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The Beauty and Cosmetics category is one of the fastest moving digital commerce areas. It is a highly competitive and innovative market with large brands quickly adopting digital models and challengers innovating their way to the top.
The emergence of the ecommerce sales channel for beauty brands has seen a long wait. The time has come for beauty retailers to align with the customer’s demand and specific requests. For example, a recent AT Kearney study showed 28 percent of online shoppers use the digital media to get informed on products. They carry this information in stores where they are sometimes more knowledgeable than the store assistants, which may pose a real challenge for beauty brands.
The AT Kearney study shows that only 16% of all online shoppers are online enthusiasts. The rest either use the digital media for information or for shopping for products they are already familiar with:
Online shoppers are more inclined to shop for particular products, such as skin, personal and hair care. Products such as beauty tools and nail care are less likely to be purchased online, unless is a very specific product, one the customer is already familiar with:
In this post we’ll get a glimpse of the eight most important type of beauty brands that engage their users through digital commerce (also). We’ll have a look at a selection of global champions with different backgrounds and different models. From digital pure-plays to established brick and mortar brands, let’s have a look at some of the most interesting approaches to beauty and cosmetics digital retailing:
As expected, Amazon leads the way when it comes to online beauty retailing also. Customers are delighted to almost 2 million products, including luxury brands.
Its Beauty category is the go-to place for most of online enthusiastic shoppers, where Amazon is available. And with Amazon’s shipment policies, that’s basically everywhere.
Amazon’s secret weapon lies in its free-shipping policy (for orders above 25$), a great motivator for online shoppers and a better threshold than challengers Sephora and Beauty.com.
Another great asset Amazon will use to gather shoppers around its beauty retailing section is the fact that more customers use Amazon (30%) than Google when doing online product research.
Sephora is generally seen as the actual leader in the digital beauty commerce. Though it lacks Amazon’s ecommerce strength, the company is part of the largest
luxury high quality goods (ahem…ahem) group, LVMH, packing a lot of beauty retailing know-how.
The company has developed a great omnichannel model that focuses on mobile as a bridge between online and offline.
One of the best things Sephora.com has implemented in its web store is the content marketing and digital assistance features. I’ve previously covered the subject and praised Sephora’s efforts to offer quality content, as praised are due.
The curated content customers find is a great choice to build loyalty. So is the Community where customers can browse among the knowledge base or post questions and interact with professionals.
As mentioned, one of the greatest assets Sephora has is its focus on digital rich content. Users are treated to:
Some other touches make Sephora a great choice for beauty products customers, not the least of which are the three free samples with each order (a great way to drive future orders) and the mobile apps that make us of barcode scanning to offer price info and customer reviews.
Beauty.com is an online retailer so it has no apparent need or intention to leverage offline or omnichannel sales. It has developed specific filters and features to cater to customers that either know what they want and want the best price or they can quickly decide.One of the features that really stands out (they have a pop-up to insure it stands out) is “Auto reorder and save” option. Simply put, the online retailer has noticed the habitual purchase beauty customers take and leveraged it.
Customers can set an auto-reorder flag for certain products, which can be shipped each 30, 60 or 90 days. Before the order is shipped, customers receive an email notifying them and they can pause, skip or cancel the auto-orders. The customer incentives are savings and free shipping.
Another great feature that lets customers reach the right product is the filtering option which is set not only for product features but also customer concerns and specific needs. In the Make-up section, the eye category, one can find brand and ingredients options, but also filters such as concerns (acne, dryness or oiliness), benefits (curling, hold or smooth) and skin type. Unfortunately, the filters are not usable on the smartphone version of the web store.
Just like its direct online competitor (Sephora.com), Beauty.com offers free samples, free shipping for orders $35 and above, free returns and 5% back through its loyalty program. It also features great content areas, such as its Beauty Blog, with Romy Soleimani, The Latest Trends section reviewing product news and a Beauty Videos section, ranked according to customer reviews. A great no-no on the video section is the fact that videos embedding is restricted to affiliates only, leaving a lot of marketing potential untapped.
Consumer demand is the one thing that can decide whether a retailer is successful or not. Of course, there is a whole field of marketing studies to determine how we can influence consumers to purchase. But a really important aspect of how good retailers fare in the market is their ability to “sense” demand, not just influence it.
