Why read this? : We look at how to uncover e-Commerce growth opportunities. Learn how to identify sources of growth. And how to position yourself with the highest potential customers in the market. Read this to learn how to define and refine your plan for e-Commerce growth.
The first step in e-Commerce planning is to identify the opportunity.
Opportunities help you grow your business by meeting new customer needs, or better meeting existing customer needs.
But of course, you need to know where to find these opportunities. You also need to know who each opportunity is with. And you need a plan for how you’ll go after them.
In this article, we share different tools and processes which answer these questions :-
- Where does growth come from? – e.g. the Ansoff Matrix from innovation planning helps you work out if growth will come from existing or new products and markets.
- Who is it with? – e.g. broad market research around what online shoppers want, and segmentation research to identify your target audience.
- How will you go after it? – e.g. define your competitive strategy and brand positioning to show the benefit you’ll deliver, and why customers should choose you.
E-Commerce growth - where it comes from
The first challenge is to work out where your e-Commerce growth will come from.
As this is about finding new ways to grow your business, you can use a similar approach to how you look for growth in innovation planning.
For example, you can use a tool like the Ansoff Matrix. You make 2 choices and those help identity your source of e-Commerce growth.
Market penetration : Existing products / existing markets
A market penetration approach in e-Commerce means you already sell online. Your e-Commerce growth comes from increasing your market share. You use existing products to go after existing markets.
Your e-Commerce growth comes in 2 ways. You get more of your existing target to buy your brand. Or you get existing customers to buy more often, or in bigger quantities. You grow by improving your marketing mix – product, price, promotion and place.
To use product to drive e-Commerce growth, you improve the way it “fits” with online selling.
For most products, that’s about how the packaging works. It works differently with online selling. Pre-purchase, the customer only sees the packaging on a screen. It needs to be legible and work on different screen sizes and product page layouts.
The product and packaging also need to survive the physical journey between the warehouse and the delivery address.
That means they need to be robust. Secure. Protected against breakages, and different weather and temperature conditions.
Plus, the delivery is the customer’s first physical experience of the product. It’s an important moment in the customer experience.
Apple for example, are known for doing this well. They apply the same design standards to their outer packaging as they do to their products. The packaging is part of the Apple experience.
Price clearly affects your e-Commerce growth. Online shoppers can easily compare prices between different online stores.
So, you need a clear price strategy. A regular recommended online selling price for online retailers. A clear level and frequency of price discounts. Plus, you need to benchmark the overall price (including delivery costs) against other online stores and traditional stores.
You make commercial decisions to optimise the volume and value mix in your profit and loss. You want your e-Commerce growth to come from customers shopping in your most profitable channels and stores.
Promotion tells customers about your brand.
It can be as simple as telling customers where they can buy you online. That’s often all you need for e-Commerce growth when you first start selling online.
We’ll get to how you do those shortly.
Place has the most direct impact on e-Commerce. An online store is a place where products are sold. And it works differently to traditional retail stores.
Traditional stores have limits. What times they open. How much product they can hold. Where they’re located for customers to visit them.
These don’t apply in online selling. Online stores are open 24/7, 365 days a year. They offer a warehouse sized range of products. And customers can shop in them from anywhere as long as they can get online.
What you cover under place in the marketing mix overlaps with what you cover in channel choice in the e-Commerce planning process.
Which channels you choose depends on how much complexity you can handle, and how much control you want.
Market development : Existing products / new markets
Those could be new customer segments. Customers who don’t currently buy your product, but have some common attribute or behaviour you go after.
In e-Commerce, that could be customers who like to buy in bulk, for example. Or customers who buy for other people – in buying groups or for gift purchases.
It’s often about customers in a different geographic location. A different part of the city, country or even selling internationally.
In theory, e-Commerce gives you access to customers all over the world. It’s why many business see e-Commerce as such an exciting growth opportunity.
The challenge of selling to new markets
However, new markets means new challenges. There’s many logistical challenges for international sales, for example. Customs and export regulations. Exchange rates. Difficult transport conditions. More challenging customer service situations to manage.
For digital services, you also need to work with different selling laws To the customer, they’re buying in their country, not yours. They expect local laws to apply. Their rights on returns and refunds for example. Privacy laws. Trademark protection. You need good research and planning to make your terms and conditions clear and legal in these areas.
