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eCommerce Today

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Business Viability Calculator.
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Continued…

The Secret Formula To
Building A Thriving
Ecommerce Business
in 2021

The Secret
Formula To Building
A Thriving
Ecommerce
Business in 2021

I’m absolutely delighted that you’re still with me. Let’s continue…

 

It’s no secret, ecommerce is big business. Global order volume has gone through the roof over the past year, and it’s not just the big players who are benefitting. Entrepreneurs the world over are trying to get into this space now more than any other time in history. And some of them are succeeding. Shopify, the e-commerce giant, reported that their revenue more than doubled to $988.6 million for the first quarter this year. That equates to around 500,000 new stores on the Shopify platform alone! But the sad reality is that an inconsequential number of these stores will never get off the ground. Here’s why:

BUILD IT AND THEY WILL NOT COME

Why is starting your own online store such an aluring opportunity? It’s not only because of the current explosion in online sales around the world. It’s also because the barriers to entry these days are virtually non-existant. With platforms like Shopify and Woocommerce, it’s as cheap to start an online store as a modest dinner for 2. Add an ecommerce gold rush to a zero barrier industry and you get an erruption of entrepreneurs trying to jump onto the opportunity.

“Start an online store today. It’s quick, cheap, and easy. You can have your online store up and running in only a few hours. And you will start generating traffic and making money almost instantly.”, said almost every ecomm guru with a sales funnel.  

Really? Anyone who honestly believes that you can build a business that will generate the kind of income you can survive on by spending 24 hours and as many Dollars needs a reality check. Is there any business in the world that you can start with a few bucks that can do that? No. And ecommerce is no different.

Any business that can generate that sort of income demands endless hours of hard graft and a huge amount of skill, risk tolerance, upfront capital, research, education, and knowledge, to stand any chance of long-term success. And again, ecommerce is no different.

Sadly, the old adage of “Build It And They Will Come” is simply not true in the ecommerce space. So herein lines the first issue. It’s so quick, cheap, and easy to set up the actual tech infrastructure to sell online. But what an overwhelming majority of new entrants in the market don’t realise is that a great, functional storefront only makes up a tiny fraction of what is required to build a successful business. Have you considered what happens once your site is up and running? The fundamental question is “how am I going to generate traffic?”. Generating traffic is easy. Pay Google or Facebook a ton of your hard earned cash and they will send you traffic! But that’s not good enough. The real fundamental question should be “how am I going to generate a reliable and scalable stream of high quality traffic that converts profitably?” You see the difference?

Diving into any sort of traffic plan, marketing campaign, boosted post, or whatever you want to call it, is futile unless you have a comprehensive grasp of:

1) how much traffic you need to generate, and
2) at what cost, at what CPC, and at what CPA (or conversion rate),

to be profitable in the long term. In order to figure this out, you need to have a good sense of what your net margins after all expenses are going to be. If your projected net income (not turnover) is higher than your cost of generating traffic, you have the first foot in the door.

It’s easy to calculate these metrics. Use our Business Viablility Calculator which we’ve already mailed to you to get started.

THE SECOND ISSUE

Once you’ve done a few calculations, you might be astonished at how much money you’re likely going to need to invest in traffic to reach your revenue and profit goals. Herein likes the second issue. Most people start their online stores without having the faintest clue about the commercials… the basic numbers we’ve just discussed. So they launch, spend a few Dollars on Facebook or Google ads, get zero return, and quit. I personally know people who have spent in excess of $5,000 on traffic without generating a single sale. I know others that have gone into debt to the tune of hundreds and thousands of Dollars, who’ve generated revenue, but zero profit. I’m sure you can imagine how quickly you can drain your savings when you’re investing in ads that don’t generate profit. It becomes like a gambling addiction for many people as they spend more and more, obsessing over meaningless traffic, waiting for that first sale, without knowing why their ads aren’t converting.

So, what do you do? We know that starting an ecommerce store is not a quick, cheap way of generating sustainable income. But what if we understand that and accept it, and are prepared to put in what we think it will take to succeed? If you have a rock-solid plan, good source of supply (with plenty of margin), and the commercials make sense, you might be inclined to save up before starting, or to borrow money, to fund your initial traffic. Either way carries an enormous amount of risk.

Just because the commercials make sense, that is still not enough to prove you have a winning formula. And investing any amount of money, whether your own or money you’ve borrowed, without a proven formula, is a high risk gamble at best.

