How to Build an Online Store That Sells
For a physical store, having a dominating merchandise selection such as Target, or the lowest price such as Walmart, might be enough to assure success. Creating an online store poses a different set of challenges, some of which are unique to the Internet. In order to achieve success through this channel you need a strategy, plan and execution that will take these challenges into account.
An essential starting point in this process is to define your market.
Defining Your Market
Unlike physical stores with broad merchandise assortments that cut across wide consumer segments, Internet stores that aren’t simply an additional sales channel for companies, will be better served by focusing on more narrowly defined customer groups with a specific merchandising focus. This is because the Internet, while available to most of the population today, is not a mass medium in the traditional sense, but more like a collection of special interest groups and communities. It is more effective when targeted to and customized to meet the specific needs of these audiences. Two examples which illustrate the success of this approach are eBags (www.ebags.com), an online retailer which has grown into the largest online purveyor of travel bags and accessories with a lifestyle focus and Blissworld (www.blissworld.com), which focuses on upscale cosmetics for a hip, young fashion conscious audience with a spa type attitude. We need to be as specific as possible in defining this audience as this will help determine the merchandising, presentation and marketing strategy. If you are aiming at consumers, you must consider things like disposable income, lifestyle, location and related interests. Try to quantify this if possible, including the size of this market and the amount of money spent on your product or service.
Competitive Analysis
The next step in this process involves researching and analyzing the competitive universe for what you plan to offer. You will want to review competitor’s specific audience, pricing, presentation, marketing strategy, management strengths and weaknesses, sales and financial resources, all to the degree possible. Once you have identified the key competitors and put together an accurate snapshot of each, you can begin to quantify, analyze and compare their strengths and weaknesses against your own.
Armed with the information you have gained by going through the market definition and competitive analysis process, you should be able to figure out how to best position yourself in this marketplace, evaluate alternative strategies and develop a realistic set of expectations. You can also begin to examine how to implement the most promising strategies in building your Internet store.
The first step in this process is developing your approach to merchandising this store.
Merchandising
The store’s product needs to be organized into clearly defined collections and sets. Just as in planning a store layout, those items that you think will sell best should be put “front and center” for the customer. Let the customer know “what’s new’ or what your best sellers are for example. With regard to pricing, you can start with a simple three-tier approach: low, medium and high. Don’t be afraid, however, to offer and test higher priced merchandise - you may be surprised by your ability to sell higher priced merchandise. Wait to see where the action is before adding options. Start simple, you can add product and adjust pricing relatively quickly once you get a sense of what is working best.
Design and User Interface
The look and feel of the store encompasses a variety of factors beyond showing merchandise to their best advantage. And since the store is web based, you need to visualize the process from the customer’s point of view so they can navigate quickly to find what they are looking for. An important aspect of this is to build a search function or have clearly delineated categories and subcategories listed. This requires a combination of skills and experience - technical, practical and creative. It is important to work with people who have “been there, done that” in terms of website design and e-commerce with at least generally related products. You proceed at a lower cost with an existing e-commerce platform provided by an application service provider or web development company. You will be required to build your product database, user interface and shopping cart based on an existing model. Or given the financial resources, you can create a customized solution which is also based on proven models.
In either case, be sure that you can easily create and access sales and merchandising reports. Whoever is hosting the site, as part of their hosting arrangement, should provide you with easily accessible website traffic statistics. This information will tell you how much traffic you are receiving, who is visiting your site, where they came from, entry and exit points, shopping patterns and more. All extremely valuable in helping determine adjustments to the site and marketing.
Copy and Content
Visual presentation is important, and particularly critical, if you are selling items like fashion, jewelry or art for example. Copy also plays key a role in the sales process. The Internet is still primarily an information medium and since your customers can’t touch and feel the goods you will want to have as comprehensive product information as possible to help you sell more. It may also be also helpful to have some content that will reinforce your expertise in the subject matter or category you are featuring. Be careful, however, as you can easily lose visitors in this material and detract from your primary objective – sales.
Policies & Service Issues
You will need to determine and describe things like your guarantee and return policy, privacy policy, payment options, safe shopping mechanism, sales tax and shipping options. If you have an existing business, these policies should be exactly the same as it is very common for customers to visit your site and then want to place an order on the phone, at your store or through your catalog. (Have a toll free number clearly visible on the site.) Many of these policies and issues can be handled in an FAQ (frequently asked questions) and how to order section. If you create the right questions and answers here you will reduce the time and cost of having people on the phone to answer these questions .You will also need to have well trained people available to answer calls as many customers are still not comfortable placing orders over the web.
