how important they are. Just like the "old" shopping centers, customers go to marketplaces because diversity means options and options mean they can find what they are looking for.
Diversity drives customers. It drives sales. So you want to be there but plan ahead before you dive in.
As an online store start-up you should be looking for as much exposure as you can get but still try to focus on the right marketplace. Amazon and Ebay are the obvious choice but before you join them you have to ask yourself:
Listing your products on all marketplaces can seem like the right choice but it's usually not. Each marketplace is a sales channel itself. You should be sticking to those that work for you and improve your experience there. Until your business is large enough to allow you to handle orders from more marketplaces, focus on fulfilling orders effective and quickly.
Most marketplaces offer some form of integration with your existing store and you should use those. Product information should be going out of your online store and orders should be synced with your order management system. This way, the order management team can have a single point of entry for orders instead of getting lost in a dozen of order management systems scattered throughout the marketplaces you are using.
Marketplace orders will continue to be a large part of your business. So large that they will, in the future, dwarf those from your online store. The reason is people tend to gather and shop where they will find diverse products and retailers. Just like in the real world. Online is even more so – marketplaces get even more traffic from search engines, have more money to spend on ads and are better at keeping customers returning.
Each sales channel you will be adding will bring you more exposure and more sales if handled correctly. The sales channels I've described so far are the most popular ones right now. But they are not the only ones. As technology evolves, so will commerce. New channels will pop-up and some I haven't mentioned here will probably increase in importance.
Think about the impact Internet of Things will have. Maybe in the future the greatest sales channel for groceries will be smart appliances. Think of a refrigerator than can place orders for customers when it's depleted. It sure is going to be an interesting challenge to integrate those in a sales channels mix.
( Omnichannel means connecting all sales channels in a way the customer finds natural )
By adding sales channels you wil turn from an online retailer to an multichannel retailer and if all channels work seamless together you will become an omnichannel retailer. If you want to know what that means – have a look at Macy's omnichannel strategy. And if that is not enough dive into this omnichannel report I've wrote to help retailers integrate their sales channels.
Marketing is one of those concepts that's so hard to understand and yet so overused. Most of the times its meaning is so cluttered by useless acronyms and buzzwords that people have trouble understanding what it actually is.
I am not saying that marketing is easy. It's not. Yet is not the Holy Grail of human knowledge either. It's just communication. Talking, showing, describing products to the people most likely to buy it.
It's that simple. The basics need to be simple.
If you are going to survive as an online store owner, you need to keep your marketing basics simple. You have a product. Hopefully a great one. There are people who want to buy that product. Most don't know they want to buy it from you. You need to show them why they should buy the product you're selling. You need to show them why they should buy it from you. And then, if everything I've shown you so far has been decently implemented, just let them buy it.
Everything else is gimmicks. If you've got the basics right, everything else will fall into place.
To get people to buy your product, you need to know who these people are, what they want and how they act. Most likely not everybody will want your product. But if you've done your planning right, you pretty much have know a lot about your market.
Yup, your customers are "the target". Why is it called that you ask? Well, because your communication targets them. Until the internet became the norm and we've started gathering more data than we can handle on customers, we used to define them through demographics. That means basic info on consumers. Age, sex, marital status, location, education … this kind of data.
( Pictured here: advertising in the 60s. Not pictured here: Google algorythms and tabacco advertising ban )
These targeting methods were made popular when mass marketing was just blooming, in the days of TV, print and outdoor ads made by the likes of Mad Men. When you ran your ad in the magazine or on national TV, you needed to know who's going to use your product, make sure you understand their psychology and shout from the top of your lungs how cool the product is. Once the ad was approved, there was no going back. Advertising agencies would research, create and test the ad before the campaign was launched because there was no way you could change, tweak or even pull back a campaign in real time.
So demographics were the bread and butter when you would push your message to the market. But the Internet changed that into …
Basically, if you were a mid-class urban wife with no college education in the 60's there were slim chances you would receive ads trying to sell you repair tools for your car. Even if you were actually a mechanic. The same would hold true if you were a man and would be looking for a sewing machine to fulfill your lifelong passion of becoming a fashion designer.
You would have to find those products yourself. We've come a long way and thanks God, we now have the freedom to fix our own cars and sew our pants, no matter the gender
That happened when contextual marketing (the ads you might see when searching on Google), interactive marketing (information instantly delivered when interacting with say an website) or behavioral marketing hit the shelves.
The last one, behavioral marketing, is probably the single most important aspect in online retailing. Technology now personalizes marketing and responds to customer behavior.
For example Amazon's recommended products ("See what others have purchased") is a form of behavioral marketing that is based on a complex research on previous customers behavior before they purchased something. Simply put, when people would purchase something, their interaction trail (the products they've seen so far) becomes an indication that people taking the same or similar steps would most likely purchase similar products.
The ads you see on Google feature a similar concept. They are shown as to answer your needs. Some ads respond better than others at what you are looking for and thus have a better chance of getting clicked. Google trusts this system so much that they invoice advertising on clicks, rather than how many people have viewed the ad.
So basically we went from effectively targeting people to targeting people's behavior. Still, demographics and customer profiles are very important and a lot of what you will be doing is to try to guess customer responses based on demographics assumptions. Such assumptions might mean you will favor ladies over men if you are selling women's clothing (doh!) or rather more complex assumptions such as "Men over 32, employed and married are more likely to buy a family car".
Indifferently of your assumptions, test them and always quantify your results with …
Here you go … numbers. Charts. Estimates. Hope Miss N., your math teacher, was your favorite back in school, because this is going to be damn complex. Nah, just kidding. Most analytics software is pretty much plug and play and the numbers and charts I mentioned are usually generated on the fly and in such a manner you can easily understand.
You can't have marketing without analytics and research. Fortunately, it is a lot easier now for a small online store than it was 40 years ago for the largest companies in the world. What is not so fortunate is that it's easier for everybody so you'll have to dive deep and understand what your analytics are saying. So will the competition.
Once you have installed Google Analytics or one of these other ecommerce analytics software, you will probably dive in and see what your customers are doing. What you will want to look for is patterns that lead to increased sales. Special products, a certain type of copy, products featuring media versus those that don't have media. Look for what makes your sales increase.
So you know the target, you have the analytics figures, now it's time for the actual marketing. The web is full of resources to fine tune your online marketing understanding. I will show you which are the most effective ways of marketing so you will have a bird's eye view on what makes an online store sell.
As a startup there are really little things you can do better with smaller budgets than writing quality content and optimizing for search engines. SEO (Search Engine Optimization) is a really large concept and many people earn their living through SEO services. You will probably ask a SEO expert to help you find the perfect balance so your store will show up in search engine results. But before you do that, have a look at the basics. These are the things you will need to keep in check so Google will bring the right customers to your store:
Ask your customers to leave you their email address so you can update them on news and offers. This is a great way to get people right back on your store.
But don't annoy them and don't do spam! Everybody hates unsolicited email. Make sure your customers give you their permission to send them emails. You can use apps such as Mailchimp or CampaignMonitor to save customers' emails and then send them newsletters.
Where would you go if you were to market a product? The answer is fairly simple: where people gather and interact. Social media outlets such as Facebook, Twitter or Pinterest are now used by billions of people. That's where your online store should be.
Just like interacting with friends, some things work better than others. Here are some tips on how to use social media to interact with potential and existing customers:
If your social media strategy is not going the way you'd want it to, there are always the ads. Most social networks provide ways for you to get closer to your potential customers, faster. Most people call them ads . Facebook, Twitter and Pinterest – they all provide advertiser with the possibility of engaging fans through ads.
And speaking of ads, one of the most effective way of advertising your store and products is …
Remember those Google ads I've mentioned earlier? That is Google AdWords, a very effective form of advertising that places ads on search results, ads that are directly related to your search.
For example, if you were to search for "cars", you will be shown the natural search results AND special search ads. These ads are fueled by advertisers that pay each time someone clicks one of their ads.
You can be one of those advertisers. By carefully analyzing traffic and allocating search ad budget, you can determine with high accuracy the number of clicks you need to convert visitors to buyers. Because search ads are contextual, this means you can optimize your ads in such a way that only those interested in purchasing your product might click it.
However, paid search campaigns are usually better managed by professionals. Even though you might spend a little extra for someone to handle your ads, just leave it to the professional.
Performance – well that sounds nice. What is it?
Performance marketing is a broad term that means advertisers pay a fee depending on how well an action is performed. This action can mean showing an ad a certain number of times or making that ad transform into a special action. The standard actions you might want to encourage are:
And because marketing people happen to love acronyms, you might find the info above coded in three-letter words:
Performance marketing is sometimes used interchangeably with affiliate marketing. That is more of a misconception, as affiliate marketing, though popular, is a subset of performance marketing. It works as a shared revenue deal, where the retailer shares a portion of the revenue with the publisher (the one displaying the ad), whenever advertising turns into purchases.
