What does a successful ecommerce business look like?

how you going everyone it's katherine langman here tuning in from productprinter6shq and today i have a brand new training for you guys uh and you know basically today what we're going to be talking about is uh what does a successful ecommerce business actually look like so this came about because recently i was asked by someone in my rockstar productpreneur community what does a successful e-commerce business actually look like the person asking the question has an existing online store and has experienced some growth some good growth over the last year but still wasn't you know drawing a big enough wage to support herself and and her hubby and her kids and was you know kind of wondering if it was possible to grow an e-commerce business to that stage that uh you know it could support herself and her whole family and you know i suppose uh at the end of the day we all know growing at the growing a successful e-commerce business or growing any business really um it's never really been super easy and i think success can sometimes feel a little bit more elusive these days especially considering the insane amount of uh growth in the e-commerce sector for sure you know you might want to call it the covert bubble whatever you want to call it you know it's been an insane amount of growth uh e-commerce has literally experienced like a decade's worth of growth in the past year thanks to covert 19. now i suppose you know when when we think about success as well your definition of success might be a little bit different to the next persons i have some clients whose idea of success is a profitable lifestyle business the kind of business you know where your work fits really easily and flexibly around that your lifestyle maybe you know you've got children and young children or whatever and you want a business that consistently pays you an income and replaces your uh previous job so that's totally cool and then other clients that we have have goals of pretty much global domination and are looking to grow really big you know multiple seven eight figure business uh you know revenue businesses uh you know they're looking to sell into major retailers here in australia as well as exporting globally and eventually maybe selling the business for a nice tidy sum um and you know so that's like different spectrums i guess and there's all sorts of things in between so ultimately whichever way you want to go uh and whatever you just find success as for yourself a successful business in my opinion it does really need to be a profitable one right and part of my own personal definition also requires that the business can eventually operate without requiring me to necessarily be there doing the work that might not be your definition but for me if it can't do that because no one else knows how to do anything or because it doesn't generate enough revenue to hire anyone you know staff or contractors then it's not really a business it's a job now that's not to say that that's a bad thing of course plenty of people do extremely well working in that way but personally i want to build my business as an asset i want to be paid regardless of whether i'm sick or on vacation and can't work for any reason and i also want to build my business you know into an asset that i might one day sell and i think probably most of my clients might be in the same boat there as well so whatever your definition of success is if you want to build a profitable business uh there are some solid do's and don'ts that you really want to look out for and you know some some definite numbers and and performance metrics i guess that you really need to be able to meet so that's really what we're going to discuss today and of course as we go on whether you are watching live or you're watching this on the replay please do feel free to comment with any questions and if i don't see your question live i will absolutely come back and answer you later and i'm just going to quickly check in to um you know facebook on my phone and just see if i can see the video make sure that it is coming through and it definitely we are live and i can see people are saying g'day already audrey how you going it's fantastic to see you here all right so firstly let's discuss some common mistakes that i do see ecommerce brands making all the time and so i just want to pre preempt all of this with a quick statement this is not an exhaustive list at all you know business is a complex puzzle sometimes so i just want to pre you know talk about these three common mistakes because they are think i really do feel like they're my top three at the moment uh and the first is that customers don't know how or why to buy from you maybe the navigation is difficult or the site is really slow or clunky or the product value just isn't clear and this you know this can come down to things like making a poor choice in website platform but it also might be because of bad design you know the visual design so not tailoring the design to the brand or to the ideal customer or poor choice of images etc etc poor quality images i mean there's you know various ways you can end up with a bad design second mistake is really not marketing effectively so spending and i do see this a lot spending all the funds on the stock and getting the business actually up and running in the first place and not leaving anything left over to invest in the marketing but it can also um you know this mistake can also come from relying too heavily on one platform for marketing like putting all your eggs in one basket so to speak i've certainly been talking about that a lot lately and it can also be not spending enough time or effort actually building up an audience or building uh building up brand awareness you know there's this perception i think sometimes and you know i think this is something we all know but it's a mistake that many of us and i made this when i first launched two that if you build it they will come and that's just not the way that the internet works uh and then the other thing about mistake about the marketing not working really is um not differentiate not differentiating your brand or setting your business apart from the competition so that makes it extremely difficult for customers to really work out you know why should they buy from you instead of the next person and of course you know my favorite with sales and marketing is of course systemizing the traffic and sales generating activities and uh ecommerce businesses that don't you know they fail to do this um you know that's definitely a big no-no uh and you know at the end of the day we just have to figure out how to attract and convert customers consistently so that we don't end up relying super heavily on constantly hustling or constantly discounting and all of that sort of stuff and then i think the the third mistake that i see happen a lot and this one's a tough one it's got nothing to do with marketing and it's where a business runs into cash flow problems so this happens for a variety of reasons certainly it can happen if there's just not enough um capital up front