Tag Archives: ecommerce website

Making Money Online Requires Analysis, Planning, Effort and Lots of Patience

It seems that right now is the best time for making money online. According to Statista.com, retail e-commerce sales worldwide amounted to 1.86 trillion US dollars during 2016 and online retail revenues are projected to grow to 4.48 trillion US dollars in 2021.

Ashwin Ramasamy writing for PipeCandy estimates that there are between two and three million eCommerce websites, excluding websites from China, on the web. So, if you do the calculation, taking the numbers of 2016, the average annual revenue per eCommerce website could be around 740,000 US dollars.

And with an online retail revenue of 4.48 trillion US dollars projected for 2021, there seems to be a lot of spare capacity to take up. Is making money online that easy? Not really…

“eCommerce has about an 80% failure rate. Other researchers claim it’s as high as 97%. One of the reasons the failure rate is so high is because an eCommerce business can be easy to set up, for a small amount of money. Creating a store front is easy. Making it successful, on the other hand, not so much”, says Dianna Labriem in Tech.co.

So, the Trillions of US dollar revenue generated each year by online retailers is shared by a handful of eCommerce websites.

Making money online the hard way

From the moment that you’ve activated your ecommerce website, you need already to know what value you’re offering your customers. In other words, what is your competitive advantage in the online market you’re targeting?

A sustainable competitive advantage may be defined as ‘the ability to deliver superior value to the market for a protracted period of time’ 1. Here, superior value refers to the fact that the consumers of a product or service must be convinced that they are getting something of value for their money. The value proposal for Bricks and Clicks retailers was previously discussed in this blog.

The hard way of making money online starts with analyzing your online market.

Analyzing your online marketplace

To make money successfully online, you need to know everything about your market. Your market consist of your customers, suppliers and intermediaries and your competitors.

Analyzing your customers:

  • Who are your biggest customers?
  • Who are the most profitable?
  • Where can you find your customers online?
  • Do your customers have any unmet needs?
  • What are the benefits they seek from your products?
  • And what price are they willing to pay for your products?

Analyse your intermediaries:

Intermediaries have captured a significant proportion of the profits available in the online retail market 2.  Therefore, their impact on your business’s marketing mix should be analysed.

  • The place (delivery) – most online retailers are dependent on logistic service providers to do the ‘last mile of delivery’ to their customers. Retailers should analyse the different service providers and choose one that is the most reliable at the best price;
  • Your product – only source products of the highest quality at reasonable prices from reliable suppliers;
  • Your promotion – which marketing intermediary will deliver your marketing messages the best? Google’s AdWords or social networks such as Facebook or Twitter?
  • The price that intermediaries charge – analyse the offerings and choose those who deliver the best service at reasonable prices.

Analyse your intermediaries

Analyse your competitors:

You need to find out how to satisfy customers better than the competition. By doing a competitor analysis you may begin to understand the level of competition that exists in your target market and it will help you to make the right pricing decisions.

The strategies and actions of your competitors may well determine if you will be making money online:

  • Who are our present and potential competitors?
  • What are the positions that they have established in the market?
  • What are their strategic objectives and thrusts?
  • What are their present and future strategies?
  • What are their strengths and weaknesses?

The next step to do to get your online business on its way, is incorporating all the data you’ve generated with your analysis into a strategic plan.

A strategic plan to make money online

By now you should know who your customers are; who the intermediaries are that you’re going to use; and whom you’ll be competing against. Now you should develop a competitive strategy.

The competitive strategies available for online retailers to obtain and maintain a sustainable competitive advantage are 1:

  1. The differentiation strategy – value is added to the product or service through differentiation to make it different from competitors’ products and services.
  2. The low-cost strategy or overall cost leadership – this implies that an organisation will supply a product or service more cost-effectively than competitors.
  3. The focus strategy – here you can focus on a special product/market niche that you may later monopolise.
  4. The pre-emptive move or first-mover advantage – this strategy can be pursued by an online retailer who takes a calculated risk by being the first to enter a market with a new product or service.
  5. Synergy – this means that all the components of an organisation are working together and so creating a sustainable competitive advantage. For example a physical retailer that adds the online channel to its business.