Affiliate marketing is ran through affiliate marketing services, that cover three very important aspects: they connect advertisers to publishers, they make sure all sales are registered and attributed to the right publisher and they handle transactions between advertisers and publishers.
If you decide to go along the affiliate marketing path, here are the most important affiliate networks that can help you sell your products:
A great way to get your product out there is place it in comparison shopping engines. These applications gather information from more online stores and show potential customers what is the best way to shop in terms of pricing.
It basically works for those that are price competitive so before you join such a program, make sure your prices are aligned with the market.
(Shopzilla is one of the most popular comparison shopping engines)
Most comparison shopping engines are CPC based and you will pay anytime people click your products, arriving at your web store. The top four most popular are Google Shopping, Shopzilla, Shopping.com and Pricegrabber. Getting listed can draw targeted traffic and can mean a very scalable way of converting traffic to sales.
So there you have it – these are the most effective ways you can market your new online store. But don't stop here, don't settle. Marketing in the digital world is usually a matter of imagination. Be curious and try new things that might be fit for your online store.
For example you can attract relevant bloggers to mention your store and review the products. You can put out press releases and talk to the media. You can run contests and sweepstakes to increase reach and turn fans into loyal customers. Once you have the basics up and running, you will be ready to add more and more marketing options to your online store.
Remember: your work is never done. If you want to keep your customers happy and sales growing, you need to constantly optimize and tweak your store. To do so you can run tests that determine what works and what does not. When testing you will be looking for either errors, bottlenecks or usability issues. Do so through:
A great way to see how customers interact with your company is drawing customer journey maps. These "maps" show your existing sales channels and how customers interact with them. Customers may find you on social media, browse products on the web store and place orders through the phone. This is a customer journey map.
When these journey maps get too complex you have to constantly test and look for signs of problems of sources of frustrations for your customers. It may be a poorly designed checkout cart or the voice of your phone operators. By understanding your target customers and their journey maps you can have a guide to testing what works and what doesn't on your store.
( A blank example of potential sales channels. By connecting the channels you can draw journey maps )
Testing means improving and you should strive to make your store better and better. Little improvements and constant focus on making the customer experience better turns your store into a success. So keep testing :).
We've got this far. Wow! Testing is the last section in our guide to starting an online store. It's been a great ride and I hope these posts will help you build the store of your dreams. If you've managed to get this far I believe you are ready to start your own store. Give yourself a pat on the back for having the patience to get through all this data. It's not easy, I know, but it is a lot easier than just starting a store and then figuring it all out along the way.
I am more than happy if I've managed to help you on your path to becoming an ecommerce entrepreneur. If this guide was useful to you, please refer it to someone else who may be in the need for know-how.
You've taken a large step ahead to running your own business and online store. You may be anxious and a bit scared but rest assured. So was Jeff Bezos when he started Amazon. Knowledge, hard work, innovation and persistence will get you far. Have a safe trip in reaching out for your dream!
Featured image source. Modifications made to the photo.
Welcome to part 4 of the complete guide to starting your online store. So far we've covered the basics of planning, registering your business and finding suppliers. Last but not least we've discovered the importance of developing your fulfillment operations.
By now you have an idea of what your online store will pe selling, you already have some pretty sweet deals in place with your suppliers and the fulfillment team is hopefully ready to process and ship the orders. But wait: you have no actual store. So let's get started with building a brand for your company, finding the right software for your web store and adding products and content to it.
What is a brand? Is it a name? Is it a nice logo that people like and recognize?
I will not get academic on you and I will try to cut beyond all the buzzwords you might encounter when building your brand.
The brand is all those mentioned above and more. The name, the logo, the colors and everything else is there to remind your customers of how much they like you and why. The brand is that feeling you get when you think of someone. You don't know whether it's the clothes, the color of their hair, their personality or anything else. You just feel in some particular way about that person. That's the brand. The way people feel about your company.
Now, to build a brand you need some special ingredients. Some are easy to come by and some are harder. However, once you got that main ingredient on the table, the others will be easier to implement. Here they are, ordered by their importance:
This is "who" your company is. You have to decide right from the start what type of personality you will be showing to the world. Are you young and enthusiastic or maybe mature and conservative?
What does your company stand for, except for … you know … selling stuff? What is your purpose for being in the market? You have to answer these questions and maybe more to find out what is the right personality for your brand. Remember – people will most likely never meet you or any of your team members in person so you have to focus on sending out the right message in the digital world.
One of the best use cases of building a great brand personality is Warby Parker. The company designs, manufactures and sells beautiful eyewear at an affordable price. Not only that but sales fuel its humanitarian efforts in providing developing countries with quality eyewear and means for individuals to self-sustain.
They have an extensive section in telling people WHO Warby Parker is and why they're a great fit for society. Branding goes beyond just commercial info and showcasing the products. It projects an image and a personality so customers can have the feeling of actually interacting with a real person. A great one, that is.
Shakespeare said "A rose by any other name would smell as sweet". Things are what they are. The names are secondary. Once you know what your online store stands for, once you know what your brand's personality is, you can put a name on it.
For example, Jeff Bezos named its famous company Amazon because Amazon is the largest river by drainage. He envisioned the largest store in the world right from the beginning and named it accordingly.
The name you will be choosing is extremely important. Out of all the other components in building an online store brand, this one is the one most likely to turn into a real asset. Your brand personality may change, so could colors, shapes and slogans. But your name has to stay the same. The reason is the Internet is built this way. Web pages get bookmarked, indexed and remembered by their name.
Amazon for example changed its personality and graphic cues throughout its history. But the name stayed the same. So did all other brands that managed to catch the customer's attention.
When choosing a name for your online store do check for available:
Once you've designed and presented your online store's personality, you need to code this personality through visual cues.
The brain perceives images faster than sound and letters. Images deliver powerful messages almost instantly whereas sound and text take longer to be perceived.
That's why companies compact their messages in some iconic combinations of symbols, colors and letters: logos. The logo is the basis to building your store's visual identity. We use symbols because our brains are wired to connect shapes to meaning. Color is usually added to further identify a given company. For example you probably don't remember what's the exact shape of the Coca-Cola logo, but you do remember the red-white combination.
Once the basics of visual identity (shapes and colors) are set, more elements are usually added to the list of brand identifiers:
Once the visual identity is set, it will be communicated through a brand manual, or brand usage guidelines collection. You can have a look at Amazon's brand manual here to get a feeling of what you can incorporate in your visual identity.
Once you've got all those above ready, you can begin expanding your brand to other areas. There are two large areas your brand needs to shine in, and they are independent from one another:
1. Within the company: what does your brand mean for your team? What is the message you are sending to your employees? For example Zappos strongly supports handling customer service in the best way possible. Zappos customer service went so far as to register a 9h and 37 minutes call with a customer that needed support on choosing the right shoes.
The brand can be implemented within the company through signage (remember the large company logos in call-centers or warehouses), company communication but mostly through the culture the company will build.
2. Outside the company: Your brand will meet your customers. There are some very important touch points you will need to keep in check and see how the customer perceives your online store:
(Examples of Amazon using its brand on different supports)
When everything is in place and you have your brand ready to go out and face the customers, it's time to build the online store.
To do so you will have to go through:
Ecommerce applications are usually targeted at two types of users
I will not get into too much details regarding what large retailers use but if you want too, you can check them out here.
Instead, I will focus on guiding you through the four most popular options for small and medium retailers. In the end, you will have to decide which one is best for you.
Before I go any further I would like you to have a look at this chart from Google Trends showing how many searches for each of these applications have been registered in the past. This is a great way to see how popular each of them is and what could you expect in the future.
The graph above shows how the four most popular solutions for ecommerce have evolved throughout the years in terms of Google searches. You can see Magento at the top, Prestashop right beneath it, WordPress ecommerce at the bottom and Shopify growing like crazy. Let's have a look at what ech of these tools has to offer.
Magento is owned by Ebay Inc and works as an open-source application. It first hit the digital shelves in 2001 so it packs quite a lot of experience.
It is estimated that roughly 250 000 stores are now powered by Magento. It is usually used by medium sized retailers because of these reasons:
There are however, some cons:
Long story short: Magento is fit for medium to larger retailers. It is usually installed on your own hardware (server) so beyond development costs you will also need to take into account hosting costs. Development and server costs usually top everyone else on this list. However, it makes up in stability and features what it lacks in cost structure.
There are now more than 200 000 stores using Prestashop. The company started in France and is now a global player that aims for Magento's spot. Unlike Magento, it can be used both as a hosted solution (on your own server) or as a cloud solution (where you pay a standard monthly fee for the right to use it).
It's easier to find developers that can handle Prestashop's structure so development costs could be lower. It's targeted at smaller retailers (usually startups) and you can read a full review here.
All in all Prestashop is a great choice for small to medium online stores so it's definitely worth checking it out. It may not get you to $1 billion in sales but performs great for startups. It's highly customizable and easy to manage.