THE SECRET FORMULA EXPOSED

I hope you’ve made it to this part of the article, and if you have, you’re going to thank yourself later. Because I’m about to share The Secret Formula to Building A Thriving Ecommerce Business in 2021. The formula is an actionable plan consisting of a powerful, proven, low-risk market-entry strategy, and the top 5 secrets for success that industry heavy-weights don’t want you to know. Apply the knowledge you are about to aquire and you’ll be well ahead of the thousands of other new entrants in this industry.

THE SECRET FORUMULA 

PART 1: VALIDATION

Once you’ve decided on a niche, follow these steps to validate your business plan:

Step 1: Make sure you have a stable source of supply with margins that exceed 25% and a delivery turnaround time of no more than 7 working days.

Step 2: Open a Google Ads account and use the Google Keyword Planner to check if there is enough search volume (ie demand) for the products you want to market in the territory you want to sell them in. Another great tool you can use to check search volume is Semrush (semrush.com).

Step 3: Complete the business viability calculator to determine what you need to be spending on marketing to generate the traffic required to meet your revenue and profit goals. Your revenue and profit goals can be phased into a few milestones. Milestone 1 should be small enough to be low risk and big enough to excite you and to prove that your business concept works.

If the commercials in the validation exercise make sense, you can proceed to Part 2. If they don’t make sense, you need to go back to the drawing board and re-think your strategy. If the numbers aren’t quite lining up, the three main things you need to look at are:

1. Are my targets realistic? Is there a market for the products I want to sell? How aggressive is the competition? And can I sell at competitive prices?

2. Are my margins high enough? If you’re not projecting to make an average margin of at least 25%, you’re going to find it very difficult to drive traffic profitably.

3. Is my projected average order value high enough? If a majority of your product range consists of very low value items (less than $30), you’re going to have to invest a massive amount of money in traffic to generate any worthwhile income. Make sure you have a good selection of cheaper products and accessories that you can use as sales bait or upsells/cross sells, as well as high-demand premium products ($30-$100 is a sweet spot for most startups).

PART 2: THE ROLE OF PAID MARKETING

At this point, you should have a pretty solid idea of what you need to be investing in traffic on a monthly basis to get your business off the ground. Before I reveal the three winning strategies for sourcing funding to market your business, I want to give you some insight into the role that paid marketing actually plays as part of your marketing plan.

As a new business, you need to build a customer base. To do that, you need traffic that converts. If, at best, you are only able to break-even on the first sale you make to a new customer as a result of paid marketing, you’ve done a good job. Paid marketing should not be seen as a way to generate profit. Instead, it should be seen as a way to buy a customer base. Of course, in some instances, you may be able to generate a positive return from paid marketing, but if not, that’s totally fine. If you can break even on marketing, you are in effect buying a customer base for free. And that is all that’s required from your paid marketing strategy.

So how do we make money? No different to traditional brick-and-mortal retail businesses, you make money on the second, third, fourth sale to the same customer. I’m sure you’ve heard of the phrase “lifetime customer value”. LCV is the amount of turnover you are likely to generate from a customer over the customer’s lifetime association with your business. A customer who buys a mobile phone cover from you today might come back and buy a power bank later on. The second sale doesn’t cost you anything in terms of advertising, so you make the full 25% margin on the sale. Generally, the cost of generating a sale reduces for each additional sale made to the same person. That’s why it’s critical that you have a solid plan in place to retain your customers and to entice them to come back again and again. The lifetime of a customer will be different for every niche. In some niches, a customer will only ever buy once (in which case your paid marketing does need to generate a positive return). In others, the customer lifetime may extend to 1-5 sales a year over a 2 year period. If you are selling consumable products like protein shakes, your customer lifetime might be monthly for a period of 1 year.

Now that you understand the role of paid marketing and customer lifetime value, you can do a simulation to determine how much money you need to invest in marketing to generate your revenue and profit goals, taking repeat purchases into consideration.