Store Operations and Fulfillment
Part of your ability to manage this will be governed by your e-commerce platform and administrative interface. Whoever builds your site should provide an easily accessible product database that can allows prices and copy to be modified by someone without extensive web experience. Try to make the check-out process as simple as possible without requiring the customer to keep clicking to get to the next step in this process. Make sure they know shipping costs or other relevant costs prior to getting close to the end of the process. Many customers will exit just prior to completing the purchase if there are any surprises. The other aspects of running the store should not very different from running any store. Just remember that many people who use the web to shop are looking for faster gratification then they would get in other channels. So be sure your system provides order and shipping confirmation and your fulfillment operation is swift and well tested.
Marketing
Once you have your site built, attracting qualified traffic will ultimately be the determining factor in the store’s success.
Qualified traffic can be directed to your store through a variety mechanisms including:
- Search engines
- Pay per click search engine advertising
- Direct response advertising in traditional media
- Direct mailings to existing customers and rented or exchanged lists
- Permission based email programs to existing customers and rented or exchanged opt-in email lists
- Link exchanges
- Affiliate programs
- Viral Marketing
- Internet advertising (banner ads, pop-ups, etc.)
- Public relations
You should be able, in most instances, to measure traffic and sales from each of the traffic generating mechanisms. Traffic patterns within the site and traffic “referrers” from other sites can be accessed in the statistical reports gleaned from server logs that are available from whoever is hosting the site. These statistics combined with actual results will allow you to change and adjust the site as you will continuously seek to improve performance. As you learn what works best you can focus and increase promotional efforts based on a more predictable return on your investment.
Convert these prospects into paying customers
This is where the rubber meets the road! Traffic, conversion ratio and average dollar order size will be your key success drivers and they should be consistently and frequently monitored. The chart below is a simple spreadsheet that illustrates gross sales based on monthly traffic (unique visitors) using different conversion ratios with an average order of $100. You can easily see the effect on sales by changing any of the variables (conversion %, order size, traffic etc.). You should experiment with presentation, placement, pricing, policies and different promotional offers to see how these affect conversion and order size. Regarding presentation, there has been much written on what is termed the “landing page” - the first page a customer views when they type in or click on a discreet internet address (url) or link. If you don’t catch there interest at the customer’s first stop on your site – all is lost. People will often experiment with different presentations and offers contained on this page to see how well it affects conversion. Always keep in mind that when testing, you can only test one thing at a time. Otherwise you will not know what made the difference.
Monthly Traffic (Unique Visitors)
| 10,000 | 15,000 | 20,000 | 25,000 | |
|---|---|---|---|---|
| % Conversion | 1% | 2% | 1% | 2% |
| % of Orders | 100 | 300 | 200 | 500 |
| Average Order | $100 | $100 | $100 | $100 |
| Gross Sales | $10,000 | $30,000 | $20,000 | $50,000 |
Build a customer database to fuel future sales
Developing a customer database for purposes of analysis, customer segmentation and relationship marketing, is key to building a successful Internet business over time, just as it is for any retail or direct marketing business. The information captured dealing with purchasing activity and behavior will enable you to make much smarter business and marketing decisions. It will allow you to continue your relationship with existing customers and fuel additional sales. The chart below illustrates additional follow-on sales with both customers and prospects. Past customers will generally respond at a higher rate than prospects. Don’t ignore prospects (leads) as these can be captured in quantity and represent an excellent source for additional sales and new customer acquisitions. You can capture a prospect’s email address on the site or at the point of sale (if you have a physical location) by offering relevant information in a newsletter or notification of special offers. Prospects can generate an excellent response with a well-crafted offer.
Email Promotions
| A | B | C | D | |
|---|---|---|---|---|
| # Customers Mailed | 200 | 400 | 1,000 | 2,000 |
| % Conversion | 5% | 5% | 5% | 5% |
| Average Order | $100 | $100 | $100 | $100 |
| Gross Sales – Customers | $1,000 | $2,000 | $5,000 | $10,000 |
| # of Prospects Mailed | 500 | 1,000 | 2,500 | 5,000 |
| % Conversion | 2.5% | 2.5% | 2.5% | 2.5% |
| Average Order | $100 | $100 | $100 | $100 |
| Gross Sales – Prospects | $1,250 | $2,500 | $6,250 | $12,500 |
| Total Gross Sales | $2,250 | $4,500 | $11,250 | $22,500 |
In Conclusion: The basic philosophy to apply in building this business is to develop and refine merchandising, marketing and operating concepts in a controlled, step-by-step process that reduces unnecessary risk. Utilizing proven direct marketing techniques, you can test an approach to a business and aid decision making by adding predictability to expectations. Once you know what works you can increase spending and put your foot to the accelerator to ramp-up sales and profits with confidence in the outcome.
© Multi-Channel Marketing; all rights reserved.
Alan Hecht is the founder and president of Multi-Channel Marketing. Mr. Hecht may be reached at (919) 969-8000.