Shopify is the great challenger on this list. It works great for small startups, you can start using right away, its pricing structure is great and you get tons of apps you can use on your store. It is the fastest growing solution right now and it is used by 150 000 online stores.
Not only that but the company is really well funded. It recently received $100 million in venture capital and now it aims to work as a cloud platform for both online and offline small sellers. Although it started as an online store solution, it now works for offline retailers through its Shopify POS solution.
The fact is Shopify is the most promising solution on this list. It is well funded so it probably won't close shop any time soon, it is the fastest growing and its app and themes ecosystem makes it perfect for the ecommerce entrepreneur. You may need to switch to another solution once you go big but until then – everything works just great.
Although WordPress is not technically an ecommerce application, it evolved beyond its blog youth and its content management adulthood. Using ecommerce themes such as these, shop owners can easily extend WordPress beyond content management.
What WordPress lacks in native ecommerce support it more than makes up in developer community, theme and plugins support. At the moment 74.6 million websites rely on WordPress. Out of this huge figure more than 50% are self hosted.
There are 40 translations for WordPress and WordPress.com receives more traffic than Amazon. These facts and others make WordPress quite a great platform for shop owners just starting up.
Unlike other ecommerce applications that are built with commerce processes in mind, WordPress is great at managing content. Products can be described in so many ways and content can be easily published. This does wonders for search engine optimization and communicating with your audience.
Oh, and remember that figure above? Check out the difference in searches on the term "wordpress" only, as opposed to the other applications:
That blue line up there, dwarfing all others, is WordPress. It has a huge user base and these users can turn their blogs into online stores.
Wordpress is a great way to get your store off the ground quickly and at a low cost. But if you want something more, you will probably need to look into other solutions.
( A visual comparison between Magento, Prestashop, Shopify and WordPress for ecommerce )
For all those solutions above, you will most likely need two types of support:
To do so, you will need to find talented and effective designers and developers on established online marketplaces. The freelancing marketplaces are pretty straightforward. Think of EBay for digital jobs. You post the requirements and freelancers will bid for your online store requirements. There are dozens of places to find designers and developers for hire but some really stand out:
Elance.com is one of the oldest and most popular places to find great programmers and designers from all over the world. There are currently 260 000 programmers and 190 000 designers listed on Elance.
Guru was founded in 2001 by Inder Guglani and now boasts more than 1.5 million members worldwide and $200 million worth of freelancing jobs processed through the marketplace.
Smashing is a very influent online magazine for designers and developers alike. As talent naturally gravitates around other talented people, this community jobs site is a great place to find those great freelancers to get your online store up and running.
All of the ecommerce software solutions listed in this post rely on themes and plugins to customize the layout and improve the functionality of your online store.
Both themes and plugins are offered by their respective developers either free or for a premium. You can think of plugins and themes as building blocks that you can attach to your online store and get it to either look or behave better.
You can find plugins and themes on special marketplaces as well as developer's plugin shops.
The best places to look for themes and plugins are the following:
When you've chosen the application you are going to use to manage your online store, contracted the right developers and designers and chosen the appropriate theme and plugins, you're ready to implement your online store. If everything is set so far, the freelancers you've contracted will know what to do. The overall process will be, in a simplified manner, the following:
Once the process is complete you will have an up and running online store, without any products or any type of content.
Content is any text, image or rich media that you will be hosting on your online store. As a startup, great content can mean great sales. There are two converging reasons for this.
The first reason is search engine optimization. Many of the people that will be visiting your online store and hopefully buying, come via search engines. You probably know a bit about how Google works, you may have heard a thing or two about search engine optimization but the fact is content is king. Great content is better indexed by search engines and can provide you with visitors you can turn into customers.
The second reason you should pay great attention to content is the customer. The customer needs to get as much information on your products and on your company as possible. Upload beautiful images, write extensive product presentations and say everything you can about your company.
And go beyond …
Here you'll find three great strategies to conquer your market with content. Explain your customers how to use the products. Showcase the lifestyle around your products and brand. The more content you will be pushing towards your customers, the more credible your brand and online store will be.
When you've added all the products and the relevant content, don't stop there. Optimize your product descriptions constantly. Start a blog and get people to send you their stories. Content is king and it will stay like this for a long time.
Once everything is ready to go live, you still need to do one thing: train the team. Segment your fellow team members and train them according to their responsibilities. For example order management personnel won't be handling product information so there's no point in showing them how to use these features.
The main areas where you will find features that team members need to learn using are:
Most of the ecommerce applications have their usage guidelines either online or can be provided to you when required.
So training should be done according to responsibilities, it should be done in an interactive manner and team members should be provided with a form of software manual or written guidelines.
Once the online store is set up and reflects your brand, the products are all online and the team members are familiar with the ecommerce software, you are ready to go live!
Wow – we've covered a lot of ground and by now you should be ready to have your store online. But there's one last chapter to our journey. Meet me next week on the final part of this guide, covering marketing, extending sales channels, testing and fine tuning.
So you've got this far. Starting an Online Store is a lot easier when you've got the right info and this is the place where you can find it. It takes a lot of drive do get through Part 1 and Part 2 of this guide, so good for you!
During this part of the guide, you'll get a better understanding of what fulfillment means and how to build a company that can effectively manage orders and ship the right products to the customer.
Good, good fulfillment. Yeah! But wait …
Good question! Although the term fulfillment is used quite a lot, not everyone has a clear grasp on the whole idea. I mean – why fulfillment? Well, it's actually a pretty simple concept. Order fulfillment is anything that has to do with fulfilling your promise to the customer. That promise is you're going to ship the products they've purchased, those products are going to be in good condition and they will arrive as soon as possible.
Fulfillment also covers the reverse process (also called reverse logistics). That means getting merchandise back from the customer. That type of operations happen:
So basically when your ecommerce business is fulfilling an order, it is actually making good on its promise to deliver merchandise in the best way possible. Although the concept is not that really hard to grasp, making it happen is a little bit harder.
In order to make sure your fulfillment operations you'll have to look for the answer to four very important questions:
Fulfillment is probably the most complex and tedious part of ecommerce. It is also the one thing that is the least talked about in terms of ecommerce. It's not flashy and it's not cool. It's complex, involves a lot of tweaking and a lot of work to getting it right. While most ecommerce guides will point out to the importance of picking the right shade of orange for the "Buy now" button, few will speak of how important fulfillment is.
Just to get a glimpse of how important fulfillment is - think of your car. While having the right color and the right type of leather is important, the car won't start without an engine. Fulfillment is the engine that keeps ecommerce going.
There are just five basic steps in fulfilling ecommerce orders. Four of them are mandatory and one is optional. Hopefully you will cover this last step as few times as possible. These five very important steps are:
Overview of the Fulfillment Process (including returns)
Customers will place the orders through one of your sales channels. It may be your online store, on the phone or through a mobile application or a pop-up store.
There is a great variety of order management software out there and later on on this guide will get through some of them. It matters less what you will be choosing later on. What matters from a fulfillment standpoint is what the order info should contain. Here is the minimal information you will be needing:
Most of the time, you will be receiving more info from your order management tool but these are the essential blocks of information to keep in mind.
Before moving on to the actual order fulfillment bullet points I have to make a point. You don't HAVE to fulfill the orders yourself. Some companies outsource their fulfillment to other companies. My advice is you should keep most of your fulfillment operations within your company. You won't be able to ship products across the globe but you can pick, pack and carefully wrap orders for your customers.
When medium and large online stores are fighting each other over consumer mind share, we only see the marketing and superficial aspect of this battles. But the fact is, underneath all this visible struggles, the real battles are won in the warehouse. Your real chance for success stands in picking, packing and shipping the right products, within the timeframe you've promised.
It may seem hard to handle fulfillment operations and it sure is. But because it is hard, you have to master it before the competition does. Walmart and Amazon, two of the largest retailers in the world, are also two of the best supply chains in the world. It's not that these companies have developed spectacular fulfillment operations because of their huge sales but the other way around.
Glad we've got that out of the way. Now – what's the best way you can receive products in your inventory?
It all starts with an order to your supplier. It is usually called a "Purchase Order" as you are placing an order to purchase products. We will assume that you have already set up an agreement with your suppliers and they will ship the products. You will probably pay as you place your order, when the order arrives or at a given time after the order has arrived, if you have agreed as such with your supplier.
Once the products have arrived at your warehouse you will need to:
( Basic check list when receiving products from the supplier )
Placing the products in the inventory is a very important part in receiving the products. The better you keep track of where the products are, the less time and effort you will need when picking and packing the products.
When placing the products in storage you need to keep in mind some very important aspects:
Hopefully at this point you have managed to get the products in your inventory, they are correctly marked and stored and you are ready to pick said products for the orders you are going to be shipping.
Once you have the products in the inventory and orders are coming in, it's time to process these orders.
