How to Build a Great eCommerce Business?

There are thousands of sites across the world selling from diamonds to grocery. We have seen multi-billion dollar businesses like Amazon being created while a huge number sites do not even last a year. What is it that makes Amazon more successful than the sites that could not attract enough buyers to sustain? The reasons below might look simple and intuitive but believe me 9 out of 10 sites do not get the basics right. There are a number of eCommerce Blogs that have blogged on this topic but I believe that there is still a need to write about it to give this topic the attention that it needs. Here are my 10 things that a digital business need to get right:

1. User Experience

User experience is probably the most important reason as to why the consumers keep coming back to a few sites while there is no loyalty for others. The objective should be to make online shopping so easy and convenient that customers won’t think twice. User experience is more than just user interface design: it encompasses all aspects of the end-user’s interaction.

Human Factors International published a white paper on user experience and it suggests that what creates a truly successful eCommerce experience is the dynamic synergy between usability, power, persuasion and branding. The figure below shows the five dimensions of user experience.

Five Dimensions of User Experience

It is important to remember that user experience is dynamic, because it changes over time as the circumstances change. What was good yesterday in web 1.0 is not good today in web 2.0 and what is good today will not be so in coming years. In the year 2000, even an online catalog was a big deal but today consumers expect the offline experience while buying online. Some retailers have started to get fitting room online so that the consumers can get experience as close to a physical store as possible. Who knows, tomorrow the buying experience might shift to videos or gesture.

2. Focus on Supply Chain

An online store is much more complex than a physical store due to scale of business and delivery to the customer. In most of the cases, the SKUs (Stock Keeping Units) are also much higher than that in a physical store leading to added complexity. Therefore it is very important that the online stores focus at least 50% of their efforts on the supply chain.

A number of start-ups have relied on drop shipping which involves transferring customer orders to another company, who fulfills the orders by shipping the items directly to the customer on their behalf. However, with increasing competition, drop shipping may not be a viable option as consumers are not ready to wait. In fact a number of companies have started same day delivery which is not possible in drop shipping without compromising on quality. Hence, the best available option would be to stock inventory in the warehouse which can be an expensive proposition. I am not proposing that warehousing might be a better option than drop shipping. It is for the individual companies to decide basis their own unique situation but in general the trend is likely to be towards in-house warehousing.

Delivery is another important aspect of supply chain. Timely delivery has started to emerge as a key differentiation. Indian eCommerce sites like FlipKart and Jabong have in-house courier services to overcome the uncertainty owing to poor infrastructure. Time will tell if the companies can really own the courier services without having a major dent on their bottom lines or added complexity in the operations. However, the consumes have started to expect faster deliveries.

3. User Reviews

Studies have shown that consumers have more faith on user reviews than what the seller has written on the site. According to a recent survey from PowerReviews, 59% users get influenced by user reviews (refer to the figure below). The same study shows that almost half (48%) buyers consider user reviews a must on any retail site. Unbiased reviews help consumers make decision faster. Once the consumers make up their mind, it is unlikely that they would visit other site to find a better product or a better deal.

I find the user reviews on Amazon and Tripadvisor the best across all the sites. No wonder both the companies are doing exceedingly well.

4. Social

Social media has started to change the way we shop online. The data in above chart clearly shows the impact of social on the buying behavior. Such is the power of social that social commerce is emerging as an important sub-set of eCommerce. User reviews are important for any site but in future, I would not be surprised if the online retailers start to rank the reviews by social distance from the consumer as anybody would trust the family and friends more than unknown people. Tripadvisor highlights the reviews from social graph very well and it is one of the reasons for its popularity.

Social Log-ins impact the behavior of the shoppers and the consumers really do not want to create yet another digital identity. A study by Monnetate shows that almost 40% consumers in US prefer using social logins to creating a new/guest account on e-commerce sites. The consumers using social log-in also spent relatively more time on the site compared to people who cannot comment or log-in using their social identity. I am reproducing the infographic below from Monnetate for the benefit of the readers (Please note that the infographic is based on survey in US).