In a recent study, IHL Group claims Overstocks and Out-of-Stocks cost retailers almost $1.1 trillion world-wide. To put it in perspective, that figure is the size of Australia’s GDP.
What that means is that Overstocks and Out-of-stocks, collectively defined as Inventory Distortion, are a problem that cost retailers world-wide 7.5% of their gross revenue.
The figures translate into poor performance, decreased customer satisfaction, decreased sales and increased costs of inventory warehousing and inventory spoilage. Basically there are two really simple outcomes:
Either way, one thing is for sure: Inventory Distortion leads to poor retail performance.
Demand Sensing is a concept and set of technologies that make use of analytical and prediction models to estimate … well … demand. Imagine a retailer that runs a network of 10 stores, one online store and has a mobile app that drives sales also, along side a call center.
Said retailer probably has an inventory management system, an warehouse management system, a sales reporting tool and probably some type of integration with suppliers and manufacturers.
Let’s imagine this retailer selling a type of red shirts that is available in one of the 10 stores and that inventory is not available online. If a customer will visit 3 of the stores in search of that particular red shirt and then search for it online and still not find it, it will probably consider it to be out of stock and the retailer would lose a sale opportunity.
You probably see where the problem lies: even though the product was available, it was not available to the customer and opportunities were lost. The same thing goes for products that are not exposed to the customers, or they are, say, unreachable on the shelf or unfindable on the web store if the search engine is not fit for the job.
The opposite situation, where demand is not correctly estimated and out-of-stocks become a reality, are just as bad as sales opportunities are lost.
The solution lies in gathering enough data across all sales channels, compiling this data and using models to predict demand. That easier said than done because …
As you are reading a blog on omnichannel retail, the term was bound to appear somewhere along the line. So here it is. You can’t have Demand Sensing without a connected sales operation and inventory transparency. All inventory sources have to be connected and data should be generally available. So should sales data across channels.
The picture below shows an example of omnichannel supply chain, one where all the operational pieces work together and share data. When such a structure is implemented, demand is easily “sensed” and estimated and thus inventory distortion can decrease.
So now we have the data. Implementing omnichannel retail can lead do a better demand sensing and therefore improve inventory distortion, a small glitch in the global retail system costing “only” $1.1 trillion.
Today marks the start of the 10th annual edition of GPeC Summit, one of the most important ecommerce events in Central and Eastern Europe.
With a strong focus on growth, the region sees fast innovation and lots of opportunity.
(Photos courtesy of GPeC Summit / Resp. owners)
The event is held in Bucharest, Romania, a country with a 55% internet penetration and a high ecommerce growth potential. The ecommerce market in Romania grew from EUR 600 million in 2013 (~$668.7 million) to approximately EUR 1.1 billion (~$1.22 billion) in 2014.
With such high growth rate, the event was bound to attract regional and international market leaders and speakers.
Among the speakers at the GPeC Summit you’ll find regional and international entrepreneurs, digital marketing experts and ecommerce professionals.
Among the highlighted conference panels, the audience can tap into insights provided by the likes of:
The full list of speakers on the summit’s website, alongside other data regarding the event.
A very important part of retailing is pricing and the most important part of pricing is the cost. To get a complete view of how much a product would cost, retailers think in terms of net landed cost.
The net landed cost is the sum of costs associated with manufacturing and distribution. When thinking in terms of net landed cost you have a better chance of understanding your total cost.
A common fallacy is thinking of costs just in terms of manufacturing, either from a purchase only point of view (how much you pay your supplier for a given product) or a more inclusive manufacturing point of view. The manufacturing point of view assumes that even if you are not manufacturing the product yourself, you still have the liberty to choose another supplier or change merchandising altogether.
The most important advancements in retail, in terms of supply and cost effectiveness, have focused largely on manufacturing costs in the past decades. This has lead to increasingly efficient production lines, a more competitive manufacturing market, shifting manufacturing overseas and many others.
This manufacturing improvement trend has had beneficial results on the customers life through more accessible, more diversified merchandise. It also meant companies managed to sell more, to more people. Companies such as Walmart have grown to their existing magnitude thanks to a wide network of suppliers, providing them with products manufactured at the best possible cost.