Order processing is split between four main areas:
Picking is probably the most time consuming part of order processing. It also gets a lot more complicated as your business grows and it may be prone to errors. Having more products in your inventory will increase the complexity of picking the right products in the fastest way possible.
If you've managed to place the products in the right spots (as stated in the step above – receiving products) your chances of correctly processing orders increase big time. The reason is it will be easier for picking staff to move fast through the aisles and pick the right products.
To have a streamlined picking process that works just as well with 10 orders per day or 1000 orders per day you have to decrease the chances for errors. To do so, your picking staff will cycle through these steps:
( A basic example for a picking list )
Packing is the next step in the fulfillment operation. Once the products have been picked from the corresponding aisle, shelf or bin, they are sent to the packing station where they will be split into orders and prepared for shipping.
The packing operation is usually split into these further steps:
Once the products are placed in the right package, a quality control station will check for any errors that may happen.
Quality control personnel will usually check for one of the following errors that may appear:
Once the products have been picked, packed and quality control made sure there were no errors in the order management process, the package is ready for shipping.
Online stores usually partner with one or more shipping companies to deliver the goods. The shipping station will check the package weight and direct it to the right shipping partner.
Most shipping companies will provide you with a general framework on how to handle packing and preparing for shipping. Here are the most popular ones:
When these companies (and others) will charge you for their shipping services they will take into account some (or all) of the following variables:
Once the orders are picked by the shipping company, the order status is constantly updated so customers and the online store knows where the packages are at the moment.
When the products are delivered the status is updated and the order is confirmed. After this point the product is in the customer's ownership and any reverse process wil be treated as a return.
Oh, returns – can't live with them, can't live without them. Just kidding. A clear and friendly return policy is what sets the likes of Zappos.com apart from the competition. They will let you return the products you've purchased within 365 days, free of charge and as their return centers will check the products you will be credited within 7 days with the money you've spent.
Ecommerce customers love a great return policy and you need to be ready to handle one. The logistics involved in such a return process are usually dubbed reverse logistics. This means you will reverse the steps mentioned above.
Basically you will unship the products, unpack, unpick and un-order everything.
If you offer free shipping, you will have to handle the shipping costs from the customer to your return center (for small and medium companies, the return centers are the same as the fulfillment facilities).
Now, the big problem when getting information on handling returns is that most of the resources out there are either
What will follow will hopefully be a bit more relevant and a bit less boring. The big idea you have to keep in mind is returns are the reverse process of everything you have read so far.
You will have to tailor the following concepts to your specific company structure, accounting, IT systems and processes.
That being said there are three main areas you need to focus:
There are usually three main options to do this:
Once the products are back at the fulfillment center you will have to get them back into inventory. The process is similar to what you would do if you were to receive goods from your supplier. The main differences are:
Once the products have been checked and returned to the inventory, you will need to issue a refund to the customer and inform said customer of these changes.
And … that's it.
It may seem complicated right now but keep in mind that thousands of online store owners are doing all these things. Now that you've got the basics, you will be able to deal with most of the operation challenges you will face. If there is anything else you need to know – just ask in the comments sections bellow.
This concludes this part of this guide. This is probably the hardest and the most important part of making your store run smooth. It involves many operations, usually lots of people and it needs to be built in such a way that it will easily scale when your company is growing at double digits.
Next week we will focus on branding, designing and choosing an ecommerce platform for your online store. See you soon!
Last week we've covered the basics of starting your online store. We've talked about choosing your market and your particular niche, We've covered the main questions you need to figure out before you start building your actual store. Finally we went through the main business models and scanned some of the most innovative and interesting implementations in B2C (business to consumer) ecommerce.
Now that we've covered the basics, let's turn your idea into a real store. This part of the "Starting an Online Store" guide will show you how to register your business and how to build the operational basics for your store. At the end of part two of this guide you'll know how to find the right ecommerce suppliers, integrate your business with said suppliers and set the prices for your products.
Note: This part of the guide is intended to work as a guide mainly for readers in the US. That's why some of the acronyms and type of companies you'll find in here are going to be aimed at those of you registering your business in the US. If you are registering your business elsewhere please leave a comment as to where you intend to register your business and I will try to get back to you with more info.
That being set, most of the information you'll be reading here is in essence applicable in other countries or regions. Even though business structures may have different names and have slightly different usage in different parts of the world, their purpose remains pretty much the same, as globalization tends to level the playing field.
Sure, planning and building your business is a great way to spend your time and effort. But you also need to work as a legal entity.
There are basically two ways you can register your business:
You can start as a Sole Proprietorship (the most popular type of business for ecommerce entrepreneurs) and move to other forms of businesses as your chances of success increase.
If you are the sole owner of an online business, the Sole Proprietorship (also known as DBA – "Doing Business As") is the easiest form to register and manage your business. It actually works as an alias for the individual doing the business. Because of this, the owner is personally liable for the company. That means that all debt is imputable to the owner. However, as Sole Proprietorships are usually low-liability businesses, a lot of startups work under this type of legal entity.
The second big option in starting an un-incorporated business is the General Partnership. In Partnerships, more individuals get together to start some kind of business. Just like the Sole Proprietorship, Partnerships are easy to set up and manage and because partners share equal control on the company, the liability and profits are also shared.
Like I've mentioned above, the second category of companies falls under the "corporate" model. When you're incorporating your company you don't become a corporate behomoth and you don't automatically get billions in revenue, as you'd expect. It just means you're operating under a different set of rules. Plus you get to do a lot more paperwork and pay some extra taxes.
Pros of incorporating the business
The most important reasons to incorporate your company as an entrepreneur are liability protection and documenting deals with partners.
By far liability protection is the most important reason to incorporate your company. Under a corporate structure, your business is treated as a separate legal entity. If things go awry in your business (and sometimes they do) the company is liable for paying all debtors, not you. That, of course, if you have been operating your business in a legal manner.
Basically, registering as a corporation will keep your assets (house, car, golf clubs) protected from any issue that might arise operating the business.
The second important reason to incorporate your company is documenting a business deal with partners. Whether you are raising money from investors or selling shares in your company, you need a corporate structure to do this.
Cons of incorporating the business
You may hear other reasons why you should incorporate your company, things such as tax benefits, business credit and transferable ownership. But don't rush to register your corporation just yet. Most entrepreneurs are doing just great running un-incorporated business in the beginning. Tax benefits are usually tangible when your company is already successful enough. So if you are just a startup, you can probably forget about tax benefits.
Building business credit means companies are evaluated independently from their owners but that doesn't necessarily have to be a good thing. If you are a startup with no cash in the bank, no sales and no clear plan, that fresh business credit won't be of help much.
Finally, saying an incorporated company is a lot easier to transfer to other individuals or companies leaves out a very important aspect. Before transfering your company (hopefully selling it for lots of cash) you need to build this company. So again – this won't help you that much either.
But the biggest disadvantage small businesses that incorporate have to face is paperwork. Lots of paperwork. You will have to fill in state reports, organize annual meeting and deal with involved bureaucracy.
Then there's the fees. You'll be paying fees for legal council, tax filling and others. Professional help is not cheap. Plus you get the minimum franchise taxes and others. These amount to thousands of dollars in fees, which is a bit much for small business owners.
So incorporating a company is no easy feat. Or better said – it's not easy to manage an incorporated company if you are a small business owner.
But if you do find yourself in need of incorporating the business, here are the most important type of corporations you can choose:
You have probably heard one thing or two about LLC (Limited Liability Company). It's the most popular form of business among small and medium businesses, including online store owners. It combines what is called pass-through taxation for its members with the limited liability corporations provide.
Although not technically a corporation, it is a great choice for those that want to join a limited liability partnership. It basically works as partnership or sole proprietorship in terms of taxation. This means the owners (called members) pay taxes on the LLC's profit directly. The company doesn't fill taxes separately, which makes things a lot easier to manage.
This types of businesses are actually pretty young as a commercial concept. The LLC structure was first formed in 1977 and now it's accepted in all US states and a throughout most of the world.
At the heart of LLC stands the "Operating Agreement", a document signed by all members, setting the rules under which the company will be managed. It covers things such as profits sharing, company management, adding or removing members and more.
The LLC is the most popular choice in the world right now for forming partnership, usually chosen by groups of up to 5 members.
Although starting and managing a LLC is less complicated than a corporation, it is still more complicated than starting and managing a sole proprietorship or a partnership. You will probably have to hire a legal counselor to help you with the set up and operating the company.
The Regular Corporation is … well … the corporation. A company organized as a corporation is a separate legal entity from its owners (called shareholders). The company can thus protect owners from liability issues or company debt.
The corporation provides advantages such as:
Once the corporation is set up, it will pay taxes separately from its owners. This can lead to double taxation as companies are taxed on profits and once those profits are distributed, shareholders will also have to pay income taxes. The double taxation problem is solved by incorporating as a S Corporation (see below).