Do you have a number yet? Let’s say you need to spend $1000 a month on Facebook and Google ads to get started. As you’re only just about to launch, you still don’t have a POC – proof of concept: Proof that the business actually works. The only way to determine POC is to dive in and launch, and as you start generating traffic and sales, to monitor your conversion metrics and tweak your advertising, product offering, service, delivery and pricing strategies to make the actual commercials line up with the simulated ones. This takes time. You could get it right in the first month, but what if it takes 6 months of tweaking before you get it right? That would mean you would need to be prepared to invest at least $6000 before becoming profitable. Herein lies the risk. What if you invest the $6000 only to discover that no matter what, you can’t get the business to generate profit? At that point, you may want to cut your losses, re-think your strategy, and start again. But you’re already $6k in, and you’re going to need another $6k for the second attempt. Whether you fund this business with your own money or with borrowed money, the risk is the same. So how do we mitigate this risk? Here comes the golden nugget you’ve been waiting for…

PART 3: THREE ALTERNATIVE LOW-RISK SOURCES OF FUNDING

1. Marketplaces

Marketing 101 dictates that you take your product or service to where your customer is. By now, we know who our ideal customer is. We also know that the are currently buying products like yours on well-established marketplaces. So it’s futile to ignore this opportunity. Launching your products on marketplaces puts your products right in front of an existing customer base. You might need to give away 10-15% of your margin to the marketplace, but you only pay when you make a sale. This makes it a zero-risk strategy where the commission you pay to the marketplace is guaranteed to cost you less than your initial cost of driving cold traffic to your online store using Google or Facebook ads, and the commission is only payable when you make a sale. Some marketplaces worth exploring are:

1. Amazon (53% of Amazon’s sales now come from third party sellers like you)
2. eBay
3. Wish
4. Etsy
5. Walmart

Here’s a link to an excellent article on The World’s Top Marketplaces in 2021.

2. Single Product Store

The next powerful technique is to find one high-demand product and build a store just for the one product. The product should be one that will allow you to generate a positive return on ad spend. If your simulation shows that running Facebook ads to this one product will cost $100 per customer acquisition with a net profit of $200, you’re in the money. If you slowly scale such a campaign, you can get to the point where you’re investing $1000 to make $2000. The beauty of this is that you invest $1000 once. The $1k generates $2k. $1k is profit, and the other $1k is your original investment that you’ve made back, which you re-invest to generate another $1k. And the $1k profit is what you use to fund marketing for your main store. This strategy works well for Facebook/Instagram as well as Google Shopping ads. Here’s an example of a very simple single product store that consistently and effortlessly generates profit: https://postureprostore.com

3. Content Funnel

A content funnel works in a similar way to a Single Product Store. In fact, you will need to first build a single product store to use this strategy, as this strategy is an alternative traffic source extension of the Single Product Store strategy.

All you do is create a blog that talks about your single product in great detail. The blog should appear as if it was written by a third party, review style. Prospective customers are likely to respond more favourably to a third party review than an advertisement. The end of the blog should have a button or link to your single product store. Then, you market the blog on a Native Advertising platform. My personal recommendation is Taboola. (taboola.com) Native ads are ads that appear on news websites like CNN and MSN, and they are laid out on the news site to look like all other news articles (hence the term ‘native’). Having your ad for your blog appearing on a major news website like CNN or MSN gives your article an element of credibility.

Here’s how it works. A prospective customer reads the news on MSN, sees your ad, clicks the link. The lead is in “news consumption mode”, so they’re expecting to land up on a news-style page. That’s why you direct this kind of traffic to a blog, and not directly to your Single Product Store. Once on the blog, the lead consumes what appears to be a very complimentary third-party review of your product. Whilst consuming the content, the lead becomes indoctrinated, and by the end of the article, they’re sold. Then you present them with a link to your Single Product Store, and the sale will most likely happen.

The beauty of this strategy is that is not very common. It’s not over-used, and it therefore continues to be one of the most powerful, cost-effective forms of marketing. And it works for all niches. Especially anything to do with health & fitness, beauty, pets, kiddies, vacations, vehicles, and DIY/home improvement. It’s also way cheaper than Facebook and Google to advertise on Taboola and similar native networks.

From a commercial standpoint, use this stratgegy the same way you use the Single Product Strategy. Get your funnel to the point where it is generating a 2:1 return, and use the profit to fund paid traffic for your main store.

CONCLUSION

There you have it. The formula is simple. Make sure the commercials make sense, then generate a low-risk, scalable income stream to fund the marketing of your main store. These strategies have been used by the ecommerce marketing elite for over the past decade, and it’s these strategies that will not only separate you from the hundreds of thousands of new entrants in this industry, they will also greatly reduce your initial risk which will help you buy the time you need to perfect the conversion optimisation of your new store. 