for sure but you know oftentimes that's not the problem it can be about not managing the inventory and not reordering inventory in time and therefore you know running out of stock to sell and when you have nothing to sell you can't make any money uh we definitely have seen that happen time and time again um it can also be you know down to people taking too much money out of the business especially too soon you know if you're in the early days of the business you know you see money come into the bank account it can be tempting to just take it out and think that it's all there for you but if you don't set aside funds to to cover things like stock purchases or tax obligations or you know all the other kind of overheads that a business needs to run then you can really run into some serious trouble um so absolutely and look i'm no accountant but absolutely you need to get your head around just the basics of accounting and for me i use a accounting platform called xero which is pretty easy to use and it gives you that you know profit and loss statement that's really easy to read um and then you know the other running out of money issue is where the profit margins are just too slim and uh therefore just aren't really sustainable um you know it's very difficult if the profit margins are so so skinny that you know you just don't have enough money to really operate and grow the business and make some money for yourself and then i think i'm just going to add in a fourth mistake i was only going to give three but i just want to kind of touch on one other and that is um and i don't see this all the time but i do want to mention it if the product is not something that's actually in demand you know we definitely want to make sure that we do our research before we start our business and make sure that we we're selling something that customers actually want um and for a price point that that customers are willing to pay so hopefully that goes without saying and we can kind of move forward with this training without uh needing to consider that one um so of course these areas are definitely avoidable and if you take the time to learn um you know you can really get past them and mostly they're fixable if you put your effort in the right place so let's talk about what are the metrics or uh the you know the performance metrics that include um or that indicate i guess a successful profitable e-commerce business and i want to take a look at each one in a little bit of detail so you can see how you can try to measure and improve in these areas and the first one that i want to talk about is actually low acquisition cost so by low acquisition cost i'm talking about acquiring new customers so low not spending too much to actually win the sale so to speak uh you know i think getting truckloads of profitable customers for cheap uh if i can put it like that you know it's kind of the holy grail for most ecommerce businesses but how low is a low enough price does depend on your preferred profit margin uh your customer lifetime value does depend a little bit on your competitors and i guess you know the the price point that the market is willing to um to support and it also depends a bit on your appetite for you know how fast you want to grow and invest in that growth right so the biggest part of uh this customer acquisition cost really is the marketing expense to acquire each new customer and you know even if you aren't actively spending money on things like advertising which most of you will be uh you know there's still a cost incurred in converting every new customer so you know first you can and probably most of us do get away with simply spending your own time with the marketing and and winning new customers but as you grow obviously you're going to be um spending money on things so you know when you're more established you might hire experts or you might hire staff to do the marketing for you and of course most of you are going to be spending money on advertising as well so let's talk take a look at the two primary drivers behind this this uh part of the puzzle or this yeah piece of the puzzle i guess um which is you know customer acquisition and these two primary drivers are going to be your brand and your marketing efforts so uh you know brand branding building a brand you know it's kind of the fuzziest but one of the most impactful ways to really stand out in the marketplace and also to lower your customer acquisition costs um and you know i want you to have a think about how many people have actually heard about your brand and know what it stands for how are you different from your competitors why would a potential customer be triggered to check out your store you know you want to you really want to figure out why you are different and better or how you're different and better and how you give your customers a reason to come to you instead of the next person right so when we go through this exercise with clients um sometimes we can come up a little bit empty-handed um you know i think it's just something that is not always thought about so deep down they can't really give us a compelling reason why people should buy from them versus their competitors and that's not because there's no reason it's because it's just really well hidden and they don't know how to think about this stuff so going back to the oranges of why the store came into existence will often help to find that reason and for me if i think back to when i still had my first business which was my modern cloth nappy brand that reason was to help regular everyday parents to adopt this eco-friendly and cost-effective product so how do you measure whether you are successfully building your brand and uh you know look there's you can get super sophisticated about it but you know i don't want to make things difficult for you so the easiest way to keep track of things uh would be to keep track of things like the size of your following on social media platforms and in groups if you have your own groups the size of your email subscriber list the volume of organic traffic organic search traffic rather so people actively seeking you out the number of people literally googling your for your brand name that's a pretty good indicator so obviously that's not an exact science and i'm sure there are and i know there are way more thorough ways of tracking it but you know really in my experience it's totally fine to keep things as simple as you possibly can especially as you're getting started so moving forward the second part of this low customer acquisition cost is going to be around your marketing efforts and you know really creating a strong brand initially means deciding what you stand for and also what you don't stand for right and so that's going to mean that you'll have a better idea of who your customers are who to target and where to find those people and so that's a really good starting point when it comes to your marketing so how do you generate consistent traffic and sales through your marketing efforts uh you know many of you guys have been learning from me already for a while so you know what i like to to do in this um