Managing an online store

Why read this? : We review the different skills needed in managing an online store. First, the marketing skills you need to understand customers and improve their experience. Then, the commercial skills to manage income and costs, and grow your business profitably. And lastly, the operational skills to lead teams and set up processes and routines. Read this to learn how to get better at managing an online store.

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Connect better with online shoppers

Before launch, you use market research to identify your target audience, and what they want from online shopping. You work out your e-Commerce competitive strategy and your positioning.

But in terms of actual selling, you have to manage orders through your business. Our e e-Commerce planning process guide introduced the 5 key steps you need to manage orders through an online store.

These were digital media, the shop website, payment, delivery and customer service. (these last three also known as the order to delivery system). You interact with customers at each of these points.

Together these make up the D2C customer experience.

A real customer experience

Managing an online store means working out how to optimise these different customer interaction points.

For all your research and planning, you won’t know how strong your online store is until it’s live. Only then do you start to understand actual shopping behaviour. You use the marketing data you gather to build insights into all the interactions in your D2C experience.

It’s not research about intentions anymore. It’s real and in real-time, customer feedback on actual customer actions. You use these insights to make better marketing decisions as your business progresses.

With a live online store, you interact regularly with your customers. You ask for feedback on how your service was after they buy, for example. You add surveys to your website or emails. And, you use marketing technology to personalise the online shopping experience.

Track performance against KPIs

One of the first tasks when managing an online store is to track performance.

You want to know how much you’re selling, how much it’s costing and how your brand activation is doing. You want to work out where you’re winning and losing with customers.

As part of your online store strategy and your digital media plans, you should have Key Performance Indicators (KPIs) for each of your major activities.

Each KPI should have a measurable target, to be delivered by a specific date. There’s usually a short-term target for each which you analyse at the post-launch review. At that review, you re-evaluate your longer-term KPIs.

You also usually set up an e-Commerce dashboard to track your KPIs. (see our marketing data article for more on KPIs).

This is a regularly updated performance summary to check your progress. Most online store performance dashboards capture on a single page the key metrics that show how the store’s doing. Your dashboard identifies whether performance is on target, ahead of target or behind target.

On target is easy. Usually, no action required.

Where performance is ahead of target, investigate to work out the cause. Maybe there’s more opportunity in that area? You could invest more on high-performing campaigns or products, for example.

You also investigate if you’re behind target. As per our e-Commerce post-launch issues article, it’s more common you’re behind target than ahead. Look for what’s causing the under-performance. Was your forecast too optimistic? Is the competition stronger than you thought? Behind target usually means you need actions to “fix” the issue.

Fixing the issues with your online selling

Knowing something’s wrong from the e-Commerce dashboard is all very well, but you still need to do something about it.

Data, research and insights help you diagnose issues, but it’s actions and decisions which fix them. (see our research in the marketing plan guide for more on how to covert research into action plans).

Going over the marketing mix from your marketing plan can be a good way to check what’s wrong. As online stores are a service, it’s better to use the broader marketing 7Ps rather than the more traditional 4Ps.

So, for managing your online store, areas to consider could include :-

Product

Which products do you include or feature in your advertising and media? Do different products generate different response rates?

Which products do you feature on your home page? Or, on your social media page?

Is it better to focus on 1 or 2 hero products, or to highlight broader ranges? Do some products work better when placed next to each other? Do you offer different levels of features on your products?

Which types of product information or content drive the most clicks and sales? Should you change the order in which you show information and content?

What about how you show the products on the product pages in your online store? Can you use different images, different copy and different calls to action to drive more sales?

Think about how you evaluate your photography. Is it on brand and likely to appeal to the target audience? How many images should you use? And which style of images work best to drive sales?

Think about your key selling messages. Have you tried different styles of sales copy? And if so, which ones perform the best? Can you test different words or phrasing to improve the call to action?

Price

What’s your regular price for each item, and what’s your sale or promotional price? Do you offer price discounts or incentives for bulk buying, or spending a certain amount?