It takes a lot of effort to make money online

Mostly, money doesn’t just start flowing in because you have an ecommerce website. You may need to spend many hours a day to monitor the happenings on your, (and your competitor’s) website. You need to follow the trends in your market, negotiate with intermediaries and confront your competitors. You definitely need to create quality content for your website and also get a presence on social media networks.

Furthermore, you should manage the finance of your business and identify the risks of the business. Your online customers demand a 24/7 service – and that is what you need to deliver. For your customers, the alternative is a click away…

Concluding

Although the internet offers us billions of potential customers, anywhere at any time, it will take some time for your online business to show substantial profits. That is especially true for small retailers with a limited marketing budget…

However, if you do the right thing and do that right, with lots of patience and belief, you’re online business may be part of the 3% that make money online.

Notes:

1 Du Plessis, P.J., Jooste, C.J. and Strydom, J.W. 2001. Applied strategic marketing, Heinemann.

2 Laseter, T.M. and Rabinovich, E.  2011. Internet retail operations: integrating theory and practice for managers, CRC Press.

Images

  1.  Featured image: Pixabay
  2. Image in body: Pixabay

Website Analytics Helps You to See How Your Online Business is Performing

Website Analytics is there for retailers to use. You’ve just decided to start an online retail business. Why not? It’s relatively easy and cheap to do. You can start a Drop Shipping business, or join Shopify or trade your own goods online with a Woocommerce site. According to Quora, there are between 12 and 24 million ecommerce websites on the net. However, only about 650,000 ecommerce websites generate annual sales of more than $1,000. That’s a miserable 2.7% generating very modest turnovers.

Is your online business not performing as planned? Are your paid search adverting and social media marketing campaigns not resulting in sales? Then you’re probably targeting the wrong customers at the wrong place with the wrong products. So how will you know that you’re doing things wrong? You can do the right thing by using a Website Analytics tool such as Google Analytics.

What is Website Analytics?

Web analytics is the process of analyzing the behavior of visitors to a Web site. Indeed, the use of Web analytics is said to enable a business to attract more visitors, retain or attract new customers for goods or services, or to increase the dollar volume each customer spends, says Margaret Rouse in Techtarget.com.

Web Analytics is not just a process for measuring web traffic but can be used as a tool for business and market research, and to assess and improve the effectiveness of a website, according to Salini, Malavolta and Rossi (2016).

Salini et al (2016) mentioned that the four essential stages of Website Analytics are:

  1. Collection of data,
  2. Processing data into information,
  3. Developing Key Performance Indicators (KPIs), and
  4. Formulating an online strategy.

Each of these stages impacts or can impact the stage preceding or following it; in other words they are sequentially connected and not isolated from each other.

  1. Collecting data for Web Analytics

The simplest, cheapest and most used Web Analytics tool is Google Analytics (GA). Indeed, Google analytics offers a free service to its users. But before you can use GA, you need to create a new account. GA will create a tracking code that you can copy into the memory of your website. Your website should now be connected with Google Analytics.

However, your site needs traffic in order for GA to do its algorithms and results. Therefore you need to write a post or promote products to start attracting visitors.

  1. Processing data into information

Google Analytics can track a visitor’s location, device, landing page, and behavior while he or she is using your website. In addition, you can see where the visitor came from (Google, Bing, Yelp, etc.). This can help you to spend those pay-per-click marketing dollars wisely.

Kristi Hines suggests in his blog Kissmetrics.com that Google Analytics help you as follows:

  • Find out which online campaigns bring the most traffic and conversions.
  • Determine where your best visitors are located.
  • Learn what people are searching for on your site.
  • Visualize what people click on the most.
  • Uncover your top content.
  • Identify your worst performing pages.
  • Determine where people abandon the shopping cart.
  • Discover if you need a mobile site.

Before you start perusing the pie charts, line graphs, and spreadsheets available in the user interface of Google Analytics, it’s important to figure out what to monitor.

  1. Developing Key Performance Indicators (KPIs)

Since you’ve identified what works and what does not work with your website, you need to develop KPIs. A KPI, or Key Performance Indicator, is a metric used to measure performance. Drew Strojny of The Theme Foundry advised that SMEs and bloggers using WordPress to keep the following ideas in mind when identifying website-related KPIs:

  • KPIs should align with business goals. The KPIs related to your website should align with a specific action you want website visitors to take. In many cases, this will be a revenue-impacting action, like contacting you for a quote if you’re a service provider.
  • KPIs should correspond to trackable metrics in Google Analytics. Therefore, when you know what your KPIs are, you should connect each one to a specific tool or tool in Google Analytics.

