03 Aug 4 Fatal Prejudices against E-commerce
It’s a fact that e-commerce in Italy continues to grow: in 2016 online sales grew by 18% by nearly 20 billion euros, according to the report of Osservatorio eCommerce B2C Netcomm del Politecnico di Milano, but currently it represents only 5% of companys’ turnover.
Our country is still backward compared to the rest of the European continent, where e-commerce generates about 14% of sales. Digital transformation in Italy still has a long way to go. Nowadays, just a few companies have fully grasped the opportunities the web offers and decided to take the challenge.
There are many causes for this delay, but the main reason lies in the lack of a digital culture both in small and in large-sized companies, which often results in disinterest or mistrust. Let’s see what are the main preconceptions against e-commerce that are most common among business owners and that compromise the success of an online business.
1) I prefer to sell on Marketplaces not on my own web store
Very often, if they do not have a well-known brand or a successful product, many companies prefer to start selling online through a Marketplace such as eBay, Amazon, or Zalando rather than to start an online store. And you can’t blame them. An owned e-commerce includes development and management costs, as we have seen in the previous article (E-commerce: Advantages and Disadvantages of Online Selling). Investing in an e-commerce, in fact, means to face not only the costs for the implementation, but also for the maintenance and especially for the promotion, which is often not taken into account.
For this reason, at first many entrepreneurs choose to open their own store within a Marketplace, because they are not sure to get a return on investment . They will pay a sales commission, from 9% to 20% depending on the platform and the product category to increase brand visibility on the web, reach new customers all over the world and above all reduce time and cost for the management, since many activities will be directly carry out from the Marketplace (technology platform, customers and orders management, logistics and shipments, web marketing activities).
However, there are some important considerations to make. Marketplaces are common platforms where most sellers offer their products, so the risk is anonymity, that is, to be just one of the many. Because within the platform, companies can not customize thier space by communicating the image and the unique value of their brand, it is more difficult to distinguish themselves from other merchants and to retain consumers, who have the perception of buying from the Marketplace not from a specific company. Moreover, companies do not have the possibility to establish a direct relationship with consumers because the audience is a property of the Marketplace.
In our opinion, the best solution would be to start an e-commerce site that would help to establish the brand’s identityin the market, integrating it with Marketplaces, which are powerful promotion and sales booster.
2) Let’s open an e-commerce and start right way
Very often, those who decide to start an E-commerce want to go online from the very first moment and focus exclusively on the website’s implementation without going through the preliminary analysis, thinking that as soon as the website is be visible on the web, the business will explode. Totally wrong! An e-commerce with these premises is going to fail already on the go.
E-commerce is not a simple website, but a complex project that requires analysis and planning. The first step for a successful online business is therefore the marketing plan, then the action strategy based on it. Most entrepreneurs consider this step to be only a waste of time that increases the startup costs of the project. On the contrary, this is a necessary step in the e-commerce project to achieve the expected sales outcomes. But let’s see what it is. First of all, the market analysis which consists of two elements: the target audience and the competitors.
The target audience is made up of potential customers. Who are the people who are potentially interested in your products? How can you reach them? If you already have an e-commerce, you can analyze and know your target through web analytics tools such as Facebook Insights or Google Analytics that provide an overview of the behavior of prospect clients visiting the website.
It is important to know customers’ interests and preferences to develop a targeted offer that meets their specific needs. We suggest first to create a general profile of the target and then to split it into specific segments based on features so that the marketing strategy can be more effective.
Competitors are other firms in your industry and market segment. It is important to know the competition because it is at the base of the marketing strategy. There are several useful tools for studying online competition, including SemRush and SeoZoom, which allow you to identify direct online competitors, the organic and paid keywords through which they are visible on the web, the links they receive from other sites, which social networks they attend and how they communicate.
Through the analysis of external factors you can see if your products meet the real needs of the market, whether it is necessary to offer an alternative where competitors are missing or to focus on a niche where there is much more competition.