5. Mobile

Mobile is a mega trend that the digital commerce entrepreneurs cannot ignore. The internet usage on mobile will be far higher than that on fixed line, e.g. in India, the mobile internet traffic has already exceed the internet traffic coming from fixed line. Mobile has inherent benefits of location, imaging, sensors, etc. which would allow the entrepreneurs to creatively use mobiles for digital commerce. I had written a post on the top trends in mobile commerce which highlights the reasons behind proliferation of mobile for commerce.

6. Customer Service

Nothing can take away the importance of great customer service. Good customer service is central to improving customer loyalty, encouraging positive referrals, and increasing sales. Retaining customers is especially important for e-commerce stores, where online competitors are just a few clicks away. Customer service is especially important in today’s socially connected world as consumers can harm the image of a company with a single comment.

Meeting consumer expectations is very important for any online retailer. This means honor the commitments made to consumers at any cost. If a retailer promises to make the delivery in 5 days and delivers in 4 days then the consumer is happy but if the retailer promises to deliver it in 2 days but delivers in 3 days then the consumer is not happy. On the face of it, in the second case the delivery was faster than the first case but it is all about the promise made to the consumer and hence the expectations set for him.

7. Analytics + Upsell/Cross-sell

Any online store captures enormous data on consumer and can capture consumer’s attention anytime in the funnel. A Forrester study shows that when online retailers suggest relevant products, they increase the average basket by 47 percent and the number of products sold by 27 percent. Amazon’s key strength is its data analytics capabilities and the way it uses the data to  to upsell or cross sell other products. The benefit of analytics is huge as the retailer is able to get more out of the same customer thereby increasing customer profitability.

When correctly implemented and interpreted, web analytics provide eCommerce merchants with a wealth of valuable, actionable data that can be leveraged for great benefit. One of the techniques that is being used a lot these days is called the “Big Data Analytics“. Big data analytics is a process that allows you to examine large amounts of data of different varieties to uncover hidden patterns, unknown correlations and other useful information. Any online store aiming to be highly successful should be spending significant resources on analytics.

8. Business Model

Business Model is perhaps most important aspect of any business. Business model consists of the 3 V’s

  • Valued Customer – Who is the customer?
  • Value Proposition – What is the pain point that we are solving?
  • Valued Network – How are we solving the pain point?
We have already talked about the valued network under supply chain. It is important to know the customer and his pain point that one is attempting to solve. One needs to ensure that he or she is creating a unique business differentiated by target segment or geography or pricing or the way the product is delivered. Otherwise, one would end up creating yet another clone of any popular shopping site. Creative business models have emerged in the last few years for eCommerce with many of them with the potential to become big in future.

9. Application Programming Interface (API)

APIs are a set of standards and instructions that enable the software applications to talk to each other.  Many entrepreneurs ignore the importance of APIs in the initial development phase. This is a costly mistake as they miss out on the opportunity of others creating on top of that they have themselves created. Today, the online world is more connected than we think. No player can do everything by himself but in partnership with others, it can provide a complete experience to the consumers. By making APIs a priority and integrating them into ecommerce platforms, online retailers will be able to enhance the user experience across multiple touch points like smartphones, desktops, kiosks, tablet, etc. Today over 20K shopping and payment APIs are available

10. Images

The high street stores spend huge amount of money on display and interiors of the store to attract the shoppers to their store and then make them spend more than what they had originally planned to. The same hold true for digital commerce. The user interface is like interior decor of the online store but then the images make the interface come to life. Images make everything better. And that’s a good thing, considering how several big shifts in the social media world are now placing a bigger emphasis on using high-quality photos in content. The infograpic below from MDG Advertising shows the impact the images are having on the eCommerce.

In this post, I have deliberately not talked about the IT infrastructure, uptime, etc. to keep focus on the important business aspects which sometimes get missed. I would like to get your feedback on the issues I have raised and please add if I have missed anything.

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Disclaimer: The views expressed in this article are my personal views and do not reflect the views of my employer.

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