What’s your overall pricing plan? How does it fit to your competitive strategy? Do you always aim to offer a low price? Or, do you have a higher regular price, but more frequent sales promotions?

What if you’re a premium product? Or you only sell high ticket items rather than more regular everyday items. Do you choose to not do price promotions to keep your product exclusive? Where do costs like shipping, insurance or warranties fit in?

What about average spend per basket? How do you incentivise shoppers to buy higher priced items?

Promotion

How are your different campaigns and channels performing? Is one particular piece of advertising or channel delivering consistently better results in terms of clicks and sales? Do online shoppers respond better to particular styles or themes in what you communicate?

Are you able to track changes in awareness and engagement based on your promotion activities? Do these correlate to changes in sales? Is your advertising and media spend paying off in terms of generating more sales through your online store?

What about the timing or placement of your media campaigns? Are there certain times of day, or days of the week which drive stronger levels of sales?

If you run display advertising on third party media sites, do you get more clicks from some sites than others?

Place

How is your online store website performing?

Is the content performing well from an SEO point of view? What do your key metrics like time on page, clicks and bounce rate look like?

Can you test changes to the order you display products? For example, can you use priming to boost particular products or influence how customers view your site? (see our article on design psychology for more on priming).

What about the design and layout of your store? Can you test the website to see if there are ways to improve it to drive more online sales?

What about more ‘offline’ touchpoint such as how you deliver the product to the customer? Are there ways to track and measure how you perform here?

People, process and physical location

As online shopping is a service, you should also look at the service specific “P”s in the marketing mix.

For example, when customers contact you, how do your customer service teams handle those enquiries? What people measures do you have in place to build teams which support the growth of your online store?

For processes like payments and deliveries, do you have clear KPIs and targets you track and measure?

Do you have a target to minimise chargebacks or fraudulent orders, for example? Or, a target to deliver products to the shopper within a specific time frame.

You can also look at processes the customer goes through as part of the customer experience. For example, do shoppers add to cart, but then abandon the cart before completing the payment?

When managing an online store, physical location is very similar to place. But you might also include here, coverage of which countries or areas you deliver to. You might also consider where your warehousing facilities sit as part of this performance tracking too.

Building connections with your online shoppers with marketing

The digital data inputs you get when running an online store, needs to go back into the briefs and plans which drive your marketing activities.

Learning what worked and what didn’t helps you develop better advertising and media campaigns in the future.

Digital data helps you define the best types of sales promotions and price discounting for your online store.

And overall, you can use digital data to continuously find ways to improve the online customer experience. Those improvements help you drive more sales and grow your online store.

Commercialise : How to sell more and spend less

The second key skill to focus on when managing an online store is the overall commercial management of the store. This skill focusses on how to drive sales and manage costs, so that your online store runs profitably and efficiently.

You will grow sales though building stronger connections with your online shoppers through marketing as we just outlined. But viewed through a commercial lens, means taking a much more detailed view at the profit and loss of the business.

Focus on the profit and loss

As per our online store business model guide, the profit and loss is the key reporting tool to manage the commercial side of your online store.

In simple terms, it describes the total income of the business, less the total costs to operate the business. What’s left is the profit or loss.

While you’ll find a profit and loss in eery business, online stores come with their own set of challenges which can often freak out accountants used to more traditional business models.

You aim to maximise income and minimise costs of the online store to drive better profitability.

Maximising income in your online store

There are three key ways to maximise income in your online store. These are to sell more units, to increase the average price paid per unit and to recoup delivery costs from the online shopper.

In your online store business model, you should have set a forecast on the number of units you thought you would sell. This forecast was based on your understanding of the key factors that drive shopper choice.

These factors will vary by store and by category. But, they will usually link to key elements of the marketing mix. So, how well the product meets consumer needs for example. How much value the online shopper sees in the price point. Or, how attractive and compelling the promotional message is.

