Ready to Hang Out a Shingle in the Brave New World of Online Retail? New ecommerce firms need to scope out a strategy to lure customers over their virtual thresholds.
Opinions expressed by Entrepreneur contributors are their own.
Retailing can be a very demanding business, with low profit margins and fierce competition. Online retailing is even harder because it depends on reaching audiences through social media and mobile devices -- skills never required of old-fashioned bricks-and-mortar storefronts in the past.
These days more consumers are giving up shopping the racks in physical stores for the convenience of buying online, especially with their mobile devices. Pure-play online retailers are using this mobile revolution to disrupt the status quo for traditional chain stores. This new breed includes Zulily, which last fall held a successful initial public stock offering. In this Amazon-dominated world, a new era of ecommerce companies are emerging with strong market capitalizations.
While ecommerce retail might seem like an attractive opportunity to a would-be entrepreneur, success will depend on the business model, the competition and market factors. Here are some basic tips for ecommerce entrepreneurs weighing their options for online retailing versus selling via physical stores.
Related: Ecommerce Basics: 10 Questions to Ask When Creating an Online Store
Understand the fast-changing market dynamics. E-tailing can be a high-growth, high-risk business, so it's important to gauge how you will maximize sales (such as creating ways to achieve better economies of scale) while limiting risks (with tactics like heading off shopper fatigue among loyal customers).
Another key to success involves finding the best ways to measure your progress, by analyzing such metrics as revenue per customer or profit per SKU. Lastly, it's crucial to analyze every strength and weakness of your market competition, from the largest retailing chains to the nimblest startups.
Establish a unique brand identity. Amid so much stiff competition out there, you should position your company in a special way to stand out. For some online sites, this means providing exclusive deals on favorite brands. For others, it means offering huge "flash" discounts on certain items for a limited time only.
One e-tailer got its start as an online retailer but recently branched out to provide supply-chain logistics services for its partners. Others have taken the opposite approach with a direct manufacturer-to-consumer model, doing away with fulfillment centers and instead acting as a manufacturer's online storefront.
Each e-tailer has to define its own sweet spot. For some, a core strength involves an attractive vendor platform and personalized web offerings. Still others focus on daily deals. You will need to decide if your site will be more commodity focused, based on lower prices and faster deliveries, or more tied to a heightened online experience with clean design elements, attractive "window shopping" images and distinctive specialty products.
Related: 25 Ways to Make Your First Online Sale
Master the mechanics of customer aquisition. The most obvious strategies for acquiring online customers include use of search display advertising and social media ads, with mobile applications continuing to drive increased revenue. To truly succeed, you'll have to be truly proficient in all these areas.
A less intuitive tactic for driving web traffic involves airing traditional TV commercials, which can reach and convert new consumers who are not yet accustomed to online shopping.
Another secret for acquiring new customers is bound up with the design of the online form used by people to enter their contact information. Simplifying that form to just a single field for data entry can dramatically increase user click-through rates and purchases.
Keep suppliers and customers happy. On the supply side of the equation, working closely with manufacturers is important so that they can align their product outputs with your sales expectations. And the best way to attract brand-name suppliers is to grant them the most beneficial terms possible on your payment rates and payment dates.
On the demand side, nothing is more important than keeping customers happy by limiting prices and trimming delivery times. But when consumers can purchase the same items from countless stores and websites, what will compel them to buy from you?
Some sites make shopping more entertaining for bargain hunters by emphasizing the thrill of discovery on great deals. Others earn their reputations as specialists by diving deeper into the latest electronic gadgets, high fashions or exotic sporting goods. Whatever your strategy, remember that online retailing depends on setting it up so shoppers become so hooked on great bargains that they become regular repeat customers.
Work smarter not harder. The most successful daily deal sellers have turned online shopping into a national consumer pastime by keeping hordes of customers searching for daily deals and updated offerings from their favorite brands. This breakthrough has made e-tailing an attractive opportunity for entrepreneurs, but like any other business, it pays to know what you're doing first.
Success in this new e-tailing paradigm does not necessarily mean working harder but rather working smarter. The retailing market is clearly undergoing a major upheaval in this nascent era of ecommerce, social media and mobile devices. Harnessing the power of all these new tools is not only a wise business decision; it's perhaps the only way for retailers to guarantee their future survival and success.
Related: How to Innovate in E-commerce