As retailers improved on the manufacturing, there was one part that has been left mostly untouched. That was the distribution. Distribution costs have decreased but not dropped.
To get a better view of why, get a glimpse of what are the factors that weigh in the distribution costs basket. Here you have costs associated with getting a product from the manufacturer to the customer. This includes freight, stocking, customs, costs associated with store development and maintenance, marketing costs, customer support and others. This is a very large area and a lot of work to be done.
Today, distribution is changing, and it’s changing fast. As a result, the associated costs will follow.
At the forefront of this change we have several factors, one of which is omnichannel, another being technology and the third being data. This is how they weigh in and these are the areas that will be soon transformed:
Logistics have not been fully transformed by technology. For example, freight has been virtually unchanged in the past decades. Think about it this way: cargo ships are still loaded after excel files are checked, faxes are sent and handshakes seal deals. For a large part, the industry is archaic and it’s but a question of time until it will be transformed. There is a lot of room for disruption and companies such as Freightos have challenged the status-quo and promise 10-17x ROI. In weeks.
And it’s not just freight. Fleets of small vans contractors have taken up the Uber model and are now roaming the streets of Hong Kong to deliver goods the likes of DHL and UPS can’t.
Omnichannel makes possible and desirable a few things the previous retail models couldn’t. First of all it allows for a better inventory transparency and improved shipping effectiveness.
Customers that would otherwise expect orders placed online to be shipped at home with the respective costs and operational challenges, can now just pick up orders in store. Or better yet, they can have the closest store ship these items at home, instead of mixing the order in a large, central warehouse.
Omnichannel also makes possible having just a limited number of products in store and keep the most either in the warehouse to be shipped when convenient or with a supplier. By reducing store footprint companies can reduce fixed costs associated with marketing and distribution of products, thus decreasing costs.
And it’s not just these, the many aspects of omnichannel retail all converge to a decrease in distribution costs and more efficient ways to handle product demand.
John Wanamaker was a retail innovator. He is credited with the fixed price and money back guarantee marketing concepts. Wanamaker was one of the pioneers of the department store and loved advertising. He is also credited with the famous saying :
“Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”
Good thing that was more than a century ago.Marketing is now changing rapidly and unfortunately for some advertising agencies, long gone are the days when the Mad Men of advertising charged millions for concepts that could or could not work.
With the rise of digital commerce and omnichannel retail and the smartphone to bridge the gaps, data is all around. Marketing is now data driven and the half of budget Wanamaker complained about can now be easily tracked. Companies such as Macy’s are investing heavily in omnichannel policies and marketing. The results are clear. While their competition is diving, Macy’s business is on the rise.
Advertising is data driven and marketing costs are constantly improving.
By improving distribution and decreasing distribution costs we have two very important things happening. The first is that companies engaged in improving this area will be more profitable and more inclined to continue on this path.
The second thing is that lower distribution costs mean better prices for the consumers, therefore an improved appetite for consumption. Improved profitability and decreased prices – these are two very strong forces that will shape tomorrow’s retail. And it’s happening today.
Check Point Software Technologies released a media alert regarding online shops running Ebay’s open-source software Magento.
The company discovered a massive vulnerability that allows malicious attackers to execute remote code.
If it’s exploited, this vulnerability can fully compromise the store running Magento. Attackers have the ability to completely bypass the store’s security and access the full database and administrative tools.
“The vulnerability we uncovered represents a significant threat not to just one store, but to all of the retail brands that use the Magento platform for their online stores – which represents about 30% of the ecommerce market.” – Shahar Tal, Malware and Vulnerability Research Manager
Prior to disclosing the findings, Check Point ST announced Ebay’s development team on this issue. As a result, the company posted a patch on February 9, 2015 (SUPEE-5344 available here). If you are running Magento and have not patched your application, now is the time to do it.
With over 240 000 installs, Magento is the most popular open-source solution to ecommerce stores in the world. As you know, with popularity comes a lot of attention and especially attention from digital threats. Some of the fastest growing online retailers are using Magento as the go-to platform. Names like Alex and Ani, Warby Parker or established companies such as Christian Loubutin or Olympus have been subjected to this threat.
It’s not the first time either. This example from HackerNews shows how attackers advertised compromised shops in order to gather credit card information.