But as you carry out marketing activities, you learn what works and what doesn’t with your target audience. So, you should go back and refine the forecast based on this new knowledge.

Statistical analysis

Once you’ve enough sales data history, you can also look at if, when and how you could use statistical analysis to deliver a baseline forecast for future sales.

You could for example carry out a linear regression on your past sale history. This would identity a future trend line based on the best straight line prediction. You could carry out more sophisticated econometric modelling to identify the key variables which influenced past sales, and apply these to future sales.

Statistical-based forecasts give you a stronger base and more accuracy about future sales. However, on their own, they can’t figure out or plan likely future scenarios such as the impact of your future activity or competitor actions.

You should use statistical forecasts as the first step in projecting future sales. But make sure you factor in any known “human” considerations. In the statistical world, this combination of hard statistical techniques and human intelligence is known as a Bayesian approach.

Pricing impact

Pricing obviously has a big impact on the overall dollar value of your sales. In most categories, you can usually sell more units by reducing the price.

Online shoppers love to feel they have got a good deal. Cutting the price can help you shift more units.

But from a commercial point of view, you need the percentage of extra units sold to be more than the percentage of the price discount for this to work.

So, for example if you normally sell 100 units at $10 each, that’s $1,000. If you cut the price to $5, you need to sell at least 200 units (200 x $5) to make the same level of sales.

If you sell less than 200 units at $5, your overall sales drop. And obviously, more than 200 units, your overall sales go up.

However, you have to factor in you’ll likely have multiple items in your online store, and items can be a different price points. You might have t-shirts at $30 and hoodies at $65 for example as we do in our shop. So, in that case, you need to sell more than two T-shirts to make the same income as selling one hoodie.

From a commercial point of view, it therefore makes sense to try and sell more hoodies as these make more money. But obviously, you need to trade this off against customer needs. People generally buy more T-shirts than hoodies and $30 is easier to spend than $65.

Trade-off income and demand

This trade-off managing the income from each product versus the demand and price point is a key skill to master when managing an online store. You need to try out different variations of activities with consumers to generate data on which activities drive sales. These then feed into your marketing efforts like which products to feature in advertising, and how to set up your product pages.

Delivery - who pays for it?

Another important commercial factor in managing an online store, is how you manage the costs associated with deliveries.

Your delivery company will charge you for every delivery they move from your warehouse to the consumer’s doorstep.

As we cover in our online business model guide, you need to work out how much of this cost, if any, you pass on the online shopper.

For low value orders, typically under $50, it’s common to pass some or all of the delivery cost on to the consumer.

Delivery cost example

So, for example, you might make a T-shirt that costs $15, but you sell it for $30. And your delivery cost per order might be $15. If you pay the delivery cost yourself on that order (i.e. you don’t charge the shopper), you make $0 profit. That’s $30 paid by the shopper – $15 cost of the T-Shirt – $15 delivery.

But if you charged say $10 delivery, so the shopper pays $30 + $10 delivery, your profit looks different. You make $10 on that sale as its $30 + $10 delivery = $40 – $15 cost of the T-Shirt – $15 delivery.

But, now let’s say the customer orders 3 T-shirts. The calculation gets different again.

It’s important to note that often the delivery charge is calculated per delivery, and not per item. So, the delivery cost for 3 T-shirts could easily be similar or the same as that for 1 T-shirt.

In this case, let’s assume it’s still $15. At that rate, you could cover the delivery charge and still make a profit. Your income is $90 (3 x $30). Your costs are $45 for the 3 T-shirts and $15 delivery. So, you make $30 on that sale, even if you pay for the delivery.

This is why many online stores have order value thresholds above which they offer free shipping. This is usually the amount at which they can cover the shipping and still make a profit.

Minimising cost in your online store

The other key way to drive profitability for your online store is to minimise the costs it takes to drive your sales. There are a number of ways you can do this when you are managing an online store.

Volume discounts

When you start selling online, your costs per item sold will be based on prices you negotiate with suppliers and other service providers.