To sell overseas, you need different functions of your business to work together. Finance, supply chain, IT and customer service, for example. It costs more and is more complex. You need to factor that in to your plan.
You also face new marketing challenges in new markets. Your “new” customers come from a different cultural background. You don’t know them. And they often don’t know you. You need to gather data and do market research to understand their needs.
All these things take time and money. There’s a lot of potential for e-Commerce growth in market development. But to achieve that potential, you need to overcome all these challenges.
Product development : New products / existing markets
In product development, you create new products for existing markets. In e-Commerce, this means changing how and what you sell. The 3 most common areas are :-
- online exclusives.
- product and service extensions.
Subscriptions usually apply to products consumed on a regular basis. For example :-
- everyday household purchases e.g. cleaning products, pet food and razors.
- hobby and interest related items e.g. comic books, fishing supplies, crafting kits.
The main benefit for the customer is usually convenience. They don’t have to remember to re-order. They never run out of stock.
But usually, you need to amplify this benefit with something more.
For example, a value offer. Customers sign up for a long-term deal and save money. Newspaper / magazine subscriptions are a good example. Get a year’s subscription, and save 30% on the cover price.
Or, it could be a discovery offer. The e-Commerce seller finds interesting and unusual products around a theme which interests the customer. They send customers a regular new box of “surprise” products. You see this in the beauty category, for example. Companies like Bellabox send out regular goodie bags and sample boxes to subscribers.
The upside for sellers is the customer pays in advance. And they commit to repeat purchases. But, this selling model also has challenges.
Your website has to handle a whole new set of tasks, for example. Customers needing to manage their account and orders online. You also have to work out how to keep customers loyal. Subscribers often leave early. Or they don’t renew (known as the churn rate). This makes financial planning harder.
(check our subscription model article for more on this topic).
With online exclusives, the seller limits availability to specific online stores or channels.
It’s a similar approach to one used by old-fashioned mail order businesses and direct marketing. Those channels say “not available in stores”. In online, it’s usually “only available in specific stores”.
It uses a psychological influence called scarcity. (see Robert Cialdini’s book Influence for more on scarcity). In simple terms, the more scarce a product is, the more we want it.
You can use scarcity to make your e-Commerce offer more desirable. To make it more of a “must-buy”. It helps you keep the price per unit high, which helps your e-Commerce profit margin growth.
Products and service extensions
You can also look for growth by adding features and benefits to extend the scope of your existing offer.
For example, you offer different levels of service. If the customer pays for higher levels of service, they can access more features.
Take Netflix, for example. They offer basic, standard and premium options.
The more you pay, the more screens you can use and the higher resolution the content.
Some brands also use e-Commerce to extend the types of products they sell. For example, Bundaberg and Vegemite sell clothing and other branded merchandise. These aren’t available in traditional channels. Selling them online helps their e-Commerce growth.
Even small brands, like say restaurants and cafes, can benefit from online selling this way. For example, they can sell cook books like this one.
(see our advanced e-Commerce techniques article for more on this topic).
Diversification means starting with a blank page. You go after new markets with new products.
You can be as innovative as you want. And anything you sell will clearly grow your business. But there’s also a lot of risk. You don’t know the market. And you’re unfamiliar with the products.
Of all the Ansoff Matrix options, it’s the one which usually costs the most and takes the most time. But, if you get it right, there can be big rewards.
Look at food delivery services, for example. In the past, takeaway food was all about cheap and cheerful. Pizza and curries.
Now, companies like Deliveroo and Uber Eats deliver restaurant quality food to your home. They offer new products (restaurant quality food) to new markets (customers wanting better quality food delivered). But they had to invest a lot of money in advertising and logistical systems to make this change happen.
These brands are the exception rather than the rule though. Most diversification efforts don’t work out. They fail to attract new customers, or they run out of money before sales take off.
E-Commerce growth - who it comes from
Having identified a broad direction for e-Commerce growth from the Ansoff Matrix, next you get more specific. In particular, you need to understand who the customers are, and what they want.
What online shoppers want
In e-Commerce, you need to separate what you sell from how you sell it.
You can sell anything you want. But the steps in the e-Commerce experience are usually more fixed, whatever the product.
