It’s 2024. Do you know where your customers are?
Yep, they’re online. And that’s where you need to be if you’re looking to grow, scale and reach as many customers as possible.
For products and services alike, e-commerce is an easy game to get into, but it’s becoming an increasingly tough game to win. The playing field is mature — Amazon is 30 years old, after all. There’s a lot to know, and your go-forward strategy will differ depending on whether you’re selling products or services.
Because e-commerce is an enormous topic, we’ve narrowed the scope somewhat for this article to mostly focus on those businesses that are selling products.
A quick primer on types of e-commerce:
E-commerce shakes out into different types based on the nature of transactions and the parties involved. It’s also possible to operate across multiple types to reach a broader audience and diversify your operations.
- In business-to-consumer (B2C)
You’re selling your products or services directly to consumers, the way Amazon or Gap do. This is the most common type of e-commerce.
- In business-to-business (B2B)
You’re selling to other businesses, like a manufacturer selling components to a car company or a software company selling enterprise software to other businesses.
- In business-to-government (B2G)
You’re providing products or services — IT services, say — to government entities.
There are other kinds of e-commerce, but since you’re reading Douglas, we’re assuming you’re selling as a business and not as a consumer.
Why should I consider e-commerce?
Well, it’s a bit of an expectation nowadays. In a web-first world, having an online presence is necessary to remain competitive and meet customer expectations, and all the better if they can buy when they’re on your site. People kind of expect to be able to shop for everything they want online, so unless you’re offering giga services like house building or an elite, hyper-specialized service like ghostwriting, having a digital storefront makes it easy for people to buy from you.
Adding online sales expands your market reach beyond your location and improves convenience for your customers, as e-commerce platforms operate around the clock and on all continents. E-commerce also provides the flexibility to scale your operations quickly and efficiently, adapting to changes in demand and customer growth.
Arguably the biggest advantage of engaging e-commerce is the ability to leverage data analytics to enhance both your decision-making and your customer’s experience. Mainstream platforms like WooCommerce and Shopify provide granular data about your customers’ behaviour, preferences and trends, which you can then use to inform product development and build more targeted marketing strategies.
Adding online sales expands your market reach beyond your location and improves convenience for your customers, as e-commerce platforms operate around the clock and on all continents.
When is the right time to move into e-commerce?
For a product-related business, you should consider e-commerce when you’ve got an established product that’s attractive to a known audience. You know your customers, their demographics and why they buy. You know what’s creating the demand and you’re very comfortable with it.
A key question to answer at this point is whether you’re going to simply sell from your own website or on Amazon. If both, your next question is: How do I manage the tension that immediately emerges between the two? That’s because selling on Amazon is a game of margins — unless you’ve got a stellar product that nobody else has thought of. “If your customer lives outside of your neighbourhood or your city and you believe that you’ve got a differentiated product,” says Mark How, CEO of NewGrowth eCommerce and Origins Ecommerce, “and you have margins that enable you to survive on 25 to 35 per cent of revenue — you have a 3X margin — it’s possible to be able to sell online.”
A 3X margin? Well … yeah. Because the field is mature and diversified, it takes a stiff game to beat out your rivals unless you’re selling something very innovative without a lot of competition. “The challenge around e-commerce is people think it’s going to be high margin,” How says. “Unless you’ve got that sort of unicorn, it’s going to be lower margin because you really are going to end up in a fight with people who are ahead of you in the game … or just with you in the game.”
If you do opt to sell on Amazon, your second set of challenges is to have enough margin in your product sale that you can sell competitively via advertising (which costs money) or via competitive ranking on Amazon (which requires you to pay Amazon out of your sales). “Amazon takes quite a bit of money,” How says. “You need to rank competitively, and in order to rank competitively you must advertise on Amazon. It’s not a requirement, but more and more, to compete you must.”
As a mature sector, e-commerce is so widespread now and competition is so dense that achieving great results demands expertise in a number of areas. “You have to have the capacity for a broad amount of learning,” How says, “or have the capital to hire experts.”
If you’re going it alone, take your time, do your research, prepare to learn and adjust, and take the long view.
And if you’re a business with capital? Hire a digital agency.
As a mature sector, e-commerce is so widespread now and competition is so dense that achieving great results demands expertise in a number of areas.
I’m up for the fight. How do I get in the game?
Depends on your business. Are you a hotel worth $200 million with a killer advertising budget? Or are you a mom-and-pop retail shop? The questions you’ll ask and the answers you’ll find are extremely different.
What you do here also really depends on your capacity to invest. You can wade in slowly, commit to the enormous learning curve (and, if you’re smart, a long horizon) and your margins can be really terrific — IF you can be patient. “If you’re actually needing to move with any kind of gusto or speed,” How says, “it can be not just expensive to get set up, but it can be costly on an ongoing basis.”
Some web platforms like Wix and Squarespace enable e-commerce, but since they weren’t specifically built as online marketplaces, a lot of beginners go with Shopify. It’s a user-friendly one-stop-shop for a fledgling e-commerce business, from building your storefront and managing orders to processing payments and making sense of user data. You can set up a new business quickly, and there’s plenty of functionality, options and room for growth.
But no matter your preferred method of entry, like any strategic initiative, getting started in e-commerce demands that you get intentional with your planning and execution.