So, the costs you pay to cover the cost of manufacture, the cost of warehouse storage and deliveries, for example.

But, your negotiating power when you start an online store is relatively low. You have no guaranteed size of business. You’ll usually have to take rate card values on services.

But when you start to scale your business, and sell a lot more volume, this makes you more attractive to suppliers and service providers.

A guaranteed higher level of business, gives you more negotiating power with suppliers and service providers. You can ask for volume discounts on materials, for example. Or, you could ask for better warehouse and delivery rates based on putting more overall value through your service providers.

Successful online stores will often negotiate contracts with suppliers and service providers for a fixed period, and set up regular reviews. This can involve pitching out the business and asking for quotes from competitor suppliers and service providers to see if you can get a better deal.

Advertising efficiency

The next area where you can look to boost profitability is to get more value from your advertising and media spend.

As you run campaigns, you can build up knowledge of what works with your target audience, and what doesn’t.

This knowledge comes from the digital data that sits behind your digital media and online store website.

You should be able to attribute sales to specific campaigns and channels. This gives you a Return on Investment (ROI) that means you invest more in channels and messages that work.

And you cut anything that doesn’t.

This ROI calculation of advertising efficiency depends on a number of other influencing factors such as what competitors did in media, and which consumers you reached. This can become quite complex, but the principles behind the decisions are relatively straightforward as we’ll show in this quick and simple example.

Advertising ROI example

Let’s say you spend $10,000 on advertising in a year on 2 campaigns (Campaign A and Campaign B) in 2 separate media channels (Channel A and Channel B).

Overall, the advertising generates $100,000 in sales. But, by analysing the data, you identify which combination drives the most sales.

Activity 1

Campaign A – Channel A : Spend $2,500 Sales $40,000 (ROI – 16)

Activity 2

Campaign A – Channel B : Spend $2,500 Sales $10,000 (ROI – 4)

Activity 3

Campaign B – Channel A : Spend $2,500 Sales $30,000 (ROI – 12)

Activity 4

Campaign B – Channel B : Spend $2,500 Sales $20,000 (ROI – 8)

So, in this case, you might decide to put all $10,000 of your next media spend into Campaign A – Channel A. This should generate $160,000 in sales assuming that year 2 works like year 1.

In reality, there are other factors to consider. It’s rarely that simple.

For example, there may be a limit or threshold for any particular campaign / channel combination, above which, spending more doesn’t make any difference. Advertising and media can also eventually “wear out” as once consumers have seen an advert too many times, they start to ignore it.

We cover more of these media spend considerations in another guide.

Operational efficiencies

The final area you can look to minimise costs is to look for efficiencies in the order to delivery process.

For example, you might change the payment rules to reduce chargebacks and fraudulent payments if these get too high.

You might be able to outsource order and payment processing and get a better deal than handling this yourself.

Where you decide to store your goods, and how they are physically moved from the warehouse to the consumer, can also be areas where you can look to drive efficiencies.

As you start your store, a lot of your processes might be very manual, and involve a lot of different people.

But for processes which are predictable and repeated, you want to try to automate many of these processes. Reduce the need for actual people to carry out the tasks.

In most cases, you want the people on your team to focus on the more creative and customer-facing activities, and less on the operational processes.

Control - People and systems : less complexity, more automation

The final area of managing an online store we will look at is how you control your online store. This means managing the people involved at each step of the online store experience and looking to establish routines and systems that reduce complexity, automate processes and generally make the online store work efficiently.

People and teams

We cover in our article on the functions of e-Commerce, some of the other people and skills you need to access when it comes to managing an online store.

As an online store manager, you should consider the people and teams behind each of those functions. What motivates them? How can they bring their expertise to grow your online store business?

Marketing people can help you think more about the consumer and shopper, and what they might be looking for. Your website and technical teams can help make the shopping experience run more smoothly. Even something as simple as making the page load faster will have an impact on sales over the longer term.

