Many of our ecommerce customers here at Signifyd find themselves in the middle of a growth phase as a company, and are faced with the prospect of expanding their operations to keep up with demand.
But, how do you go about scaling? Where should you start? What should you build in-house, and what is best accomplished through vendors?
Keep in mind: while the U.S. ecommerce industry had a record year in 2015, with sales totaling $341.7 billion, e-retailers themselves are struggling with growth in light of more competition than ever. According to a joint report by Shop.org and Forrester, in 2015, online sales were flat for almost a fifth of retailers in 2015, compared to 3% of retailers in 2014, with the likely culprit being more than 800,000 online marketplaces jockeying for customers and market share. The report surmises that “while it’s relatively easy to launch a web store, scaling an online business is extremely difficult.”
In the spirit of that, we talked with some of our bigger customers and brainstormed about what the modern ecommerce company did in order to scale effectively. By and large, the theme we discovered was that unless these companies had specific competencies in certain operational areas, they chose to leverage outside-built ecommerce tools for help with automation and expanding their operations, as opposed to building tools themselves.
The consensus of our customers gathered this: the belief that they should use tools that allow them to maintain as much focus as possible on the core of the business. Instead of building in-house expertise in functions like shipping, they chose to use vendors who had already established expertise in the area — and leverage it.
From our own discussions, and our customer’s experience, here are five things the modern ecommerce company should consider doing as they grow and scale operations.
1. Upgrading your ecommerce platform. This may seem simple, but as you grow, it’s often worth it to consider whether or not you’re being served well by the platform you started with.
Many of our customers started out with a simple site built on WordPress, Squarespace, or the like, and grew from there, only to find themselves restricted by what those sites could offer. The great benefit to upgrading to a Shopify, Magento or BigCommerce store is two-fold: the plethora of plugins available to you, and the community there.
For example, a crown jewel of Shopify’s is their Ecommerce University, which houses their in-depth how-to guides, a robust entrepreneur forum, case studies and an incredible blog. Beyond that, Shopify facilitates meetups among their customers to encourage networking and information sharing. Shopify and Magento also offer thousands of extensions and plugins for your online store, for all of the vendors we mentioned above, adding incredible functionality and versatility to your store.
2. Improving your shipping and logistics process. When thinking about ways to scale, shipping often comes up as a point of consideration. At a certain point during your growth, the logistics setup you started with isn’t doing the job anymore.
For example, let’s say you built your store on Shopify, and your plan for dealing with shipping is simple: orders come into your Shopify dashboard, and you work with your shipping provider, be it USPS, UPS, FedEx or a combination, to determine the best rate for the shipping speed desired to the area being shipped to, be it domestic or international. This may work fairly well when you only have a handful of orders a week through Shopify, but can be quite laborious when you grow further.
Now, let’s say you’ve expanded operations beyond Shopify, and have added sales channels through Amazon Marketplace and eBay. In this scenario, not only are you receiving a larger volume of orders, but you’re also receiving them from a variety of channels. The shipping process suddenly becomes far more complex, and as fulfillment times are lengthened, it affects both customer service and overall company efficiency.
At this point, our ecommerce customers started searching for better logistical and fulfillment set up, and pursued one of the following options:
- Shipping fulfillment and automation software. Vendors like ShipStation and OrderCup aggregate your orders from your various sales channels into one spot, as well as your shipping accounts, allowing you to manage fulfillment in one place, and automatically select the appropriate shipping and carrier. Plus, they print shipping labels and have the option to coordinate pickup. It’s a small price to pay for a lot of convenience. Again, the key is maximizing efficiency and automation.
- Dropshipping. Some customers go a step beyond and consider dropshipping, the practice of shipping directly from the manufacturer as opposed to keeping inventory in-house. The benefits are clear: you don’t have to store the inventory, which means less overhead, and it’s remarkably easy to scale. However, you end up sacrificing margin and control over your fulfillment process to someone else. If dropshipping interests you, Fulfillment by Amazon dominates the landscape, and Shopify has an amazing guide to dropshipping that we recommend reading further. (eCommerceFuel also has a great piece on How To Nail Your First Shipment to Amazon FBA.)