Long story short – if you are running one of the popular open-source ecommerce platforms (think Magento, Prestashop, OS commerce) – be on the lookout for security threats.
It’s impossible to predict the future and basically that’s what strategy is. Based on historic evidence, data and outside factors, companies try to predict how the market is going to evolve and how they can best benefit from this evolution.
While strategy is rarely undebatable and never perfectly executed, it is a very important part in evolving companies. Having a vision and the plan to achieve that vision is what makes companies such as Amazon, Walmart or Apple stay ahead of the competition.
But sometimes things go wrong and strategy mistakes happen. Here are three cases:
Overstock is one of the largest online retailers in the US. It is an Utah based retail company that has a 20 years background in commerce.
The company sells more than 1 million items on the Overstock.com web-store. The products range from home deco to jewelry to electronics to cars to insurance. Did I mention they run a pet adoption online service? And a farmer’s market?
You’ve probably guessed where I’m going with this. Focus is really not their strongest asset. The company has basically organized its strategy around the old “let’s just try everything and see what sticks” motto. This is, of course, the winning formula to tackle Amazon. This and of course Bitcoin, a surefire solution by the company’s CEO to fight the upcoming zombie revolution.
No, really, he actually said that:
“Someday, either zombies walk the Earth or something close to that[…]. Bitcoin is the solution.”
Patrick Byrne, Overstock CEO and Bitcoin Messiah. Source: Wired.
Overstock’s strategy turned “un-focused” to hilarious when it announced its new media service aimed at Amazon’s Prime earlier this year. A bold move one might say, as Overstock is missing a few things called content, digital infrastructure, hardware (think about the Kindle), Amazon’s market share and media know-how. But they did get featured in the Onion a full 2 years before they’ve made the move.
Make no mistake. Walmart is huge. Walmart is on top of the retail food chain (excuse the pun). It has more than 11.000 stores, in 27 countries and employs more than 2.2 million people. The company is the biggest retailer in the world with a revenue of $485 billion.
But that doesn’t mean it should be successful online, does it?
Walmart’s digital strategy is a bit … puzzling, if I may. The company’s “ecommerce” store has been online since 1996, about the same time Amazon started to grow. Unlike Amazon, Walmart.com didn’t really matter in the company strategy until 1999. That’s when the company announced the customers that no orders placed after the 14th of December could be fulfilled in due time for the holidays.
Walmart then decided to spin off that pesky thing called the online store in 2000 and transferred the operations in Silicon Valley, under a partnership with Accel Ventures. The reason, as mentioned in this throw-back article from 2002, is that online is “not where their customer base is”.
After an unusually horrible decision to shut down the store for a month in the fall of 2000, for a revamp, the store was just as bad as before. But it did managed to miss the 2000 holidays season due to a late re-start.
The company eventually realized the blunder and in 2001 bought back Accel’s share in the ecommerce company. Good thing they’ve realized just how important ecommerce was. It didn’t even take long to improve and redesign the webstore: just 5 years, until 2006.
Walmart was also quick to realize it can make a connection between the online and offline channels. In 2007, 11 years after it launched its online store, it launched the Site to Store program, allowing customers to order online and pick up in store.
Blunder after blunder, the company eventually realized the importance of stepping into a new era, one where customers are connected to Walmart digitally. The company has since changed its perception on ecommerce, hired talent and started experimenting with upcoming technologies.
But if there’s something worse than an un-focused strategy and a rigid strategy, that has to be … no strategy:
There are very few cases where the lack of strategy and extensive investments are seen so clear within the same company. Fab is one of these rare fails. The company was founded by Jason Goldberg and Bradford Shellhammer and experimented with some pivots. Five that I know of, mentioned above.
It went on to raise a total of $336 million and for a while it could have been the next Amazon, or Ikea, or Apple, or whatever founder Jason Goldberg thought was the fad of the day. Eventually it went on to be a huge whole in the investors’ pockets and was acquired by an undisclosed sum in march 2015.
The whole story is outlined in this cautionary tale. It could be a very funny strategy fail if it weren’t such a sad story for investors, founders, employees and in the end – the whole online retail market. Fab is the story of what could have been, if someone were to lay out a smarter strategy. Or some strategy for that matter.