Corporations are not necessarily ran by its owners. The shareholders own company stock. This gives them the ability to elect Directors, organized under a board of directors. Once this board of directors is set up, they appoint Officers (CEO - Chief Executive Office, CFO - Chief Financial Officer etc.), which are the people that actually run the company on a daily baisis. Of course, if you own 100% of stock, you can appoint yourself as the one and only director, be the officer and run the company.
On the other hand, if your company will be owned by more individuals, the Board of Directors and the Officers will run the company. Both the Board of Directors and The Officers have to abide to an internal company document called "Corporate Bylaws". This document sets the rules on operating the company and can be extended or modified as the company evolves.
The Corporation is a lot more formal than the LLC and of course, the Partnership or the Sole Proprietorship. The records have to be carefully maintained, there is a mandatory yearly Directors and Shareholders meeting and every decision has to be documented and reported.
Although the corporation is harder to form and maintain, it is the oldest and most reputable form of business organization.
When registering as a corporation, you should take into account the S-Corporation. By filling in the appropriate tax election form to the Internal Revenue Service, the company will be taxed as a Sole Proprietorship or a Partnership.
The main advantage for you and your partners is that income and profit is passed through to the shareholders, thus solving the double taxation problem mentioned above.
Even though you've solved the double taxation issue – you're still stuck with the paperwork and specific regulation, which can be a burden for online retail startups.
To wrap things up, here is a rundown of the main types of incorporated business structure you can choose, each with its own pros and cons:
Once you have decided on whether you're registering your business as a sole proprietorship or incorporating it you can check the specific regulations for your state here and start the registration process.
You've figured out your market, planned on how you'll build and run your store and what your business model is. You've registered your business and you are ready to go. Or are you?
Well hold on there, you still need to have those products you're selling. That means you need to source your merchandise from suppliers.
Generally speaking, suppliers are those businesses or individuals that are willing to supply you with products priced below end consumer value. Still a bit unclear? Well say you will be selling plain t-shirts. You know you can buy those t-shirts for $20 at the closest store. If you do buy t-shirts in that store, you will be buying them at end consumer value. You are the end consumer. Because you cannot price them at a higher level you are basically stuck with them – hence the "end" in end consumer.
What you need to do is go find yourself some suppliers that are willing to sell you those t-shirts for less than $20. Why would they do that, you say?
Remember the whole B2B business model? Some companies just work this way. They manufacture the products or sell them in bulk and let other companies sell directly to the end consumer.
( The basic operations needed to run your store )
When dealing with suppliers you have to be ready to make a commitment before they agree to do business with you. This commitment can come in many forms but usually it's one of the following:
Once you've made a deal with one or more suppliers you will be selling your products right on your store. When the orders start pouring in (or maybe just trickle in the beginning) you have to make sure customers receive the products they've paid for. This part is called "fulfillment" as in fulfilling your promise to send the product to the customer in exchange for the payment you have received.
Fulfillment means any task done inside or outside the company that assures the right products are shipped to the customer. Usually this means:
We will talk a lot more about fulfillment later on in this guide but for now I just wanted to give you an overview on the usual processes in handling orders and shipping products to the end consumer.
Fulfillment can be done either within your company, by the supplier or as a mix between the two. Let's have a look at these scenarios:
Usually, most online retailers (such as yourself) choose a combination between the two and maybe some other processes.
( The example below is illustrated in the figure above. Combining basic operatiosn with supplier drop-shipping. )
For example, let's say you partnered with two suppliers (see figure above). Supplier A will provide you with plain t-shirts. Supplier B brings in sneakers. After you start your store you receive two orders. Customer X is asking for 2 plain t-shirts. Customer Y is asking for a plain t-shirt and a pair of sneakers.
You will have to treat these orders differently. Order number one, the one where customer X paid for 2 plain t-shirts is forwarded to Supplier A and he will dropship these items and then invoice you for the products.
Order number two is a bit more complicated. You will have to ask supplier A to send you one plain t-shirt (if you don't already have it on your inventory) and Supplier B will send you a pair of sneakers. You will be invoiced on those products and once you have them in your warehouse you can pack and ship them to the customer.
You can also choose to work with external fulfillment services, such as Fulfillment by Amazon. These services relieve you of the burden of picking, packing and shipping your orders. For a cost.
By building and interlinking separate operations such as those mentioned above, you are actually building what is called a supply chain. The supply chain means any interlinked process that enables you to move products from the manufacturers or wholesalers to the consumer.
The supply chain is not a static structure. It can and it will change as your online store evolves. As you add new suppliers to your supply chain, your ability to distribute products to consumers will increase and so will your revenue. But speaking of adding suppliers to the supply chain …
Yeah, how DO you find suppliers for the online store? Now that you've got a sense of why you need suppliers, how to negotiate and deal with them, let's have a look at how to actually find them. When you're looking for merchandise suppliers you'll see that you have two big options when choosing, each with its pros and cons. These two options are domestic suppliers and overseas suppliers.
Assuming you are in the US, using domestic suppliers will be a very viable option but you should also consider the second. Overseas suppliers can be a great addition to your supply chain. They can be used when in need of additional product options or lower prices. Let's have a look at the pros and cons of using these two types of suppliers.
( Directories providing links to domestic US suppliers )
The most important thing you need to remember when dealing with overseas suppliers is that you have to be very, very careful. If you are inexperienced, you should ask for professional advice on how to get the best deals and protect yourself from fraud. Also – if you do find yourself in need of doing business with overseas suppliers, choose to contact those that provide a local sales office or agent or order using established marketplaces that provide escrow payment options.
( The most reliable services that connect you to B2B suppliers overseas )
Although the services mentioned above are a great way to find the right suppliers, you can also do your own digging and search for independent manufacturers or wholesalers.
There is no standard way of doing this but some tips may help you get closer to your ideal suppliers:
So hopefully you now know a thing or two about finding suppliers and you're going to get the best deal possible. Great! What's next? Oh, yeah, prices:
When it comes to pricing, you have two rather simple concepts to always keep in mind:
Basically, the prices of sold products have to cover the sum of these expenses. The bottom line is always the same: Profit = Revenue – Costs.
Your company will report a gross revenue by selling products. Profits come when you are selling enough merchandise, at the right price, to cover your costs.
Of course, it's a bit more complicated than this but you get the picture. You have to price your sold products where you can be profitable. However, prices need to stay competitive to the market. This means that there's a balance you have to keep. Prices should be big enough to keep you in business but small enough to be competitive with other online retailers.
1. Markup on cost means you add a certain percentage to he cost associated with the product. It is usually a standard percentage somewhere between 15% and 40%, enough to keep you profitable and your prices competitive.
The formula works like this:
Item cost + (Item cost x Markup Percentage) = Price
Say for example we are selling plain t-shirts, with a cost of $20. We've set the markup at 30%. The the price would be:
$20 (Item cost) + ($20 x 30%) = $26
2. Manufacturer suggested retail price (MSRP) is another way small businesses can set their prices in such a way that they are profitable but not too expensive. MSRP is the price the manufacturer recommends to resellers so they don't start price wars that can benefit no one. This type of price setting leaves out a lot of options for the online store owner and should not be a general rule in the long run.
Above are just two of the simpler ways prices can be set to attract the consumers. We will get into a lot more details in the "Marketing your store" part of this guide so stay tuned.
For now, this concludes part two of the "How to Start an Online Store" Complete Guide. Part three will focus on building your fulfillment operation (picking, packing, shipping and returns) and how to build a brand identity and the actual store front. See you soon!
Featured image source: https://www.flickr.com/photos/27017674@N06/8915361750
If you are here you're probably thinking about opening an online store and you need some help to get your business up and running. The good news is you've come to the right place. This guide contains all the information you need to get your business started.
I'll guide you through the most important steps in starting an online store. You'll notice that, just like a car, the things that make an online store are usually under the hood. Of course, an efficient web store and a carefully crafted logo are important but even more important are the products you sell, where do you get them from and how you fulfill your promise of sending them to your customer.
Basically there are ten main areas you need to focus on when starting your online retail business. These are:
That's a whole lot of bullet points. Of course: an online store is still a business and businesses are not simple. If you're trying to build a business because you need money fast or because you're tired of your day to day job, you should stop reading this post right now.
The truth is building your store or any other type of business is hard work. Seems obvious, right? If it were easy, everyone would be running their own business. It's hard but if you are ready to take on this challenge, prepare yourself with grits and start chewing as much info as you possibly can. The more information you have and the more data you gather, the more likely you are to succeed.
This guide will work as a framework, an outlook on what you have to do to maximize your chances for success. Depending on your current location and specific market factors, you may need to adapt as you go but you can rely on this framework to guide you through.
So let's dive in:
There are three very important things to take into account when starting your online store and looking for your niche:
The first thing you have to understand is that your business has to provide value for other people. Just as people do, businesses strive for purpose. Without providing value in a clear and straightforward way, you cannot expect your business to be successful.