in this part of the puzzle but basically you always want to have some marketing strategies to designed to attract and convert your new customers coming in and then some that are designed to you know generate repeat sales you know getting customers to to come back and return to you uh and you know giving your sales will all be happening on your e-commerce website this means you know it really comes down to driving traffic to your store right and so as i discussed in my previous video um the best way to build that really strong foundation for your e-commerce growth is to drive traffic from the three different types of traffic source paid owned and earned so i'm not going to go into huge amounts of detail in about that here and now you know you can go and watch that video after this one if you want to um but suffice to say you know using a mix of all three different types of traffic strategies is really key to profitable long-term success in an e-commerce business and because i just see too many business throwing all their eggs in one basket when it comes to getting traffic to their site you know for example just posting everything uh posting on instagram and not really doing anything else and you know it's such a risky way to try and market your business all right so that was the first key part that you need to have in place for uh you know building a successful ecommerce store the low customer acquisition cost and the ways that you go about um achieving that the second performance metric that we really want to aim for is a high returning customer rate so let's move into this second key performance metric that will indicate your success and that is customer loyalty or you know high returning customer rate so this factor really does increase the the lifetime value for your ecommerce customers which is really great for profitability and i think i've probably said many times before we all need to convert more and more new customers in order to grow but in order to become more profitable we need to convert customers from one-time buyers into repeat buyers and this is because you know it's pretty expensive to attract and convert a customer the first time uh you know between costs like advertising or offering incentives you know reducing that profit margin on the first sale or even just factoring in your time to work on things like seo search engine optimization or maybe even just networking in free groups right like we need to value our time especially if we do want to be able to build a business that is profitable enough to pay us some profit whilst we're paying other people to do the work right whereas selling more product to existing customers is a whole lot easier and the reason for this is they're already inclined to like you i mean presuming you gave them a really good experience and your product was good right so they're already inclined to like you they're familiar with shopping on your website already so it's easy for them to buy from you again it's easier for them to do that than to go and you know do some more research and to find somewhere else so you know this really does help you to recoup some of those initial customer acquisition costs and i want to state here that the average repeat customer rate for e-commerce is quite varied so it's between 20 to 40 so that's looking at um you know the global averages here for e-commerce whereas the most successful most profitable e-commerce stores actually generate more than half their revenue from repeat customers which sounds crazy but please bear in mind that you should never expect to achieve this at the start of your business journey right you actually need to have a decent and growing volume of new customers before you can ever expect to generate repeat sales right and if you ever stop acquiring new customers then you can kind of see your business stagnate and then potentially start to go backwards as well as your database of existing customers move past being in the market for whatever it is that you have to sell and you can you know you can kind of burn that list out right we don't want to do that so we always need to be replenishing our new customers coming through but at the same time we need to have strategies in place to convert more of them into repeat customers on a consistent basis um and so hopefully you can see that you know it is still like it's still kind of a funnel right we need to have lots of people coming in the top as first-time customers and uh then you know we want to have strategies in place to convert them into repeat customers and uh you know as you keep growing you just keep tipping more in the top and uh you know you get more money and more revenue and more profit at the bottom right so customer loyalty is something that you know it's the sum of a lot of important parts so things like customer experience as i hinted at before product selection pricing brand marketing um and notice how i did actually put marketing last i know i'm a marketer but i put marketing last because the most common approach to increase customer loyalty is simply to get in front of your existing buyers more often and even though i am a massive fan of automated email marketing and we love to use automated email campaigns to do this to try and convert repeat customers you can't do that if you know it's never going to work if the customer had a poor experience when they first purchased so you know we need to be trying to build into our systems and processes ways to you know checks and balances to make sure that customers are getting a really great experience and they're loving the product um before they start receiving any of that sort of automated marketing right uh otherwise it's definitely going to fall on deaf ears and that's not going to be cool for you um all right so the third part here that we want to move into is having healthy margins so when we think about you know these performance metrics of a successful profitable e-commerce business healthy margins are really important um and maybe sometimes as marketers and and you know small business owners trying to grow our business maybe we don't look at that often enough but a healthy gross profit margin does make your e-commerce business a lot easier to run so this is simply because it gives you the financial room to move to invest in your marketing to invest in your growth to invest in your team to acquire customers you know to spend on advertising to acquire customers and and manage fulfillment and help facilitate your growth right so as a benchmark and again this is looking globally at averages uh the average gross margins average between 22 and 38 for e-commerce which is quite low so my experience here in australia uh with our much higher average costs for things like wages and freight i mean you know postage costs in this country are astronomical it's ridiculous uh you guys all know what i'm talking about um the most successful e-commerce businesses that i've worked with uh tend to have the gross margins sitting between 50 and 60 so most of them are actually buying at least their core products at distributor prices uh where they are of course