Your warehouse and delivery teams will be the experts in moving products from A to B. If possible you should spend time in the warehouse and follow an order getting dispatched. (this doesn’t work in some models like Print on Demand or Dropshipping). You should also look for ways to improve the packaging and labelling to improve the shopper experience.

And finally most of all, use your customer service team to listen to customers. Make sure your complaint rate is going down, not up. Ask customers for suggestions about how you can improve the online store experience.

Online store routines and automation

Online stores are open 24/7, but that doesn’t mean you need to work 24/7 to run them.

You can use marketing technology to operate and run a lot of the processes needed to manage the online store website and the order to delivery process, for example.

When you first set up your online store, most of your processes will be manual. You might pick up emails yourself.

Maybe, you pick and pack products directly off the shelf in your storage facility?

But the bigger the store grows, the more you should consider re-investing some of the profits back into the business to automate where possible.

This helps you spend time on more important parts of your online store business. And less time on administering repeatable tasks.

Automated questions and emails

So rather than have lots of email enquiries which you have to handle one by one, you could add an FAQ section or a chatbot to your website. This can reduce the volume of contacts to your customer service team.

Your delivery company should be able to help by informing you when an order goes through different stages of the delivery process. You can link these updates to an automated email system which showsthe customer their order’s progress.

As the order passes each key stage of the process – order receipt, picking and packing, in transit, delivery – you can automatically send out emails to the customer. These progress updates improve the customer experience and reduce contacts to your customer service team.

Automated order handling

In bigger operations, consider movie away from manually picking products in the warehouse. The bigger retailers in online are investing in automated robotic picking and if you reach this scale it can add significant efficiencies and cost savings.

You should review each step of your order process system. Look where possible to automate the flow so the process works more smoothly for the customer. And places less demands on your time. You should only have to intervene or interact when there’s a problem or something goes wrong.

Conclusion - managing an online store

As we shared at the start of this guide, managing an online store requires a wide range of different skills.

If we were to compare managing an online store to a sport for example, it would be like the decathlon.

You don’t need to be perfect in all disciplines. But it’s the overall combination of skills that ultimately defines whether you’ll be a successful online store operator or not.

The skills across across all elements of the online store business operations need to add up to a cohesive whole.

Your ability to connect with online shoppers is important. You need to be exceptionally customer focussed. Without understanding your customers and what they want, you’ll never drive sales.

Managing an online store is essentially managing your own business. So, it’s important to be strong on the commercials. You need to be able to understand how the profit and loss works. It’s important to know how to drive top-line income and manage costs efficiently.

It’s also important you put strong controls in place, so your online store operates in an efficient way. This includes people and teams, systems and routines.

Be flexible and resilient

But probably most of all, it’s important to be flexible and resilient. Managing an online store is complex. Customers are unpredictable. Something will go wrong at some point. Recalling a product. An angry customer. A break down in a system or process. Credit card fraud. You name it, online store management throws many challenges your way.

But ultimately your online D2C store is a business you control. It can be liberating to not depend on retail buyers if that’s the model you’re used to. And for your brand, an online store is the ultimate connection with a customer. They trust you enough to hand over their credit card details, and that you’ll deliver what they want.

And with that control and connection, the best online store managers drive a very profitable commercial operation.

Three-Brains and e-Commerce

We’ve worked on many e-Commerce projects and have good experience across strategy, working with online retailers and building D2C stores. We know how to connect these expertise areas back into driving your brand marketing and growing your sales.

As you can tell from this article, we also know a lot about the challenges of managing an online store.

Get in touch if you want to know more about how we can help you with our e-Commerce coaching and consulting services.

Downloadable D2C status dashboard

Setting up an online store needs you to define your strategy and plan. You need to work out the sales and marketing and set up your operations including the finances and the delivery / supply chain model. It can be complex to manage.

That’s why we’ve used this project dashboard to great success in the past. It’s a concise summary of the key actions needed to set-up and manage a D2C online store. Download it here or from our resources section.

Powerpoint and Keynote versions of this document available on request.