This post is by Paul Watson, CEO of Volo Commerce. Paul is driving the development of Volo’s global community of online multichannel sellers and is passionate about enabling growth for online businesses across diverse sectors.
The pains of growth are often some of the most frustrating periods in the history of a business, especially those based online.
Operating at scale with streamlined processes that keep costs low and customer satisfaction high is the long-term objective. However, along the way, the opportunities to ease the pains of existing operations will often yield short-term returns as well.
It is worth remembering that rapid growth is almost inevitable within ecommerce – it is the fastest growing retail market in the world. According to the Centre for Retail Research, the US market is expected to grow by 14% in 2015 to $350 billion, and in Europe ecommerce is set to expand even more – by 18.4% to over $250 billion.
Consequently the question is often not if your online business will grow, but how you will handle that growth. Many challenges will arise as the business develops and scales – some of which can, when unchecked, threaten the very future of the business itself.
Customer Service is King
For any business active within marketplaces such as eBay or Amazon, the primary factor for controlled, effective and substantial growth is customer service. This includes elements as diverse as stock availability, logistics and fulfilment. Furthermore as this growth continues, there are also key issues of new technology, recruitment and marketplace performance metrics.
At the risk of labouring a point, it is worth understanding exactly why the complexities of customer service are so key to growth, and how they can then threaten that upward trajectory if not handled correctly.
Make no mistake, customer service is the defining aspect of sustainable growth when it comes to online selling. By the year 2020, I believe that customer experience will overtake price and product as the key brand differentiator.
Customer service is keenly linked to customer loss. A buyer is four times more likely to go to a competitor if a problem is service-related than price- or product-related. But 70% of complaining customers will do business with you again if you resolve a complaint or issue in their favour, according to consulting firm Lee Resources Inc. In short, you are your customer service.
And this is not all. There is also the reward of better revenue: 85% of customers are willing to pay up to 25% more to get a better customer experience. In short, your profits are your customer service.
Lastly, repeat custom is almost hard-wired into the ecommerce experience. According to McKinsey, ecommerce spending for new customers is on average $24.50, compared to $52.50 for repeat customers. This means that spending time and resources delivering a satisfactory customer experience can grow your online businesses quickly and substantially. In short, your growth is your customer service.
Customer Service 101: Fulfilment, Logistics and Procurement
Prompt delivery of the exact goods ordered remains the bar at which all standards of customer service are settled.
At scale, it soon becomes necessary to implement automated processes in order to handle logistics and fulfillment processes, from picking and packing to labelling and returns tracking.
In the words of Volo customer Nigel Matthews, director of GamesQuest:
Someone asked me the other day whether I could advise on launching into ecommerce and I said there were four major things they needed: 1. Automation 2. Automation 3. Automation. 4. Automation.
When these processes break down (and they will!) the problems experienced by fufillment partners will not cut any ice with your customers. Ahead of seasonal spikes such as Black Friday, where logistics providers often face challenges, it falls to the merchants to ensure all processes are robust enough to handle the increased business.
If an online business grows by developing strong cross-border trade, there will also be more complexity in managing this growth and mitigating the associated risks. However, the reward for taking such risk is certainly there: the global cross-border ecommerce market is predicted to expand from $230 billion in 2014 to $1 trillion in 2020.
Yet despite such opportunity, few retailers have advanced to the point of having a tried and trusted operational plan that covers contingencies such as logistics issues, customs delays or even customer service in a different language.
The Role of Procurement
You cannot sell what you do not have (or do not have access to). Online it is the ability to source and sell new products that drives growth. Sourcing and procuring the right product at the right price is often a fast process, and the lifecycle of a successful choice can be very short.
Furthermore there are always pressures such as copycat products and cheaper alternatives. For example, on Amazon today there are over 4,400 listings found for “tablet PC” in the tablet sub-category alone. In some niche markets such as consumer electronics, this level of competition can arise in a matter of days to weeks.
This means that a seller must have agile, rapid procurement processes that do not lose opportunities. But equally procurement cannot be reckless or – in the drive for growth – capital will be tied up in excess, wasted inventory that has to be heavily discounted.
Customer Services 101a: Communication
Moving our attention to the front of customer service, and the actual experience that the customer has, too many sellers still overlook the crucial role of communication in customer service to help growth.
It is often the speed of the communication itself that matters. 17% of consumers would recommend a brand that provides a slow but effective solution to a customer service issue, whereas 33% of consumers would recommend a brand that provides a quick but ineffective response, according to NM Incite.
This need is near universal. 83% of consumers say they consistently needed some type of support during their online shopping – 31% of them immediately, according to research from LivePerson.
Customer Service 101b: Metrics
By now it should be clear that to be successful in the long term, and develop growth that is sustainable as opposed to problematic, an online seller needs to be heavily customer-centric.
The marketplaces themselves have mechanisms in place to ensure this. To maintain its focus on the buyer experience, Amazon monitors various performance metrics automatically, and these can be viewed in the Performance section of Seller Central.
eBay has recently announced a raft of changes to their performance metrics. These new seller standards focus on what buyers care about the most – getting the item they ordered on time, and effective customer service to resolve any requests for help.