The top 8 metrics and KPIs that online retailers should take into account with website analytics are according to Natalie Pavlovskaya writing in InstantShift:

  1. Average Order Value (AOV). AOV is considered a key metric by many online retailers, because the higher you can encourage AOV to be, the more income your store will get. The basic calculation is: (Sum of Revenue Generated)/(# of Orders) = Average Order Value
  2. Conversion Rate. The conversion rate tells how effective your store is at closing deals. The basic calculation is: (Number of Sales) / (Number of Visits) = Conversion Rate.
  3. Bounce Rate. Bounce Rate is a percentage of visitors who leave your site immediately, probably because they didn’t find what they were looking or the website was too complicated or annoying to use. The basic calculation is: (Number of visitors who leave immediately) / (Total number of visitors) = Bounce Rate.
  4. Shopping Cart Abandonment Rate. According to the Baymard Institute, the average shopping cart abandonment rate is 69% (2017). The basic calculation is: (#of people who don’t complete checkout) / (# of people who start checkout) = Shopping Cart Abandonment Rate.
  5. Cost per Acquisition. Cost per Acquisition is a critical marketing metric. It can tell you which campaigns can drive your sales and which will become a costly pile. The basic calculation is: (Total Cost of Marketing Activities) / (# of Conversions) = Cost per Acquisition.
  6. Traffic. Where does your audience come from? Which channels produce the most customers? What social networks, keywords work best for your business?
  7. Net Profit. Net Profit is the actual amount of profit a business generates after all expenses. It tells you the profitability of your ecommerce business after taking all costs into account. The basic calculation is: (Total Revenue) – (Total Expenses) = Net Profit.
  8. Customer Lifetime Value (LTV). Customer Lifetime Value measures the total amount of money a customer spends in a store during his relationship with it. The basic LTV equation: (Average Order Value) x (# of Repeat Sales) x (Average Retention Time).

Once you’ve got the overall picture of your online store’s performance, you’ll need to formulate or change your online business strategy.

  1. Formulating an online strategy

Formulating an actionable online strategy for your business may be your biggest challenge. Sarah Williams Founder & CEO of 816 New York proposed the following steps to develop a Google Analytics Measurement Plan:

  • Step 1. Document your business’s objectives. Ask yourself as a company: Why do we exist? What is the Core Purpose and Vision of the brand itself?
  • Step 2: Identify strategies and tactics. One Strategy you would adopt is to sell products. The tactics that support that strategy, then, might be to sell online through the website, sell items in stores, or sell via a mobile shopping app.
  • Step 3: Choose KPIs. For an e-commerce site, the KPIs (measurements of strategies and tactics) might include monitoring how much revenue has been generated, and the average order value from online and mobile app sales.
  • Step 4: Choose segments. It’s important to segment your data to drill down to its essence. Not all customers are the same, and it’s often helpful to segment your reporting to identify distinct market segments.
  • Step 5: Choose targets. You must define the targets for each KPI. What indicates success? Where can you do better? Isn’t that what you want to find out, after all?
  • Step 6: Implement and control. Monitor the data regularly to adjust your tactics with the trends.

A Google Analytics result page

Concluding

Lastly, one of the greatest advantages having an ecommerce website is that you can measure the activity and the behaviour of users. However, there is no advantage if you don’t measure the performance of your website and marketing strategies. Therefore, make sure that you target the right customers with the right products at the right places, and, o yes – the right prices. For that reason mastering website analytics tools such as Google Analytics may bring you close to achieve all your KPI goals. Good luck with your website analytics!

A last word from Albert Einstein “Not everything that can be counted counts, and not everything that counts can be counted.”

Read also:

  1. Predictive Analytics helps Retailers to make sense of Big Data
  2. Marketing Automation is enabled by Artificial Intelligence, Big Data and Chatbots

Note

Salini, A., Malavolta, I. and Rossi, F. 2016. Leveraging web analytics for automatically generating mobile navigation models, In Mobile Services (MS), 2016 IEEE International Conference, 103-110.

Images

Pixabay.com

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