Find out what people need or want. A combination of both is great but if you have to choose, go for need – it is way better in the long run. Find out how you can supply these products or services. This is the value.
The second thing you have to take into account is that other online stores may provide the same kind of value. Do your research. Google the type of products you want to sell. Check Google Trends to see how the terms for your products have evolved throughout the years. Compare the number of product searches with the number of companies providing the same type of value you're planning on offering.
There is a dynamic between demand and supply that you cannot ignore. You are looking for a market that is booming but there are not many competitors. And that's were the third point comes in: you have to provide value for lots of people. You may like hoodies for cats very much. But it is probably not such a great idea. You are addressing people in your country (don't think you're going international just yet), who own cats, who think that dressing up cats is a good idea and who like hoodies. A pretty small market, don't you think?
The lower the market size, the lower your chances for success. The higher the market size, the higher are your chances at building a great business.
See the graph below on where you'd want to place your business in:
So there are two great combinations that you can choose. Both need as many customers as possible. You should strive for a market where there are plenty of people ready to buy your product.
The ideal situation is the one in the lower right corner. That's where few companies will compete with you and there are plenty of customers willing to buy your products. But to position your online shop there, you need to identify a need before the competition and quickly get as much market share as possible. However, in this situation, you'll need to market your products and your brand, advocate product usage and purchase. That means actually building a market. This is no easy feat for a startup.
The upper right area shows a combination of many competitors and many customers. This means this is an established market and you're more likely to succeed if you prove yoruself better than (part of) the competition. With slight adjusments to the business model, you can compete to established leaders (see below for innovative ecommerce models).
Once you have discovered the kind of product(s) you will be selling it's time to start building The Plan. You will notice that I'm using the term "the plan" and not business plan. That is because this is your plan. It has to come as a natural idea and set of targets you want to acomplish in the future with the business you're building.
There are nine big questions you need to answer here. You have to be as pragmatic as possible when answering these questions because when you start building your online store there won't be any place for wishful thinking.
These questions are simple but the answers are usually not:
Answering these questions will get you thinking and preparing for the future. You will notice that these are actually the questions you need to figure out the answers to when building a business plan.
However, take your time to think through these questions. Find information to support your expectations. Question your own assumptions because the market will surely do so. If you've taken into account all these questions you are likely better prepared to starting yoru online shop. Remember, "failing to plan is planning to fail".
You're probably thinking the ecommerce business model is pretty straight forward. You post some goods online, someone orders them and then you ship them and collect the big bucks.
Well, that is why you need to know that even if the logistics and operations may look the same in all ecommerce business, the differences can have a huge impact on how you're building yours.
I'll walk you through the 4+1 main segments of ecommerce business model. Than we'll look through different implementations of the B2C model (business to consumer), the one you're probably aiming for.
B2C Ecommerce is the most popular form of commerce online. The B2C stands for Business to Consumer and that's exactly what it means.
Online retailers (aka "The Business") will stock goods, post them online and sell directly to the customer ("The Consumer"). The Consumer will reach the web shop, browse and hopefully buy the items posted online. When this happens, the operational team will be notified. They will pick the merchandise from the warehouse shelf, pack it and ship it to the consumer.
(Illustrating the B2C ecommerce model)
Most of the online shops you are familiar with are focused on this type of ecommerce business model. Some examples you might be familiar with are Walmart.com, Target.com or HomeDepot.com.
But B2C is not just for the big players. Many ecommerce startups employ this type of business model. For example Bonobos.com and WarbyParker.com are doing just great selling directly to the consumer.
Bonobos is a fashion ecommerce retailer for men. The company manufactures and sells its own line of men wear and its main selling point is it makes shopping easier. How it does that? You'll find out later in this guide.
WarbyParker.com sells stylish eyeglasses and sunglasses directly to the consumer. It is a great example of finding the right type of product at the right time and packaging it with the right type of social activism twist. When you buy a pair of glasses from them, a social mechanism makes sure that part of the money you've paid go to those in need of eyewear in the developing world.
But wait, isn't Amazon a B2C ecommerce site, you might ask? Glad that came up. See, Amazon has started as a B2C online shop but since then it evolved past a single model. Most of its sales are still directed at the end consumer but Amazon also ships items to businesses (B2B ecommerce) through its Amazon Supply outlet. It also brings other sellers (businesses and consumers) in contact with its own customer database. This means Amazon is indeed the largest online retailer in the world, but it's not just a B2C ecommerce website.
Another business model that works great is the B2B Ecommerce model. In this model Businesses sell merchandise to other Businesses through an online shop.
You might wonder why even mention this model. I mean, couldn't those listed above just allow businesses to buy from their shops? Of course they could and most do. But here, I'm talking about a different type of companies, different type of products and most of all – different number of items purchased and different pricing.
(B2B model illustration)
Say you're a company manufacturing hoodies for cats. Supposedly your market is not as popular as the smartphone market and your factory can ship 1000 beautiful cat hoodies every year. You could, of course, open an online shop and ship these hoodies directly to the consumer. But you'll find out that it implies development costs, marketing costs, customer service costs and you just want to be in the factory all day, trying to finally manufacture the perfect cat hoodie.
Along come Business A and Business B. These companies are probably retailers and have an established commerce operation, with a huge database of customers and they think they can sell 500 hoodies this year. And they want everything you manufacture.
Before these companies came along you've done the math and thought: "My cost for each manufactured hoodie is 10$. I'll sell these hoodies for 20$ and make a nice proffit." But then you went on and started selling on your own and saw that including marketing, shipping and other expenses your cost rose up to 18$ and you're actually making only 2$. Not that much, is it?
But now both Business A and Business B decide they can offer you 15$ for each hoodie and they are going to buy everything you manufacture. On one hand they are offering you less than your asking price but in the end your earning 5$ instead of 2$ so you decide you're better off selling directly to Businesses.
This simplified scenario is the basis of the B2B ecommerce business model. It means that businesses (either manufacturers or wholesalers) sell directly to businesses and offer incentives to those that buy in bulk. The usual incentives are lower prices, extended payment conditions, free shipping or custom manufacturing.
Some of the most popular B2B ecommerce sites are Quill.com, AmazonSupply.com and of course AliBaba.com, the largest B2B marketplace, connecting businesses in China to buyers all over the world.
(Business to Business to Consumer business model graph)
This is a rather new type of ecommerce business model. It stands for Business To Business To Consumer.
How does it work? Say you have your own stocks and you're selling your cat hoodies through your very own ecommerce website and it works pretty well. But you're thinking – why not sell more?
So you think of new sales channels, the type of opportunities where your cat hoodies can sell even better if exposed to a larger number of customers. Kinda like Amazon or eBay.
Larger retailers, such as Amazon, offer you the possibility of selling on their own website. You supply the goods and post them on the Amazon Marketplace, for example, and next thing you know -bam! – your cat hoodies can be purchased by Amazon's customers. Depending on your decision you can either fulfill orders on your own (receive orders from Amazon, pick, pack and ship yourself) or just let them handle the logistics, through their Fulfillment by Amazon program.
So we've covered businesses selling to customers and other businesses. Shouldn't consumers sell to other consumers too? But they do and this area is actually booming.
Consumers usually meet other consumers through online marketplaces. By far, the most popular is eBay.com, the place where anyone can sell and buy anything. Even though eBay hosts businesses also, we will focus on the individuals selling their items through these type of systems.
The online marketplaces enabling C2C ecommerce help sellers post their goods online and buyers to find them.
There are many mechanisms in place to handle these transactions, things such as product showcasing, selling, payment and feedback. But if we were to look at what makes C2C marketplaces work this has to be the network effect and peer review. The network effect means that the more people engage in trading goods in a marketplace, the more people will come and more successful the marketplace will be. This effect also ensures seller and buyer lock-in: the more people are buying or selling, the harder it is for someone to leave the marketplace. The reason – where else will this person find so many customers or merchants?
The second big feature that defines C2C marketplaces is peer review. When you're buying or selling through this type of systems, you really don't know who's on the other end. And because relying on luck and having faith in the good character of people is not the most efficient solution, marketplaces introduced peer review.
When someone buys from a merchant and they get what they asked for, they offer a positive review. When they don't, and things take a turn for the worse, they slap the merchant with a negative review so others know the merchant is not to be trusted.
The same goes for the merchant. If the customer doesn't pay up or somehow tricks the merchant – there's always a bad review at hand to get things leveled.
Once these reviews start pilling up, they start working as a certificate of good standing (or bad standing). If you are a honest merchant or customer, you won't leave the marketplace that stores this certificate. That's because reviews are a valuable asset that help members trade in better conditions.
Why mention all these? Because building a C2C marketplace is really, really hard and expensive. For example eBay lost $100 million trying to enter the Chinese market before giving up to AliBaba. It's that kind of expensive so I would rather advise against building a general C2C marketplace if you're a startup.
You could, however find a niche where individuals are willing to trade with one another and cater to that specific niche.
