Snapshot : Great e-Commerce businesses put the right skills, processes and systems in place to support their operations. These skills, processes and systems are come from building e-Commerce capability. In this article, we outline 12 different types of e-Commerce capability that you can improve to be a better online seller.
For online buyers, shopping seems easy. Pick what you want on the website, enter your details and voila, the product turns up on your door-step.
But if you’re the online seller, life’s more difficult.
You need to set up and manage skills, processes and systems that stretch across marketing, IT, finance and supply chain. These all need to connect to create a seamless experience for customers.
We’ve identified 12 such e-Commerce capabilities that sit at different steps of the e-Commerce planning process.
This process has five key steps.
First, you identify the opportunity. Then, you validate it. Next, you create a channel planning and shopping experiences for your target audience. And then finally, you go sell online.
Step 1 – Identify the e-Commerce opportunity
There’s two main types of opportunity in e-Commerce.
Firstly, there’s when you find unmet shopper needs or wants. If your brand can meet those needs or wants, then those shoppers will buy your brand.
Then there’s poorly met shopper needs or wants. This is where you see how you can better meet shopper needs or wants that they are currently being met.
Better quality, cheaper prices or faster delivery, for example. You find ways to do something that matters to customers better than the competition can offer.
(For an explanation of the differences between needs and wants, see our article on marketing and e-commerce divided by a common language).
There’s three main ways to identify these opportunities – market research; data capture and analysis; and test and learn.
E-Commerce capability 1 - Market research
Market research is the traditional way to find out what customers need and want. There are two main market research approaches where you talk directly to customers.
Firstly, there’s qualitative research. This is where you speak directly to individual or small groups of customers. It helps you ask questions about why customers do the things they do.
It helps you identify and explore attitudes, behaviours and motivations. These insights inform the choices you make, so you can make better decisions about how to appeal to customers.
Then there’s quantitative research. Here you speak to large numbers of customers.
This group statistically represents the total market, so you understand how many of them think, feel and do the things you’ve identified. This data becomes part of your business case which we’ll come to shortly.
You’ll usually use a market research company to carry out the research itself. But, you still need to understand the market research process. Likewise, you need to know what research questions to ask. And you need to know how to turn the research answers into marketing plans and actions.
Market research helps you understand customers better, which helps you understand what they need and want from e-Commerce.
It’s a great way to make sure you create experiences that online shoppers need and want. But, it’s not the only way to identify opportunities.
E-Commerce capability 2 - Data capture and analysis
You can also identify opportunities by using marketing technology. Rather than asking directly, you observe what customers do online to generate ideas.
This observation comes from data capture and analysis when customers interact with you online. This can be on your own website, or on third-party sites like Google, Facebook and your online retailers.
This data-based e-Commerce capability helps you better understand what people do online.
Observing what people do, rather than asking them what they do takes away the researcher bias which exists in traditional market research. This is where the researcher unintentionally influences the response from the customer.
For example, say you want to understand how customers make decisions about quality over price.
In traditional market research, customers might worry they are being judged on their responses and not give true answers.
For example, they’ll tend to overstate how much quality actually matters (because they want to make themselves look more discerning). And they’ll understate the importance of price discounts (because they want to avoid looking like they’re tight-fisted).
But when you observe their behaviour, you get a true read of what they do. What they say they do, and what they actually do can be very different. What people actually do matter more.
To capture this data, you need to be able to set up and use marketing technology. For example, looking at search trends and using tools like Google Analytics to analyse how customers interact with your website.
This technology capability needs to combine with data analysis skills. Analysis helps you to create clear insights and stories that bring to life shopper needs and wants.
E-Commerce capability 3 – Test and learn
The final way to identify opportunities is through the test and learn approach.
The more of your e-Commerce channel you manage yourself (see Step 3 for the different options), the wider the scope of activities you can test out. Managing your own online store including the whole order to delivery gives your the most control and flexibility over what to test and learn.
Test and learn means carrying our “experiments” with small, distinct groups of customers. These are also usually smaller in size in terms of the resource (time, people, budget) required.
Creative thinking help you generate ideas to improve the customer experience by using techniques like brainstorming and lateral thinking.
For example, this could be as simple as changing the colour or wording of a button on your website. Or as complex as creating an online exclusive or a subscription service.
Creative thinking is driven by idea generation techniques like picture and word associations, using opposites and varying the attributes.
(see our guide on creative thinking for more on this)
Secondary research is where you look at existing research and information for insights and ideas about customers.
For example, competitor analysis is a common approach. So, you look at what competitors do on their websites, or on other platforms. You see if there are ideas you could adapt or transform for your own customers. Mind you, copying competitors is not usually not a good idea. But if they offer customers something you don’t, you need ideas on how to resolve that.