Online commerce is growing fast and innovation is key to staying relevant on the market. The simple catalog model is still here but for how long? With customers in need of customized products and personalized offers, with omnichannel gaining momentum, it's the new and innovative startups that are defining tomorrow's shopping standards.
To show just how important innovation is in online retail, this post will showcase three web-only business models that proved successful. Each of these companies has been listed by Internet Retailer as a top-growth retailer.
Let's start with …
Year on Year Growth: 200.3%
You know how cosmetics and hair care companies list so many hair coloring products? Yeah, that's because hair color is quite a personal choice. So eSalon has made sure it stays this way. They provide a special customization form where customers can offer personal info, relevant to building the perfect hue. Hair coloring delicate and often hard to do perfect. So there really is a lot of data you have to fill in before you get the right product but I believe it is worth it.
The company's main target are women and do it yourself hair coloring is not an easy process. Help from expert that can combine and blend multiple ingredients in one perfect hue is great. But eSalon doesn't have to do this blending too often. Once the hair color is just the right fit and the customer is happy with it, it will probably keep coming back.
Year on year growth: 242.10%
Here they are – shaving blades. It's the one item most men have to use daily. Dollar Shave Club manufactures shaving accessories and personal care products for men. Their main product: shaving blades, sent each month to customers, for 1-9$ subscription fee.
Dollar Shave Club (named this way because the blades start at $1 + shipping and handling) has a great marketing and branding approach, fit for their target. Don't believe me? Have a look at this great promo video:
Too bad they only ship in the US, Canada and Australia. The world could be a better place for men worldwide.
Year on year growth: 550.2%
Blue Apron is the fastest growing US retailer, with a 550% growth from last year. Any kind of business that grows five times in one year has to be a pretty amazing concept. And it is.
Think of Blue Apron as IKEA for the kitchen. Cooked meals get a lot less expensive when they're purchased as ingredients. Basically a web web grocer, Blue Apron has decided to take a special approach. By showing how ingredients fit together with recepies, they were able to increase the number of products purchased by customers.
A great concept like Blue Apron has to have a great team behind it. That team is made up of a previous VC investor, a previously technical architect and of course … a chef. A recipe for success, if i might say so.
For a very long time, retailers used a linear approach to the supply chain. It meant that merchandise flowed in just one direction. Products would move between the manufacturer, the wholesaler, the retailer and onto the sales channel. This sales channel meant the brick and mortar store, in all its variations, for a very long time.
With the internet revolution came the concept of eCommerce, where customers would place the orders on an internet store front and they would receive it at home. Medium and large retailers used the same method of silo-management to the online store.
The "silo" approach meant that each new sales channel would be treated as a separate silo, independent from the other stores. That worked for the previous concept of brick and mortar stores, so it had to work for the ecommerce approach, too, right?
Not quite. The concept of having an online store work as a separate operation doesn't fit the profile for the new consumer. The fact is that there are very few exclusive online shoppers. People like to spend time in stores, touching merchandise, they spend time on social media, get informed, place calls to ask for info and generally live in a complex world that mixes online and offline experiences.
Customers demand new options from retailers, things such as "buy online, pick-up in store", "order in store, receive at home" – just some of the many challenges retailers face right now, trying to connect with the new consumer.
To go from being a retailer to being an omnichannel retailer, companies need to step up their game. And it's not just marketing or hardly operational shopping programs. Customers demand a real change in the way they are engaged. Companies such as Macy's have invested in creating experiences that handle multiple journey maps for their customers and the results are satisfying.
To achieve this, retailers need to adopt an omnichannel supply chain. The biggest difference between this type of approach and the previous is the fact that it is omni-directional. Whereas the classic supply chain was mostly linear, flowing from one place (manufacturer) to the other (customer), the omnichannel supply chain flows across many boundaries.
To achieve relevance in the omnichannel age, retailers need to be ready to handle:
The omnichannel supply chain is not easy to achieve. Medium and large companies are caught up in a web of systems and processes that may have worked 10 or 20 years ago but they are now obsolete. The linear approach to supply chain management and marketing is really not their best bet. The change in consumer behavior is irreversible and the omnichannel supply chain is one of the most important changes in today's retail.
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.
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