For example: Etsy.com is famous for building the biggest handcrafted C2C ecommerce community. Uber and Lyft bring individuals in need of transportation in contact with those able to provide these type of services. In fact, Andreessen Horowitz, one of the leading Venture Capital firms lists Online Marketplaces as one of the most promissing directions for startups.
Yes, C2B (Consumer to Business) eCommerce is a thing. It might look a little off but there are great ways to start an C2B ecommerce business. There are also some great established services that help connect individuals to the businesses in need of their products or service.
(Consumer to Business Ecommerce Business Model)
Take this blog for example. You see those banners posted on the side? These ads are served through AdSense (a Google program that connects advertisers and website owners). What AdSense does is connect the individual (in this case a blogger) to those businesses in need of relevant advertising. In return for posting these ads, the blogger gets paid everytime someone clicks an ad.
Reverse auctions are a great way for individuals to post how much are they willing to pay for a certain product or service. A C2B Ecommerce site can collect these auctions and forward them to companies willing to fulfill them. For example – the basic model behind the likes of Groupon.com or LivingSocial.com is a combination between B2C and C2B. Companies post their offers but the consumers have to vote by purchasing these offers. If the minimal number of offers is not met, the offers are not activated.
Another great example of the C2B ecommerce model is Elance.com. The website is one of the first businesses that connected freelancers to potential contractors (usually businesses). Freelancers would go online, post their capabilities and those in need of their services would hire them for a limited time or project based.
Monster.com is another great C2B example. Yes, people posting their resumes and getting recruited is a type of commerce where The Individual is pitching The Business to buy his services (aka hiring).
If you're an one-man startup, this can be a great way to setup something quickly. In fact, most freelance developers or graphic designers practice this type of commerce. Either through large marketplaces such as Elance.com or just by posting their resume and portfolio online and getting orders through a simple contact page.
These are the four most popular and used business models but they are not all. There is a separate class of ecommerce business models that has to do with the government. When the government wants to buy products or services from businesses it will post the tenders on a G2B (Government to Business) portal that handles auctions and offers.
If the businesses want to market their their offers to the government, they will employ a B2G business model. See that? G2B vs B2G – pretty simple stuff.
A final model is G2C – government to citizen. Using this model, government authorities can auction goods directly to the consumer. It also works as a way of connecting citizens directly to the authorities and decrease bureaucracy when issuing documents or collecting taxes.
So you've glanced through all these great ways of starting an ecommerce business and you finally decided on one of them. The vast majority of online shop startups are built on top of the B2C business model so the next part of this guide will focus on a few innovative ways of implementing an online shop.
The basics all stay the same. You are still an online shop owner trying to attract the right kind of consumers and provide them with products they will love. But how about some inspiration from the most innovative business models out there?
Remember Bonobos.com we've talked about earlier? Well their whole selling point goes something like this: most men don't really like shopping. They like to wear clothes that make them look good, without spending too much time choosing. We can make this happen.
That is especially hard when you're an online store and your customer can't see, touch or try on the product your selling. But it can be done. To make it happen, Bonobos mixed its great designs with few things to keep the customers happy and relaxed:
The key take away is if you're building an online store, it has to solve a problem. Bonobos solves the "shopping for clothes is boring" men problem and promisses the right fit without the headaches of chasing a pair of pants all day.
There's a whole post on Netonomy dedicated to Flash Sales. Basically, these type of online shops sell discounted merchandise to registered members.
Take for example Ruelala (pic above). Customers have to provide the shop with their email address to register as a member. This means that basically anyone who enters the website is also subscribing to an email newsletter.
In exchange customers get discounted, usually designer or brand name products. If you like to know more about this ecommerce model, please click here.
Most online shops have thousands of products listed. This is a great advantage over brick and mortar stores which have to actually stock on all those products. Online shops can stock on the minimal amount and later on deal with orders through supplier dropshipping but more on that later.
A new trend emerged that deals with showing just the right amount of products customers need in a given period and ship those products in a subscription based model.
Take Manpacks.com for example:
What Manpacks does is list just the minimum amount of products men need in any given month. Customers setup their pack and receive it every month, based on a subscription.
There are many advantage in starting such an online shop:
Are you familiar with the term crowd sourcing? It basically means asking lots of people to do something for you or your company. In this case, we're talking about designing products.
What Threadless.com did was build a community around the concept of designing t-shirts. Designers would submit their designs and the community would choose what t-shirts were sold. In exchange, the website shared revenue with said designers.
Of course, going against Threadless now is probably not a great idea but you can always build a business by channeling people's passion towards a commercial goal.
Mass customization is an ecommerce segment that's growing really fast. Customers want to express their creativity and they are ready to pay for this.
This type of online sales are technologically advanced and need three really important things to function:
For example Nike launched NikeID, a great way to customize their products. After a successful trial period, the program extended to many of the company's products.
If you'd like to find out more about mass customization, you can get more info at "Is Mass Customization the Future of eCommerce?"
The final innovation I think you should take into account is 3D printing. Using specially designed machines you can build 3D objects and sell them to customers.
3D printing is a technology that is actually yet to take off but it sounds really promissing. For certain products it can mean a reinvention of manufacturing and commerce. Imagine having your customers build the product in your store and having this product instantly printed and shipped. Imagination is the only thing that could limit what can be done with such technology.
Shapeways for example, started in 2007 as a marketplace for 3D Designers willing to design and sell their ideas. In 2012 it has passed the 1 million products sold threshold so there really is a market out there.
Because it is connecting designers to buyers, Shapeways is a C2C marketplace but probably the future will show 3D printing is not restricted to individual designers so B2C online shops might also leverage the trend.
This was the last of the six innovative ecommerce trends you could use to spark the right idea for your future shop. This ends part one of this guide. To wrap things up let's walk through what you've learned here. First – the importance of finding the right niche and how you cult do that. Next, you've learned about the necessity of building your Plan when starting an online shop and the questions you need to answer when building said plan.
Last but certainly not least, you've discovered the main business models you can use to build your shop and six of the most innovative B2C ecommerce models. Pretty good for a day's work.
Featured image source.
Ben Horowitz tells it like it is: starting and running a tech company is hard. Really hard. But not for the reasons you would think.
Founding and running a tech company is generally viewed as the thing anyone should aspire too. The fame, the riches and everything that goes with it is the dream of our generation. Silicon Valley is just as attractive as a career in Hollywood or being a rock star. With poster boys such as Mark Zuckerberg or Elon Musk, young men and women grow up believing that all you need is a great idea and the guts to start it.
But that dream fades when your bright idea and optimistic vision have to face the hard truths of running the company you’ve just founded. Ben Horowitz has a reputation of being a no-bullshit kind of guy and you can actually feel his straightforward words telling you that your dream will be squashed by reality.
Unlike the glamorous and relaxed articles you’re reading about the likes of Facebook, Google or PayPal, Ben’s book is a clear indication of what you can expect when running a company and what to do about it.
It’s definitely not a perfect guide to running a company but it is a great start to understanding what to expect. Being a CEO is a tough place to be in. It’s a lonely place. It’s full of doubt and decisions that may or may not be right.
One of the greatest idea I’ve found in the book is telling it like it is. Yes, telling it like it is when things fall apart. Because they constantly do and someone has to constantly put them together.
Sometimes CEO’s start trusting their PR too much. They start living the persona they need to project to customers, investors and the media. Of course, no one can just go and tell the world that they don’t have enough data to make a decision. Or tell investors that the company may or may not exist in the next 6 months or the product development is stalling. Or tell customers that the product they’ve just purchased may be out of the market in the next year.
No. The CEO’s job is to project confidence and show the world that everything works just smooth. Right? But what do you do when things are the opposite of smooth? What should the CEO do when they fall apart and everything starts running amok. How can you tell the engineers that the customers hate the new features and they just have to rewrite everything so it can be spotless. How can you tell the marketing team that the last campaign they’ve pulled is bringing in no results.
Ben’s answer is simple:
“[…] give the problem to the people who could not only fix it, but who would also be personally excited and motivated to do so”
There are three big reasons to do so:
Take care of the People, the Products, and the Profits – in that order.
Throughout the book Ben Horowitz deals with hiring, managing and retaining employees best fit for the company. And he stresses the “fit” part. People that cannot work in a team should not be part of the team. Egos and politics can destroy companies if not properly managed.
The people themselves have to build products that the market needs and wants and there’s plenty of advice on this topic also. Concise, clear and to the point advice.
Ben shows that innovative products and successful companies are built by CEO’s that lead without knowing where the path would lead to. They lead their teams and they try and try. Sometimes they get the right answers. Sometimes they don’t. That’s because there is no formula for building the equivalent of Facebook or Google or Apple. If it were – more people would be doing it right.
The hard things are things all responsible entrepreneurs and CEO’s have faced. It’s the worrying, the lack of direction or know how, the lack of guidance and the loneliness. It’s keeping your emotions in check and being stronger because of it. It’s finding answers without showing weakness. It’s the struggle you have to embrace so you can continue when things get rough.