First you’ll want to identify your niche and conduct your market research.Assuming you’ve got something unique that an online marketplace like Temu won’t just carbon-copy and outsell you on, do all the due diligence of researching your target audience, competitors and industry trends. If you’re just testing the waters, you might try some low-stakes market testing, launching your product on an innovator’s platform like Indiegogo or Kickstarter. This is a cheap way to see if anybody cares; early adopters go there to keep an eye on what’s coming up. “It helps you learn about your competition, and it focuses your mind on how to differentiate your product,” How says. “Everybody thinks they understand how to differentiate their product, but they very rarely actually understand what a brass-knuckle duke session [Amazon] really is.”
You also want to ensure your product is truly market ready. “Make sure your product has all the kinks worked out and that 99 per cent of your customers are happy before launching any commerce program,” advises Don Wharton, chairman of SureSwift Capital, a venture capital firm that buys profitable SaaS (software as a service) companies and rolls them up into impeccably managed funds with monthly distributions. “A product that isn’t consumer ready could invite negative reviews, which are difficult to come back from.”
Next, put together your business plan. Define your value proposition, pricing strategy and revenue model. Build out your financial plan, estimating your startup costs, ongoing expenses and revenue projections. Don’t overlook any costs for inventory, website development, marketing and logistics. Set your short- and long-term goals, including your sales targets, market penetration and how you plan to acquire customers.
Now the shovel hits the ground! Set up your site’s core features like product listings, your shopping cart, payment processing and your SSL (Secure Sockets Layer, an encryption-based security protocol) certificate. Some e-commerce platforms — WooCommerce, Shopify, BigCommerce and others — will do all this for you. When you’re considering platforms, look at things like how easy they are to use, customization options, scalability and integrations with payment gateways and shipping services.
Many people choose Shopify as an efficient way to enter the e-commerce space. It does a great job of supporting businesses that make $5 million or less in revenue and offers a ton of functionality. “Shopify is sort of like a vacuum cleaner,” How says. “It’s got a core engine that does a set of jobs, and then you have all these accessories that you can put on depending on the job you’re going to use it for.”
Now add the essential tools and plug-ins that will help your business run. Great systems for things like inventory management, analytics, email marketing and SEO will help you manage your store efficiently and track performance from the start.
Heads up: When you get a little bigger, suddenly payment processing becomes a BIG deal.
Obviously for e-commerce, the payments side of it is key. A lot of folks get themselves into a jam because they’re in such an excited hurry to get started that they don’t think about how things will play out in the future. If you don’t plan ahead, you may find yourself years down the road with a much bigger business but paying an outsized percentage with the payment provider(s) you signed up with when you made your first candle.
“What you’ve got to be careful of is getting too ingrained and too built into it so that when you do become successful, you grow and you scale and those payments become millions and millions of dollars every year — amounts that really, really matter,” says Peloton Technologies CEO Craig Attiwill. “If you’re creating a business plan, there should be a very big section on how you’re going to get paid, what type of payment methods you’re going to accept. And then have a payments expert look into the regulation.”
Otherwise, as your business evolves more complex payment needs, you might find yourself juggling a Jenga tower of fintech that’s cobbled itself together over the years, taking money through different payment processors (Stripe, Moneris or Square, or electronic funds transfer) while at the same time paying suppliers, payroll, international money wires and GST/HST payments through a fistful of different routes, from bricks-and-mortar banks to EFTs, Moneygram and Canada Post.
Taking a good, hard look at what you’re signing up for — and how easy it’ll be to shift to a more suitable, integrated paytech over time — can help you from getting hosed on payments as you grow.
“Most things in e-commerce are best thought of through a lens that looks something like a nautilus shell,” How says. Start close, with what you really know and can differentiate, then move one tier further from the middle. “Run a very efficient experiment under excruciatingly tight budgets until you see that you’re actually starting to succeed,” he adds. “Keep your bets close, narrow and very, very much within focus. You have to pay attention, otherwise your money can just disappear on you.”
Dip Your Toes in with Affiliate Sales
You don’t have to set up a whole business to benefit from e-commerce. You can sell other people’s things instead! Referral-based marketing has been around since before the days of Mary Kay Cosmetics, and it’s particularly great for SMEs (small and medium-sized enterprises) wanting to exponentially increase their opportunity for exposure through other people’s networks.
Having an affiliate program is a really low-entry threshold,” says Tracie Clayton, director of corporate marketing for SureSwift Capital and former interim GM of LeadDyno. “You don’t have to be an expert in many things to be able to start an affiliate program. The threshold and investment is minimal, and you could be up and going overnight.”
Make sure you vet and monitor your affiliates, to ensure they’re following policies and procedures regarding any appropriate laws and designed to protect your brand. “Without monitoring, overzealous affiliates may spread misinformation or overpromise, both of which may put your brand at risk,” says SureSwift Capital chair Don Wharton.
Hold customer satisfaction as your north star. Data is power in the e-commerce space, so set up a Net Promoter score program to help you gauge feedback from customers. You can assess scores for different groups. For example, grouping all customers referred by each larger affiliate, or grouping by affiliate-driven traffic separately from organic traffic and surveying each group independently.
Affiliate-management software makes keeping track of affiliates and their sales a snap. LeadDyno’s downloadable checklist will guide you through all the steps of setting up a robust affiliate sales program.