Most tellingly, a new, simplified eBay defect rate will include just two measures: seller-cancelled transactions for items that are out of stock or cannot be fulfilled for any other reason, and cases that are closed without seller resolution. A new on-time shipping metric will measure shipping performance. Again this reinforces the key element of logistics processes in ensuring customer satisfaction.
However, the main point is to ensure growth does not become problematic. An online business should make it a habit to check these metrics daily and act on any issues immediately, as declining performance metrics will impact the business.
Technology – the Newer Kids on the Block
Whilst it is tempting to think that the changes brought about by mobile are nearly complete, the figures suggest otherwise. In 2015, total ecommerce via mobiles in the US is predicted to grow from 18.7% of all online retail spending to 26.8%. In Europe mobile ecommerce growth is predicted to be 88.7% in 2015.
Consumers who visit a website via their tablets are nearly three times more likely to purchase something as compared to those who visit that site via their smartphones and (although figures vary) tablet users can spend up to 50% more than PC users.
When businesses realised that more than 90% of email is accessed via a mobile device, it led to a step-change in many areas. Ecommerce is no different. Many retailers already report that up to one-half of website browsing is via mobile devices. Of that growing market, 30% of mobile shoppers will abandon a transaction if the shopping experience is not optimized for mobile.
This means that any developments in product listing – and any strategy undertaken by an established brand or startup alike – must have a clear mobile consideration.
Throughout the growth of an online business, the addition of a new channel is often underestimated. It is a substantial undertaking. Every time a seller adds a new channel, they add considerably to daily and ongoing workloads, so again: streamlined, repeatable processes are vital.
However, it is clear that the platforms for selling are changing. There are new marketplaces gaining substantial traction such as Etsy and Rakuten. Social commerce sales are expected to reach $30 billion per year by the year 2015.
Large retail brands are experimenting with their own marketplaces that can capitalize on decades of brand equity. Even companies such as Uber or Airbnb can be seen as a meeting of demand and supply with an intermediary technology platform – they too are marketplaces.
Before adding a channel, a seller needs to analyse potential additional revenue and our experience is that many retailers overestimate this revenue as well as underestimate the work needed. One point in particular is to log the revenue changes that occur as these will form the basis of evaluating the return on investment (ROI) made.
A Team for Growth: Recruitment
Marketing is often critical in making the most of any new channel being explored. Before decisions are made and contracts signed, a measured approach is essential to evaluate the cost of bringing in the skills needed to fully exploit this potential.
Another product of our experience is that the diversity of online retail demands many different skill sets when it comes to marketing and these very rarely live in just one person’s head. This will typically mean employing more than one person, or using freelancers or a digital agency.
This may seem like a big investment – and it is. But it is also necessary. 74% of consumers say they depend on social media to guide their purchases. 71% of mobile purchasing decisions are most influenced by emails from companies. 78% of searches for local business information using a mobile device result in a purchase.
Two things should leap out from these statistics. Firstly they are all north of 70%, so they represent major shifts in attitudes to online purchases. Secondly, they span a lot of marketing disciplines – social media, email, mobile and local. Finding one person with all these skills is near impossible.
As a result, the development and management of a full marketing team, as well as enabling the associated knowledge transfer, is vital for growth to continue. The key questions many online businesses quickly find themselves facing is how to pull customer service, improved product listing, new channels and new products together into a consistent strategy that is both resilient and sustainable.
Sharing the Risks of Growth: Partnerships
Online businesses focused on expansion should look to find partners that can help this growth happen in the fastest, but most effective and controlled fashion.
It is possible to grow and improve customer service and revenue whilst implementing leaner operational processes that do not demand extra headcount. Indeed, these are the hallmarks of Volo customers like Bamford Trading, XS Stock and GamesQuest who have seen huge growth in recent years.
These partnerships should be relentlessly focused on removing the administrative and managerial headaches away from trading online, and keeping online sellers trained on what they do best – discovering and embracing new opportunities for growth.
Outsourcing is a brave decision, but one that reaps big growth rewards. A 2014 survey by First Data Merchant Solutions discovered that daily administrative tasks were taking up too much time for developing businesses, at the expense of activities that encourage growth strategically. The survey found that most business owners described running their operations as “a constant challenge” and a quarter admitted they spent less than an hour each day on “proactive business growth”.
Within your own business, core tasks should be simplified and repeat processes automated. It can be hard for an online business to move to techniques such as management by exception, but these are exactly the kind of approaches needed to operate successfully at scale.
The challenges of growth are many. The key areas I see growing ecommerce businesses tested by are customer service, fulfilment, procurement and recruitment. But all these problems are surmountable.
Every part of a business must mature and change to meet the challenges of scale. By adopting more sophisticated management practices, and making astute use of external service providers, ecommerce companies can remain lean and agile whilst growing – instead of collapsing under the weight of their own success.