BONUS CONTENT: 5 SECRETS TO RUNNING A SUCCESSFUL ONLINE BUSINESS

There are many entrepreneurs whose greatest desire is to build a business that allows them to live a lifestyle of their choosing, and have it run more or less on autopilot. Ecommerce tends to be fairly complementary to those desires.

However, if you want to turn your ecommerce store into a massive business, the only thing getting in the way is you. The potential is always there, and you have to make a decision to start putting in the time and effort it requires to scale up.

Here are five top secrets to running a successful ecommerce business.

1. Treat your ecommerce business as if it were a thriving offline business.

How do you treat your ecommerce business? Do you see it as a hobby? Something fun to do in your spare time?

It might be easy to see it that way, especially if it isn’t earning you millions of dollars yet. However, if you sincerely have the desire to grow it into a massive business, you need to act as if it is already.

”Your ecommerce store is a real business, and it should be treated with the same respect that the CEOs of Fortune 500 companies treat theirs,” says Anton Kraly from DropShipLifestyle.

A lifestyle business is nice to have, but realise that you can create even greater wealth by focusing on the ongoing growth of your business. Don’t wait around for your venture to feel like a big business. Think about the decisions you would make if it already was.

2. Find the right software for your business.

As a business owner, you need to have the depth of vision to see potential issues before they even come up. For many ecommerce business owners, software is something that needs to be addressed and evaluated on an ongoing basis, because it’s really foundational to the entire operation.

Security concerns, scalability, usability, marketing tools and other factors have to be taken into account when you’re looking for the right software to rely on.

“The real growth killer is when an online store owner is not running the right ecommerce software for their business,” says Susan Delly of Zippy Cart. “Your ecommerce software should be scalable, secure, user-friendly and have a solid set of conversion and marketing tools.”

The right tool depends largely on what needs you have. Make sure to identify your challenges and do your research to find the tool that matches your requirements.

3. Figure out where your customers are.

This is business 101. Know who your target audience is, and figure out where they like to hang out. Many business owners don’t take this step seriously, and end up wasting a lot of their time and resources on marketing that doesn’t convert.

“We started off promoting on social media and that got us nowhere fast. After about six months in business we were connected with someone at a deal site, ran our first deal and it was a success,” says Jessica Geier of Raw Generation. “After that I spent an entire month searching out every deal site I could find and contacted all of them until we got on their calendars. That was the catalyst for our early success and I have no doubt that is the reason we are still in business.”

Of course, this doesn’t necessarily mean that you should go after deal sites as well. It really depends on what your business is centered on, what products you offer and who your target market is.

However, you do need to take this principle seriously. If you can figure out where your marketing dollars are going to produce the greatest return on investment, you’ll have an easier time bringing in a steady stream of leads. 

4. Allow your customers to be your brand ambassadors.

There’s nothing quite like the glowing testimonial of a satisfied customer to add credibility to your business. By collecting and sharing testimonials and reviews on a regular basis, you can encourage more sales from your website visitors.

“The most powerful tip we could give in growing your ecommerce business is allowing your customers to be your brand ambassadors,” says Michelle Michalak from Slyde Handboards. “Make it easy to compile and share testimonials and reviews from your customers.”

You can talk yourself up as much as you want, but it’s ultimately what people say about your business that’s going to have the biggest impact on buying decisions. Your customers are the greatest assets you have, so learn to leverage them.

5. Remove friction from the checkout process.

If you want to sell more product, you have to ensure that your visitors aren’t getting frustrated, abandoning their carts and leaving your site to find another store where they can purchase a competitor product.

Friction is one of the biggest challenges for most etailers, especially as we move into the mobile age. You have to find a way to make checkout so simple and easy that anyone could do it.

“My biggest tip to grow an ecommerce business is practically common sense, but I rarely see websites taking it as seriously as they should: remove friction from the checkout process,” says Nick Eubanks of SEO Nick.

Eubanks goes on to suggest several ways of achieving this end:

  • Eliminate the need for account creation.
  • Reduce the number of screens the customer has to go through.
  • Make sure your default shipping option is the cheapest, unless there’s a faster option for the same price.
  • Use as few form fields as possible, and use auto-fill where applicable.
  • Save billing, shipping and payment information when and where possible.
  • Provide several ways for your customers to pay for their order, including common payment options such as Credit Card, PayPal, Google Pay, and Apple Pay.

Ultimately, you can grow your ecommerce business to whatever level you see fit. It depends entirely on how ambitious you are, and what you want out of it.

 

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