In the end I would highly recommend this book to anyone starting or running a tech-related business. My only regret is not having read it five years earlier but then again – it was not written then.
What does it take to turn a store visitor into a loyal customer? Any retailer that can answer this question is surely a leader in its respective niche but it is not a simple question.
There are a multitude of factors at play and we thought we might ask the experts. We’ve reached out to George Skaff, CMO of TouchCommerce, the leading company in omnichannel engagement. George has over 25 years of marketing leadership experience in the computer industry. Prior to joining TouchCommerce, he has held marketing leadership positions with SGI, DigitalPersona, Wyse Technology and NEC Computers.
George Skaff: TouchCommerce is the innovative leader in omni-channel engagement solutions. We have been in business since 1999. Our company was built with a results-driven retail perspective to replicate and enhance the in-store customer experience online, with chat technology. We have award-winning technology platform and mobile solution with an emphasis on data, self-service and automation. We are focused on Enterprise Global F1000 eCommerce companies. TouchCommerce real-time customer targeting engine leverages “BIG DATA” to target and engage customers in a personalized digital assistance experience on desktops, tablets and smart phones across the omni-channel environment. TouchCommerce operates in 16 countries across North America, EMEA, and Japan.
With mobile revolution happening right now, the way customers want to interact with retailers is changing fundamentally. There is a shift in customer behavior underway. You can no longer rely on them dialing your number when they have a problem and talking to a customer service agent. There are hundreds of ways they could contact you and they may well try several different ways to get the information they want. However, make no mistake: your customers are not aware that by clicking out of a webchat session and picking up the phone that they are ‘changing contact channel’. They do not care. All they are concerned with is getting their query answered in the easiest, quickest way possible. And they want their experience to be consistent across all these channels.
Combined or stand-alone, the fully-integrated custom solutions we create for customer acquisition and customer care and retention contribute to an enhanced online, mobile or in-store customer experience and increase self-service in the omni-channel environment.
George Skaff: To maintain consistent consumer experience, it’s vital that retailers start thinking in terms of the customer journey and the conversation you are having with them, rather than the platform for that conversation. In order to have a cohesive, joined-up omni-channel offering, it’s essential that the different channels are integrated at the back-end. There should be one view of each individual customer, no matter which channel they have chosen to contact you. Ideally, this view should be presented to the agent in one, single desktop application too, so when a customer calls, the agent has a clear idea of their previous interactions and account details, and can quickly access information to help solve their query.
When choosing a software provider, retailers should consider if the solution:
George Skaff: The Dynamic Targeting Engine is the core of the entire RightTouch platform and underlying technology. It tracks all user behavior and website variables to identify optimal engagement opportunities. This highly flexible tool can be configured in limitless ways to identify any group of users and target their specific needs. All direct consumer engagement activities are managed via this robust engine.
By using Our Dynamic Targeting Engine, you can focus your energy and resources on the customers by presenting them with the products they want most. This targeting tool allows us to identify consumer behavioral attributes in order to launch any one of our products with the right context, including chat, guides, offers, survey invitations or any other rich content offering a targeted engagement experience online.
The Targeting Engine enables:
George Skaff: The retailers should be very specific in selecting the metrics to measure their omni-channel marketing performance, and not to focus on metrics for each individual channel. Engagement metrics should include consumer visits, consumer interactions, conversion ratios, LTV, incrementality in all of the above measurements, as well as customer satisfaction.
George Skaff: Several innovations are happening as we speak, among them ability for the consumer to effortlessly move across the channels, as well as the ability for the retailer to follow consumer journey across the channels. Retailers are starting to pay close attention to consumer’s shopping journey online and offline (in-store.) Products like TouchStore from TouchCommerce are a good indication of the future entails.
George Skaff: Apple Pay improves the ability of the consumer to effortlessly complete the purchase, but it does not change the purchase paradigm in principle. While there has been other payments method (Google, Amazon, etc.), Apple massive outreach in promoting this is helping the fast adoption.
George Skaff: The store of the future will be like a country without borders, where consumer moves effortlessly across different channels executing their intent to purchase. The thing to remember is that customers do not generally have a preferred channel. They will just pick whichever one they think will get them the result they need most quickly with least effort.
Consumers want choice – they will want to use different channels depending on their needs – and the ease with which they can contact a company increasingly forms part of the criteria for choosing one brand over another.
For example, a customer might call their mobile provider to find out if they were on the best price plan, but they will go online to see their current balance – and then turn to Twitter to chat with an agent about data limits abroad.
Another example is when a customer is doing their research online on their laptop looking to purchase a new TV, they check with their friends on social media regarding their friends recommendations on their tablet while sitting on the couch at home, then search for best prices using Amazon mobile app, and still will end up in a physical store to touch the product before they buy, and they might get engaged with the brand chat agent while in the store, ending up purchasing the TV of their choice in the store but using the coupon pushed by the chat agent to their mobile device.
Apple announced online sales in Russia will stop due to the ruble’s volatility. Indeed, the Russian currency has taken a blow recently as it plummeted to an all-time low against the dollar.
The Russian Apple online store has been taken offline while prices are reviewed and commercial activity on iPhones, iPads and other Apple products has been halted.
But how did Apple went from more than $1 billion in sales in Russia in 2013 to pulling out in 2014?
In 2013 Apple failed to reach an agreement to local mobile operators so it went straight to retail chains and selling online. It didn’t go too bad. iPhone sales doubled to 1.57 million units. After seeing huge spikes in demand, the local operators finally gave in and agreed to Apple’s terms. Nevertheless, almost 80% of all sales came directly from retail, skipping carriers.
So basically Apple sold $800 million worth of unsubsidized products without any help from local carriers, a surprisingly good result for the Russian market. “We’re really happy“, said Tim Cook in 2013.
Yes, the ruble drop may be a problem for Apple. But why close the store? Why block sales? Why not just switch to foreign currencies only? Why leave such a huge market? Sure, Russia is struggling with an economic a crisis but on a smaller scale – so is Europe. You don’t see Apple stopping sales there.
It may be that Apple was bound to leave Russia anyway and it figured this is the best moment to do so without worrying investors.
Starting January 2015, Russia will pass a law forcing tech companies to keep Russian users’ data in Russia. That means Apple will have to move some of its servers to Russia and keep them there.
Now this is obviously an unacceptable situation. With tensions between Russia and the US, privacy and data security concerns will force the company outside anyway.
It may be that the ruble collapse is the best Apple can go about a bad situation: leaving a billion dollar market and still look like its saving the day.
They say a picture is worth a thousand words. Add a cool filter in Instagram and it may be worth more. So luxury retailers have taken up on the chance of showcasing offline products in the most popular photo-sharing app in the world.
It’s definitely worth it. With more than 300 million Instagrammers, the social network is a colorful powerhouse, just waiting for fashion retailers to tap into it. And it’s not just the numbers. From Taylor Swift to Robert Downey Jr everyone who’s anyone is walking the red carpet of Instagram.
Along these stars came the most popular and desired luxury brands in the world. With social incentives, aspiring fans can become customers and customers will become brand lovers. So photo sharing on Instagram is a go for brands looking to connect online and offline sales and marketing.
Let’s have a look at these three most effective brands on Instagram:
Hermes is unconventional and creative, focusing on outlining the brand identity without being too pushy. It’s rather “modest” fan base of just over 670k followers shouldn’t be bigger either. After all, Hermes addresses a special kind of audience – the kind that doesn’t come busting doors in look for discounts. They discreetly shop online for $11.300 leisure bicycles and $7.600 bags.
You’ve spotted that special kind of turquoise and the must-have diamond ring that’s globally recognized. 1.8 million Instagrammers are constantly connected to the stylish social media outlet Tiffany’s employs.
The Instagram page is a mix of colorful illustrations, products showcased in glamorous yet simple and stylish photos and fashion advice from models and designers. The whole philosophy is outlined by Francesca Amfitheatrof, Tiffany & Co. design director: “I believe there is great power in simplicity.”
Just like its brick and mortar stores, as well as the online store, the Instagram page is a stylish, simple and elegant work of art.
Burberry is almost unbeatable in terms of using technology to connect to its esteemed audience. Digital retail is so important to Burberry that they’ve designed a flagship store that resembled their website, in 2012. Talk about omnichannel.
Digitally connecting to their customer has been the main ingredient to Burberry’s recent growth and Instagram was not bound to be left behind. The 2.4 million followers can get a glimpse in the lives of the rich and beautiful through Burberry’s Instagram channel.
Models, carefully crafted products and celebrities all mix to give followers, customers and aspiring Burberry product owners, that warm “I’ve got to have this” feeling.
And once that feeling kicks in, the monogramed scarf is just a step away in the online store, ready to be picked up in the closest store. Or sent home. Worry not, there’s free shipping and returns.
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