When Covid-19 hit and impacted small businesses around the world, main street retailers found themselves having to take their brick and mortar stores online to survive. In a matter of months, entrepreneurs were forced to formulate and execute a complete ecommerce strategy.
While this has created new diversified revenue streams for these businesses, it has also created significantly more competition online. And as the giants like Amazon continue to swallow market share, it’s important that these small ecommerce businesses find a path to maintain and grow their piece of the pie to survive.
So how does a small business with an even small ecommerce presence grow their business in a crowded online marketplace?
Strategies for Growing Your Ecommerce Revenues
There are a number of strategies that a small business owner can take to grow their online business. Most do require investment of both time and money but often the return on that investment can be realized quickly.
While some of these strategies aren’t rocket science, if you don’t have experience it is suggested to enlist the assistance of professionals to limit costly missteps. And in the world of internet businesses, there are many professionals around the world at every price point that can assist.
But like everything else, buyer beware. There are also many charlatans ready to take your money and provide little to no value or worse, cause retuable harm to your brand.
The challenge is finding the right individuals within your budget that can help execute some of the following approaches
Expand Product Lines
The most basic but absolutely essential strategy is to sell more products. The traffic and acquisition costs of get users to your ecommerce site (Shopify or Woocommerce) continues to rise as advertising costs and competition increases. It is vital to maximize wallet share in order to lower your average cost of acquisition at the product level.
The best way to do that, is to offer more products for a buyer to purchase. You got them there, you might as well give them more things to purchase.
If you have a few products that sell well, look for opportunities to expand your product line. A simple tactic is to find complementary products that would allow you to upsell your existing customer base.
Alternatively, look for what attributes make your winning products a success. See if this is something that you can incorporate into your new products since your customers have already bought into those features.
For example, if your top selling products are environmentally friendly and focused on teens, then continuing a line of environmentally friendly teen based products could be a winning formula.
One of the most valuable aspects of being online, is the ability to sell your products outside of your immediate region. Physical retailers are limited to a certain radius of walk-in clients. For ecommerce, the world is your oyster…well sort of.
While the act of selling online enables you to have a global presence, there are still many regulations around product origination, taxation and nexus, product safety guidelines, language requirements, importation duties and other laws and regulations that need to be considered.
This often seems overwhelming to many small ecommerce businesses and holds many of them back from expanding. This can be a great opportunity for you to outwork your competition. There are many 3rd party companies that specialize in expanding ecommerce businesses globally and setting them up correctly from day one. While these companies take a piece of the revenue, they can help you expand to large new marketplace and dramatically increase your topline.
Expand to More Platforms
For many ecommerce owners, they get comfortable using one marketplace and stop there, especially if they have been pretty successful. But they are leaving money on the table, adding a level of risk to their business and limiting the resale value of their business.
If you already have an ecommerce business selling directly through your own website (Shopify, Big commerce, Woocommerce, Magento, 3DCart, etc) then it can be very lucrative to jump to a marketplaces like Amazon, Walmart, eBay, Etsy or many others around the world. These marketplaces drive sales leads to your products and can grow your topline sales.
If you started off with an Amazon FBA business, then creating your own branded site will be very valuable but will take some time and money. You’ll need to leverage a Third Party Logistics 3PL provider to store, pick/pack and deliver your products or you’ll need to set up that process yourself in your home or warehouse.
Once fulfillment is in place then you will be able to service your customer directly or leverage platforms like ebay, Etsy and Walmart on mass. The benefit however are quite large:
- You will own your customer data. Unlike Amazon that limits the information you have about your buyers, the other platforms provide more transparency so you can retarget them later.
- By diversifying your business away from a single platform, you reduce the reliance of a single revenue source. If that platform changes certain policies, increasing their prices, or shuts you down, you can lose your entire stream of revenue. Having multiple platforms protects you.
- Finally, if your intention is to someday sell your business, buyers will pay a significantly higher premium for well diversified businesses. The more revenue sources you can create the more attractive of an acquisition you become.
Just because you have diversified your sales to online channels, doesn’t mean there aren’t strong offline opportunities. Wholesaling your branded products to other brick and mortar establishments or large box stores can be a golden ticket to success.
As the retail landscape changes over the next few years, the seeds planted today that get you into larger retail outlets could pave the way to large orders.
You can bootstrap by reaching out to retailers yourself or you can get to the front of the line by outsourcing to companies and brokers that already have those relationships.
And again, this increases the value of your business by diversifying your revenue streams to both online and offline.
Whitelabelling is creating products and putting someone else’s brand on them. If you have a unique product, service or concept, there could be an opportunity to whitelabel it for others.
This works very well when the partner you are white labelling for has a large customer base or large sales team. It allows you to benefit from their existing relationships, salesforce and brand to sell your products.
While you won’t be commanding retail prices, you will be getting a strong wholesale revenue stream
Acquiring another business can be a fantastic way to grow your ecommerce revenues. Acquisitions are simply the act of buying someone else’s business. It can be:
- a competitor through a horizontal acquisition,
- a manufacturer or distributor of yours through a vertical merger
- a random company with products that help you grow and diversify through a conglomeration.
You can acquire a business for their technology, their clients, their product lines, their intellectual property, their team, their revenues, their branding, their traffic, their social media, their prospect email list, etc.