After finishing the analysis, you will outline the operational planning: marketing strategies, goals, times, assets, tools, and resources will be defined. If it’s a new e-commerce or a restyling of an existing online shop, the starting point must always be the preliminary analysis that will be translated into planning and operations. The website will be the result of data emerging from the analysis and implementation of the strategic plan.
Once the site is online, you will need to monitor each action to constantly adapt and improve the strategic operational plan. An online business advantage is that every action is editable, so you can make any changes and refine your strategy any time.
3) The costs of an e-commerce are the costs of the technology platform
One of the most common prejudice among business owners is that the costs of an e-commerce are only and exclusively the costs of the CMS platform (Prestashop, Magento, WooCommerce, OpenCart, VirtueMart) and the development of the “visible” part of an online business project. The management and promotion of the online store are rarely considered.
The costs of an e-commerce, however, do not lie mainly in technology, but rather in marketing. From the very beginning it is important to allocate a budget and resources for web marketing, that is, for all activities designed to create brand awareness, increase traffic to the site, and generate conversions, leading target visitors to the ecommerce site, transforming them into customers, and finally make sure they become brand promoters themselves.
Every company that wants to launch an online business has to consider customer journey, the itinerary that every customer travels from the first contact with the company to the buying decision, the cognitive path that brings the consumer through different interactions and channels – online and offline – to purchase a product or service. The firm will have to attend every stage of the journey with the best times, ways and means, from lead acquisition to clients retention.
From customers’ awareness, who want to meet their needs with a specific product provided by one or more suppliers, to the consideration, when consumers are orienting towards a given product, look for information on the specific features and make comparison with other products, up to the purchase, and finally to customers’ loyalty.
For example, before coming to the sale, it is necessary to plan online advertising campaigns to build the brand awareness, increase the visibility and traceability of the ecommerce site on search engines.
Facebook ADS addresses the latent demand, the potential target customers who do not need yet to buy the products offered by the company, but it’s just a matter of time: we can not foresee when it will be the right time, but it is sure that sooner or later these customers will become conscious. Google AdWords on the contrary reaches the effective demand, those customers who need a particular product, have already get information and have been searching for potential suppliers that can meet their needs. The so-called “hot clients“.
A winning approach is hat of integrated marketing, which accompanies customers at every stage of the decision-making process, and leads to effective actions and greater income. The e-commerce that does not start with this approach is going to fail, falling within that 90% of online shopping that closes within the first year of life.
4) I invest in e-commerce only if I make money
A recurring approach among entrepreneurs is to return immediately on the investment. They focus on the ROI, ie the calculation of the project sustainability without taking into account the customer’s acquisition cost, especially the custome’s long life time value. It is a pragmatic approach, but not forward-looking, because e-commerce is a long-term investment whose results come over time.
It often happens that once the e-commerce is online and ready to sell, companies, rather than investing in commercial or marketing actions, prefer to be waiting for the first “spontaneous” orders, hoping casually some users browsing in the web come to their e-commerce site and once inside the site decide to buy their products…
On the contrary, in order to launch an online business, it is necessary to allocate a budget for web marketing, which will be higher in the first period and will gradually decrease when the brand has acquired greater recognition and gained consumer confidence. Successful online businesses generally invest about 10% of gross sales revenue in digital marketing for activities such as Seo, online advertising, social media marketing, direct email marketing, affiliate marketing, etc.
Initially, therefore, the economic efforts will be greater, but long will be rewarded. A key element, which is almost never taken into account by entrepreneurs, is just the time factor. In order to calculate the performance of an e-commerce, you need to define the value of a customer over time, the revenue generating from the first order to the repurchase. Of course, acquiring a new customer is much more expensive than loyalizing an already acquired customer. For this reason, a good e-commerce strategy does not exclude that the first orders though in loss will be profitable in any case.