3. Offloading order review and fraud management to experts. Since we’re a fraud detection and prevention company, it’s impossible to make a list like this without referencing fraud. Like shipping, fraud management rises in importance as a logistical issue worth addressing as orders increase. When you’re a smaller company, verifying your orders’ validity is manageable. At that point, considering the size of the store, and the likeliness of your customers being friends and family, your fraud risk may be relatively low. Again, this changes as your visibility, and thus your orders, increase. The backlog of orders demanding your review puts pressure on your fulfillment process, forcing you to either:
- Err on the side of caution and take your time with order review, using more of a valuable resource (your employee’s time) and leading to longer fulfilment times and annoyed customers, or,
- Cut order review time short to maintain promised fulfilment times, possibly leading to a higher rate of chargebacks as fraud slips through.
At this point, our customers often seek out a fraud management provider to offload the responsibility of deciding “To ship or not to ship?” A good fraud management tool not only gives you that decision, but backs it up with guaranteed fraud protection should their decision lead to a chargeback. After all, in 2015, ecommerce companies lost, on average, 1.32% of their revenue to fraud. (To put it in perspective, not only is that a 90% increase from the year prior, for every $100 loss suffered by an ecommerce company due to fraud, the merchant ended up losing $223 in total.) As you scale, and margins are top of mind, offloading your fraud liability for a low, predictable cost helps tremendously.
4. Investing in a more robust marketing and promotions engine. With the plethora of channels available to you to promote your products, it’s time to think more about creating a complete marketing and promotions engine, and ensuring it’s responsive. (Keep thinking mobile: it led to $35 billion in US sales last year.) Whether it’s expanding an existing loyalty program,
Here’s an idea of the various channels you have at your disposal:
- Social. At this point, it’s worth it to consider using a tool that not only cross posts your promotions across social platforms, but suggests other ways to promote items and upsell your customers. A great example is KitCRM. Not only can they create ads for Facebook and Instagram (and promote them), they also help you run email marketing campaigns showcasing your products. (Plus, according to eMarketer, seven out of ten retailers have a social commerce strategy in place.)
- Email and newsletter. Leveraging email to promote a relationship with a customer is key for ecommerce companies. After all, though email reaches traditionally older crowds (as millennials flock to social and mobile), by and large, this channel has one of the best ROI. Great tools not only help you segment your customers, but automate sending based on customer action.
Another avenue to think about is how you send receipts out to customers. Receiptful, a popular tool, not only generates lovely receipts, but also uses them as an opportunity to upsell your customer by offering shipping or order discounts, refer-a-friend rewards and pictures of similar items on your site.
- SEO. Whether you completely outsource it to someone else, or spend time with Moz, SEO is one of the hardest to get right, but that doesn’t mean you shouldn’t work at it. eCommerceFuel offers some great perspective when considering the decision to keep it in-house or outsource.
- Paid traffic. It’s worth it to play around with your Google Adwords, Facebook Ads and the like to find a channel where the lifetime value of the customers you acquire exceeds the cost that you spent to acquire them. Biggest lesson here: if it works, keep putting money into it.
Bottom line: it can quickly become tedious to post and promote an offer on each channel individually. If you jump on board with an ecommerce platform that has a robust app or plugin offering, check out your options for consolidating your marketing efforts into one area.
5. Tackling cart abandonment, and figuring out what’s stopping customers from completing their purchase. Hand in hand with a more robust marketing engine in an examination of cart abandonment. Now that your site has been active for a while, it’s time to see where it’s leaking sales, and what’s stopping customers from completing their purchase. If you haven’t set up any abandonment metrics, now is the time. In 2015, ecommerce retailers may have lost a total of $142 billion to cart abandonment alone. That’s huge. Even recapturing a small percentage of your customers who abandon would be a boon to your bottom line.
So, what to do? Our customers have tackled this in a variety of ways:
- Email remarketing. Vendors like Rejoiner help ecommerce companies reach out to cart abandoners via email and persuade them to revisit their cart. They also help segment and target your customers based on their reasons for abandoning the shopping cart, be it price or shipping concerns, or simply browsing, and suggest campaigns and best practices to grab those customers, as well as insights on why customers are or aren’t buying from you.
- Ad retargeting. A common approach to tackling shopper abandonment online is to simply target them when they’re offsite. Vendors like AdRoll and Retargeter help you grab customer attention on other sites and bring them back to complete their purchase.
- Rethinking the shopping cart experience. Other ecommerce companies have chosen to rethink the entire shopping cart experience in light of how many customers use shopping carts, like a shopping list showing eventual purchase intent, rather than an intent to purchase at that moment. Shopify also has a great guide to addressing cart abandonment that we recommend.
And that’s all! Let us know what tools we missed in the comments section, and we’ll be back with more tips in the future on other areas the modern ecommerce company should consider to scale.