Digital media to drive awareness. Website visits to browse and place an order. An order to delivery system to take payments and make sure the product gets to the customer. A customer service and loyalty system to manage post-sale interactions.
You find these on every online store.
The benefits these interactions deliver for online shoppers include :-
- ease and convenience.
- product information.
Ease and convenience
Online shopping is easier and more convenient than traditional shopping. No need to physically visit the store. You can browse and place orders from wherever you are, at whatever time you like. All you need is an internet connection and a credit card.
Even with click and collect services, you don’t have to search the store to find the products you need. Online shopping’s also easier and more convenient if buying bulky or heavy products. Someone else brings it to your door. Customers pay for this ease and convenience. It’s one of the main benefits which drives e-Commerce growth.
Online shopping offers a bigger range and so more choice than traditional retail stores. That also fuels e-Commerce growth.
As we said earlier, e-Commerce isn’t limited by time, space or location factors.
Store websites can offer huge numbers of products. They’re only limited by how much stock the warehouse can handle. That also adds to the e-Commerce growth opportunity.
In fact channels like Print on Demand can offer an almost infinite numbers of products.
They hold the basic items and only “make” the product (print the design) when the order comes in. The designs are all held digitally. They don’t physically exist until the design’s printed on the blank item.
Online stores also make it easy to compare prices across retailers. There’s more price transparency. It’s easy to shop around for price discounts.
It means those customers who value getting a good price, can always work out where to find the best price. Do remember though that delivery costs often mean the overall price paid online is higher than buying from a traditional store. Online shopping is rarely the cheapest option.
Product information helps customers decide which products to buy.
For services, like travel and healthcare, there’s a time limit to how much information the service provider can give when the interaction with the customer is face to face.
These limits don’t apply to online selling though.
There’s plenty of space to share extra information. Demo videos and customer reviews for example.
These benefits all help the online shopper, and that means they also help your e-Commerce growth.
E-Commerce target audience
Next, you combine these broad e-Commerce insights with more specific insights about your target audience. For example, any segmentation research you’ve done to break the total market up into smaller groups who share similar attributes.
You look for what’s most likely to drives purchase decisions on your products from different segments.
Some customers focus on quality. Others want good service. Some like getting the best value. Some customers like variety. Research tells you what matters most.
Then you look at the relative attractiveness of different segments. You can’t go after every segment. You look for which ones have the most potential.
Finally, you build a customer segment profile to bring your target audience to life. You need that for the next step. Because now you have to work out how you’re going to appeal to them.
E-Commerce growth - how you’ll go after it
Here, you focus on offering the best value. You keep prices and costs low, so customers get a good deal. This strategy is normally driven by economies of scale. These help you keep the finances tight, so you can offer a good price and still stay profitable.
This is where you identify another decision driver that’s more important than price for a particular segment. It could be quality for example. Or a design or service feature you can do better than anyone else.
In e-Commerce, this could be around delivery for example. You offer faster delivery. More convenient delivery times. You show your superiority in some part of the customer experience. A part which the segment values and is willing to pay more for.
Focus (sometimes also called niche) is where you offer a unique product or service. It may only appeal to a low number of customers. But those customers value your offer, because they can’t get it anywhere else.
For focus products, price is usually low in the customer’s buying priorities. They’ll be willing to pay a lot (up to a point), because they can’t get the product elsewhere. This high customer desire and premium price point is what drives your e-Commerce growth with a focus approach.
This statement defines why and how your offer will be unique and distinctive. It’s often accompanied by a positioning map.
This is a visual way to show where you want customers to perceive your product relative to competitors.
You use your positioning and competitive strategy to shape your marketing plan. They drive all your briefs and brand activation. It means all your e-Commerce growth activities are focussed on the right audience. On meeting their need and delivering a relevant benefit.
Conclusion - Sowing the seeds of e-Commerce growth
There’s clearly many steps involved in finding and going after your e-Commerce growth opportunity.
Using the Ansoff Matrix to work out where your e-Commerce growth will come from, for example. Whether it’s from existing or new products, existing or new markets.
These all set you up to properly validate the opportunity, which is the next e-Commerce planning stage. At that stage, you start to commit more resources. You have to be confident in the e-Commerce growth opportunity to do that. The steps we’ve outlined here help you build that confidence.