Secondary research can also involve looking at industry association publications, looking at other categories and looking at published research about online shopping.
To win new customers, you need to influence them to change their current behaviour. The study of behavioural psychology helps you understand how people in general make the choices they do. What biases drive their choices and what habits do they have that you can tap into or try to change?(see more on this in our review of the book The Choice Factory).
This understanding can be a rich source of ideas that help you identify e-Commerce opportunities.
The ideas you generate from creative thinking, secondary research and behavioural psychology can all then be tested with customers, using the test and learn experiment approach.
For example, an experiment could be to test different offers in your digital media with different groups of customers. An experiment could be to test different images, text or layouts on your store website.
The aim of the test and learn approach is to identify ways to make your e-Commerce experience more relevant and attractive to customers. Analyse the results to work out what works and doesn’t. And then, use this analysis to help you validate the opportunity.
Step 2 – Validate the opportunity
You may end up with a long list of ideas and opportunities, but now you need to start making some choices.
Resource limitations (people, time, budget) will mean you can’t go after every opportunity. And some opportunities will just be bigger and more important than others.
So, you need to validate and prioritise. Typical information you’d gather to validate and prioritise opportunities includes :-
- Level of resource (time, budget, people) required to activate
- Number of customers the opportunity will impact
- Projected changes in customer spending patterns
- Competitor presence and likely response
- Additional capability (skills, systems, processes) required
E-Commerce capability 4 – Agile methodology
The size of the opportunity often determines how you validate it.
For smaller opportunities, you can use an agile methodology approach for example. By smaller opportunities, we mean changes that can be implemented and tested relatively quickly, at low cost by existing resources. The results can be quickly evaluated.
So for example, if you manage your own store website, it’s relatively easy to make small changes to areas like your sales copy and your product pages. Small agile teams can test different variations to see which ones work best with customers.
E-Commerce capability 5 – Business cases
But with larger e-Commerce opportunities that take longer and cost more, you’ll likely need to put together a business case.
This gathers data about customers and the opportunity and shows what you propose to do, and why the business should support it.
How you prepare a business case varies by company and context. Usually though, you’ll need at minimum a clear financial and commercial plan.
The projected return from the opportunity will need to clear any sales and and profit thresholds (a minimum amount that a project must deliver to go ahead). And the business case will need to meet deadlines for return on investment (e.g. must break even in six or twelve months).
Business cases are important when you want to make major changes in the shopper’s experience. They outline the financial results and operational activities that need to happen to support the opportunity.
If there’s significant investment in time, budget or people, the business leadership team needs to be informed and support the plan. The business case should build confidence in the scale of the e-Commerce opportunity, and the investment required to go after it.
You want everyone involved to understand the opportunity, so they’re happy to support the investment.
Step 3 - Channel plan
In the previous step, you may have already started thinking about which e-Commerce channels to go after. But the next step in the e-Commerce planning process forces you to plan more carefully.
You need to decide which channels you’ll use, and what you’ll do in those channels.
There are five e-Commerce channels to choose from.
Each has a different level of control and complexity over how you sell online. These influence what e-Commerce capability you need.
E-Commerce capability 6 - Manage Marketplaces / Print on Demand
These channels are where you sell though existing third-party online selling platforms.
For specific printed items (e.g. T-shirts), print on demand (POD) suppliers like Redbubble and Spreadshirt sell your designs on pre-made merchandise items. You either sell on their platforms or create links via your own website.
These channels are easy to access. The marketplace and POD suppliers usually manage payments. Sometimes they’ll also manage delivery for you.
Your main focus with these channels is on brand marketing. You’ll need a solid marketing plan to drive people to visit your area of the marketplace. And you’ll need great brand activation to convince them to buy your brand.
E-Commerce capability 7 – Account management with online retailers
If you work with online retailers, you’ll need account management skills to manage the on-going relationship with them. Account management is needed for both bricks and clicks and pure players.
Account management includes understanding the retailer’s strategy and way of working, negotiating commercial terms, building strong relationships and dealing with issues. But account managers also need to have understand e-Commerce and how it works.
E-Commerce capability 8 – Manage dropshipping / Direct to Consumer
The final two channel options are drop shipping and direct to consumer. Each comes with it’s own opportunities and challenges.
With drop shipping, you act as an online store front for suppliers, often based overseas, particularly in China. Shoppers order from your website, and you forward the order on to the supplier who sends it to your customer.
This approach means you don’t produce anything yourself. You don’t pay for stock and you don’t have to arrange the delivery. The supplier handles all this.
Sounds great. But it requires two new e-Commerce capabilities to do it well.
Firstly, you need to be able to find the right manufacturer / supplier who can manage orders efficiently and effectively.