When you purchase a business, you have the option of merging the businesses or keeping them separate. Both have pros and cons. Merging allows for the reduction of redundancies and simplification of processes and marketing. Keeping them separate provides diversification while still being able to leverage each other’s customer information.
Overall, acquisitions provide a very quick way to grow while minimizing risk since the company’s operations and financial information is reviewed during due diligence.
Partnering allows you to reduce the expense and risk associated with an acquisition and still gain opportunities for growth. Partnering or creating joint ventures with different brands or complementary businesses can allow the creation of new product lines and sharing of customer and information.
Ecommerce brands are building affiliate relationships with content creators and influencers to sell their products. Product brands will do collaborations to help launch new products into the marketplace. Online retailers will package their products together to form new bundle offerings.
There are many ways to partner with other businesses that can help both companies’ revenues. The largest challenge is finding the right partner that you can trust and that can provide the level of benefit and expertise to bring your brand to the next level.
Most ecommerce businesses spend a lot of money marketing their products. There is no shortage of avenues to try to put your wares in front of potential customers.
- Influencer Marketing
- Email Marketing
- Content Marketing
- Pay per Click
- Affiliate Marketing
- Social Media Marketing
- Search Engine Marketing
- Viral Marketing
- Video Marketing
And even offline marketing strategies like Television, mobile, radio, billboard, direct mail, print and more can be valuable.
As more and more companies have flooded the internet, pricing for digital marketing has risen dramatically in the past decade. It is important for businesses online and offline to examine all marketing options to find the one that will provide the best return on investment.
In some cases, even if you have an online business, print or radio may be best!
Conversion Rate Optimization
Conversion Rate Optimization (CRO) is the art of optimizing your ecommerce user interface to maximize sales. As we saw, there are many marketing options to drive traffic to your site and these options can be costly.
CRO allows us to test various settings, pages, positions and copy on your site to see which works best to increase sales on your site. Small improvements here can mean significant revenue increase.
Image you spend $3000 per month to get 10,000 visitors to your site. And of those, you close 2% of your visitors and they average $100. That means you get 200 customer paying $100 each so $20K of revenue per month
Doing that same math, if you improve your site to get 3% close rate, you’ve not increased your monthly revenue to $30,000. If you wanted to create $30,000 worth of sales through marketing efforts alone at the 2% close rate, you would have had to find an additional 5000 visitors per month to your site. That would have been some heavy advertising costs.
There are many companies and software products that can help you run A/B testing, heat maps and other approaches to improve your ecommerce platforms conversion rate.
Think of the Starbucks program where customers earn points for each of their purchases which can later be redeemed for free coffees. The more you can create a sense of “earned value” to your customer, they more they will prefer to stay with your versus finding an alternative.
If your customer has made a purchase and earned points and they find out they can get something for free after they earn a few more points, they are now incentivized to spend more with you. This is the basis of all royalty programs and they work
While coupons can be costly to the bottom line for ecommerce brands they are a great way to land new customers. Coupons allow new clients to test your product and makes them feel like they are getting a great deal.
More importantly for you, you now have information about a new customer that you can nurture and market to. This gives you the opportunity to increase that customer’s life-time value for your business and therefore decrease the effective cost of the coupon.
And if you’ve set up strong processes to increase share-of-wallet from your customers, then the coupon on 1 product can be amortized by the sale of other products.
Which leads up to…
Increase Share of Wallet
Increasing share-of- wallet is getting your customer to spend more money with you at each visit. There are a number of strategies like:
- Software that provides an additional offer at checkout
- Visual product images under a heading of “other also have purchased” or “you may also like”
- Creating discounts on other products that complement the products in a users cart
- Popups saying “ Joe Doe has just purchased product X”
- And many more
Every ecommerce business will have users that place items in their cart but never complete the transaction. Whether they got distracted, found other products on someone else’s site, didn’t like your shipping costs, internet goes downs, etc. There are a ton of reasons why someone might abandon their shopping experience.
Cart abandonment are typically software (but can be humans, like VAs) that reach out to the user to remind them that they still have something in their cart. Cart abandoned rates vary dramatically based on niche but in retail it can be as high as 70%
Finding ways to reengage these users to finish their order can add a lot of revenue to your business. You can:
- Simply provide a reminder
- Offer a discount
- Allow a user to buy without creating an account
- Offer another product they may also like
- Free shipping (since 30% of cart abandonment is caused by unexpected shipping costs, this can be a great strategy)
Referrals can be one of the best ways to drive traffic and future sales to your site. This can be done in many different ways:
- Offering a discount for those who bring in referrals
- Offering those who bring in referrals with a commission from sales
- Providing prizes for each referral
Testimonials and high product ratings also act as customer referrals through social proof.
Know Your Numbers and Measure Daily
It is important to ensure you understand your financials before undertaking any of these growth strategies.
If you don’t know your numbers yet, then start collecting data and create dashboards for yourself so you can get clarity on this. While the strategies are sound, some may be more expensive to run than others and if you don’t know your numbers you may end up pursuing strategies that make your business unprofitable.
While this might be fine for the short terms to help you create a customer base, unless your Tesla, it’s rarely a winning formula. So understand your current acquisition costs, revenue, gross and net margins, and determine what you can afford to acquire a client. Then based on that explore the various options that make the most sense for your niche, product, experience level and budget.