All those dying eCommerce websites are now pointing to the same failed root cause: we all saw eCommerce as a Digital Marketing stunt.
We are all looking for silver bullets by so-called billionaire Amazon Sellers. Those stories about passive income with Ads generating revenues with a huge ROI are so sexy. Even I sometime do buy into them… For a 30 minutes disappointment the immediate cancellation of the trial period.
The hard fact: Online Shopping should have been treated as a demand driven Supply Chain traditionnal channel from the start. As if it was a lowball IT project, we silo-ed it away from the rest of the Chain. Instead, eCommerce should be the Demand Data provider to your complete Customer centric experience.
It’s all about Supply Chain, dummy!
We’ve touched on a crucial observation. While many early eCommerce endeavors prioritized marketing and flashy presentation, the true potential and complexity of online commerce wasn’t necessarily addressed in all of its facets. Here’s a deeper dive into this viewpoint:
- Supply Chain and Logistics: At the heart of eCommerce lies the challenge of getting a product from the manufacturer or warehouse to the customer’s doorstep in a timely and efficient manner. Traditional brick-and-mortar retailers have had decades, even centuries, to optimize their supply chains. eCommerce platforms, on the other hand, had to build these systems almost from scratch in a much shorter time span. Those who treated eCommerce merely as a digital storefront without addressing backend logistics faced issues. That’s how an online shop like SEBIO.be, even though number 1 in its category in Belgium, almost died under the heavy Account Payables.
- Inventory Management: Accurate stock counts and efficient warehousing are crucial in the digital age, where customers expect a seamless buying experience. An effective inventory management system can mean the difference between a satisfied customer and a missed opportunity.
- Customer Experience Beyond the Click: A flashy website and effective digital marketing can drive traffic, but it’s the post-click experience (easy checkouts, reliable shipping, effective customer service) that retains customers. Prioritizing marketing without ensuring the entire buying process is smooth is a recipe for long-term trouble.
- Demand Forecasting: Traditional retailers use historical sales data, seasonality, market trends, and more to predict product demand. For eCommerce to be successful, similar forecasting models, adapted to the online world, need to be implemented. Understanding online consumer behavior, trends, and purchasing habits is essential.
- Returns and Reverse Logistics: eCommerce platforms tend to have higher return rates than brick-and-mortar stores. Handling these returns efficiently and in a customer-friendly manner is critical. It’s an area often overlooked by businesses that are primarily focused on acquiring new customers rather than retaining existing ones.
- Scalability Concerns: A local store, like Teatower Boutique in Liege, might serve a few thousand customers, but an eCommerce platform like Teatower.com can potentially serve millions. Infrastructure and logistics need to be designed with scalability in mind. This isn’t just about website bandwidth; it’s about being able to handle spikes in orders, customer service inquiries, and returns.
Why does Amazon win where all others fail?
Amazon is NOT an Online Retailer, it’s a Data company. More precisely, it’s a Data driven Supply Chain operator.
- Customer Insights: Amazon collects vast amounts of data on user behaviors, preferences, and buying habits. This data is used to personalize the shopping experience, recommend products, and forecast demand.
- Operational Efficiency: Data drives Amazon’s supply chain, inventory management, and warehousing, optimizing costs and ensuring timely deliveries.
- Continuous Learning: Every transaction, click, and customer interaction is an opportunity for Amazon to learn and refine its algorithms.
How can you reverse the doomed fate of an eCommerce site in 2023?
To reverse the course of a dying eCommerce is a hard, but simple task: Focus first on turning your inventory faster than your cash out. To do this, make sure that your Marketing data is fueling the Purchase department. It’s not an easy task to integrate departments that are often organized in silos. Silos belong to farms, not to your Marketing organization.
To optimize this, you have at hand the most accurate tool there is: the Demand data you can extrapolate from Google Analytics. Based on Data, you can reinvent the way your Retail organization sell to end customers. Doug Stephens wrote about this in his great book “Reengineering Retail”.
Demand Forecasting: Product Performance: Under the “E-commerce” section, you can see which products are your best sellers and which ones aren’t performing as well. This can guide inventory purchasing decisions. This will help you to categorize products by ABC, for which you’ll select to the 20% products that are generating 80% of your revenues.
Traffic Sources: Analyze where your traffic is coming from (organic search, paid ads, referrals, etc.). If a specific source is driving a lot of traffic and sales, consider boosting your inventory in anticipation of increased demand.