Then, you also need good customer service skills when things do go wrong with orders. Your customers think they are buying from you, not a third party. You take their money. If something goes wrong, it’s up to you to sort it out.
With direct to consumer, you manage ALL elements of the online selling experience. This requires ALL the e-Commerce capabilities we’ve mentioned so far, plus more like managing the order to delivery process, and the day to day management of the online store.
This is the most complex of the e-Commerce channels. But it also gives you the most control. Check out our guides to setting up your own online store for more on this topic.
Step 4 – Create online shopping experiences
With the thinking and planning done, now you need to turn those into action. You need to create online shopping experiences which deliver against the opportunity. Your channel choices from Step 3 heavily influence how you do this.
E-Commerce capability 9 - Create experiences on someone else’s platform
Selling on someone else’s platform – like marketplaces, online retailers and print on demand – limits the types of experiences you can create. Those platforms have controls, systems and processes which you’ll need to follow.
For example, they’ll usually have a product information system that you use to manage the basic content of your product pages.
Use that system to change the product name, the product images and the product description on each product page.
If you want to create online shopping experiences beyond these basic experiences, you need the support of the shopping platform owner.
This support usually means spending money with them such as on display advertising. You need to work out whether the extra sales from the activity will be enough to cover the cost.
E-Commerce capability 10 - Create experiences on your own platform
Obviously, if you manage your own online store, you’ve more direct control over the shopper experience.
You can change any part of the experience from how the customer finds your online store website to how price, delivery and customer service work.
In addition, the order to delivery process also creates more e-Commerce capability requirements.
As per our guide to the functions of e-Commerce you need to be able to manage payments through your financial systems. You need strong supply chain processes and systems to move orders from the warehouse to the customer. And you need customer service systems and processes to deal with order issues.
Step 5 - Sell online
The final step of the e-Commerce planning process is to start selling online.
Everything you’ve done to this point will set you you up for success.
But there’s two final e-Commerce capabilities you also need to factor in.
These are improving the customer experience and having the right attitude and resilience. Both are important to help you sell more online.
E-Commerce capability 11 – Improve the customer experience
It can be a lot of work to launch your online shopping experience. It’s usually easier on someone else’s platform than creating your own. Either way, the launch is a significant milestone.
But be aware, it’s only a milestone on your e-Commerce journey. It’s not the final destination.
In fact, in most cases, e-Commerce doesn’t really have a final destination. Once you start selling online, you want to keep selling online. Online stores are open 24-7, 365 days a year. They’re constantly updating and improving to win over more shoppers. You need to be part of this, updating and improving your customer experience.
Gather regular data about your customers and what they do. What’s working and what isn’t? What are your competitors doing? How can you outperform them?
Go back to the first three e-Commerce capabilities we covered – market research, data capture and analysis and test and learn. Use these as ways to find new ideas to improve the experience for customers. New ideas can mean cutting things out as well as adding extra features.
When shoppers research products, they may well welcome extra features and information. But when they’re ready to buy, these may get in the way. Don’t be afraid to remove unnecessary steps. Reduce the number of clicks and options to choose from when customers are ready to buy.
Review your activity on a regular basis. Smaller opportunities, you can review every 1-2 weeks. Review bigger opportunities every 6-12 weeks. Try to work out which ideas and activities make the biggest impact on performance. Double down on those.
That’s what’ll help you improve the overall customer experience.
E-Commerce capability 12 - Attitude and resilience
In e-Commerce, not every idea or activity works. That’s normal. You play a percentage game. You learn from both successes and failures to keep building your capability.
To deal with success and failure, you need the right mindset. It’s important to keep a positive attitude. You need resilience to keep a level head when things go well and to bounce back when things go badly.
Keep track of these successes and failures. Feed these learnings back into your e-Commerce planning so you keep building your skills.
E-Commerce capability conclusion
We’ve covered a lot in this article. So, to conclude, here’s a recap of the key points.
There are five steps in the e-Commerce planning process. Each comes with different capability needs.
Validate the opportunity depends on the size and complexity of the opportunity. Smaller opportunities can be handled using agile methodology. Larger opportunities require business cases that pull in financial, operational and commercial skills.
The channel plan step is about deciding how your brand gets in front of customers. There’s a trade-off between complexity and control. In simpler channel models like marketplaces, you hand over complex areas like order to delivery to third parties. But in doing so, you lose some control over the experience.
Direct to consumer gives you the most control but has the highest complexity. You manage everything yourself. You’ll need all the e-Commerce capability we’ve covered in this article.
The create online experiences and sell online steps add e-Commerce capability requirements in digital marketing and customer experience. Building all these capabilities and making them work together can be a challenge.
That means a key factor for success is a positive attitude and the resilience to deal with both success and failure on a regular basis.