manufacturing their own products and that you know being able to do that at a much um you know even bigger uh margin so this really isn't uh this important factor is made up of two uh really important numbers and that is revenue and cost okay so we've already looked at a piece of that cost which is your marketing so spending money on things like advertising or uh offering incentives and discounts and freebies and things like that to try and incentivize the first sale right so we've looked at that piece of the the cost but you know of course there are also other costs involved like product cost so the cost to actually buy in your stock shipping expenses and then other overhead expenses as well so i'm going to focus here on increasing revenue and more specifically how to increase the average order value so you know at the end of the day uh selling high priced products actually can you know funnily enough make this a whole lot easier it's going to increase your gross margins um or your profit your total profit rather in dollars and this might come as some as a bit of a surprise but it's actually not that much harder to sell a more expensive product you know compared to a less expensive product so it's actually not that much harder to sell say a two thousand dollar coffee machine versus a nineteen dollar fashion access fashion accessory which sounds bonkers right you know like it's not like a two thousand dollar coffee machine is an impulse buy um and i guess you know oftentimes on larger products like that or more expensive rather you know your profit margin might be lower so in percentage terms um but the total profit in dollar terms per order will be a lot higher on the first product right and i actually found this first hand with my modern cloth nappy brand which uh in that business i primarily sold in bulk value packs for several hundred dollars and it literally was just as easy to sell an 800 pack compared to a single nappy for 35 and i will actually go further to say it was so much easier to build a you know really engaged um raving fan base to you know when it was the customers who bought the larger pack they were really rusted on customers you know you're not going to like rust on your bike frame you know you just can't get rid of them sort of thing and and they really did become the best customers whereas the ones who are um spending way less money they were the hardest work all the time um so how you know at the end of the day for most of you it should really be possible to increase your average order value pro uh that you you're selling um on your store so you know you don't have to sell a 2000 coffee machine by any stretch so how can you increase your average order value even if your products are low priced so the first is upselling and cross-selling and so cross-selling of course is selling complimentary products so it might be like the 15 bottle of descaling cleaner to go with that 2 000 coffee machine or you could try bundling your cheaper products for a higher price and i want to share a little anecdote from our recent client wild dough which is a play-doh brand and normally they would sell individual products individual pots of play-doh for about 15 bucks each but they also sell play-doh kits for around 80. uh well they do now anyway which was an an idea we introduced for them so once we introduced those kits not only did their revenue increase because it was making it so much easier for customers to to just do one purchase rather than try and choose a bunch of things and and not really know what they needed right so once so that it increased revenue but it also increased their website conversion rate so clearly it was helping customers to make that purchase decision right uh and the next thing that you want to be able to do to increase your uh average order value is to nudge buyers towards a higher price so you know most people will buy uh most most customers will buy um a little bit more if you can use uh what's the word psychological nudges or triggers to just try and get people to spend just a little bit more and probably a lot of you are already doing this right so an example is free shipping thresholds where you need to spend a certain amount of money to qualify for free shipping [Music] and that can work uh absolute wonders to you know just get people to spend just a little bit more and you want to sort of hit that uh free shipping threshold at around the sweet point you know you're going to make good margins um but it's also not going to cost you an absolute arm and a leg to ship that order out right all right so i've gone through quite a few things here but wrapping up you know i guess you probably don't have the bandwidth to explore all of this at once right you know customer acquisition retention and profitability all at the same time i certainly have trouble trying to do more than one thing at one time i i know i'm a female and i should be able to multitask but the older i get the harder that seems to be so i want to kind of just talk you through a little bit of where you should focus your time depending on what stage uh you're at in your e-commerce business just to make this a little bit less overwhelming so if you are just starting out you want to focus and you need to focus on customer acquisition first okay so this means uh you know brand building and marketing strategies that are going to drive traffic and convert new customers to buy from you um so this is where you're going to have the biggest initial impact in your business it is also the least profitable stage in your business and i don't want you to be frightened off by that at any you know like at the end of the day once you can get this dialed in and you can figure out where your audience is how you can attract them to you and convert those first-time customers and put you know put a bit of a system around it then you are golden and it is time to scale up so then once you start growing your website traffic and sales so that's the next stage and you're seeing some consistent new customer sales coming in you can start working on that customer retention stage and then beyond that at scale it's time to really dig into the cost and the revenue and just really try and find ways to optimize each element in that equation so that is going to be where you're making you know more money and more profit that you can keep for yourself and that'll be when you can start taking more of it out of the business and putting it into your back pocket alrighty so that is what i've got for you today i hope you found that helpful uh you know to break it down like that and to show you you know the system that you need to have in place in order to scale and grow that successful online store as i mentioned earlier please do feel free to hit me up in the comments with any questions at all uh or of course you can jump on over into our rockstar product for nerve facebook group and uh get some extra help and support in there and you can join for free at katherinelangman.com

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2021-09-27 13:56

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