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Online store strategy

Why read this? : Your online story strategy sets out how you’ll sell online. There’s 2 main approaches to building it. Launch fast, and learn as you go. Or spend time analysing and planning, so your strategy is sharper before you go live. We cover the pros and cons of both approaches. Read this to learn the different ways you can build your online store strategy. 

Online store strategy

How this guide raises your game :-

  1. Understand the 2 different approaches to building an online store strategy.
  2. How doing an external analysis and internal capability review  sharpens up your strategy.
  3. Learn how your strategy shapes your goal, business case and activation plan.

When you decide to set up an online store, it needs a strategy to lay out how it’s going to work. Building a strategy involves many hard choices. If you go down the traditional “full” strategic process, it usually looks something like this. 

First, you define your goal. What is it you need the online store to do for you? 

Then, you identify a target audience. What need do they have which your store can help them meet better than anyone else?

Lastly, you work out what capabilities you need to make this all happen. And then you go plan how to put it into action. 

But this all takes time. And there are other options where you can launch a store fast and cheap, and then use the data you gather to build and refine your strategy after you store is live. 

We’ll look at the pros and cons of both the fast and full approach to online store strategy in this guide.

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Ready to test your knowledge?

What’s your starting level of knowledge about online store strategy?

Take the 2 minute, 5 question Three-brains online store strategy quiz and see how much you know about online store strategy already.

Online store strategy - fast or full approach?

How you create your online store strategy depend on your business context, and how you like to work. You may be keen to launch quickly, and start selling as soon as possible. 

The good news is it’s possible to do online store strategy in a “fast” way. You focus on the basic elements of online selling. What to sell. Where to sell it. And, how to manage payments and delivery. You learn as you go, once your store is live. 

However, this means taking short-cuts in the planning process. A more traditional “full” approach to strategy takes longer. You gather more data. Build insights. Create a capability plan. Build a marketing plan before you launch. 

Relay sprinter holding a baton in his blocks about to start a sprint relay

It’s harder work. And it takes longer as you don’t launch until your strategy is set. But it does usually mean a better quality of strategy. More thoughtful. More focussed. That’s the key trade off with online store strategy. It can be fast. Or it can be good. But it can’t really be both.

When do you decide to go fast or full?

As per our guide to the e-Commerce planning process, deciding to set up an online store is usually part of your channel planning.

You’ve already identified your e-Commerce opportunity. Validated it’s worth going after. Now it’s about deciding “how” best to go after it. 

Having your own online store gives you control over the interaction with the customer. But there’s many different ways of “having your own store”. Some marketplaces and online retailers let you set up your own brand space within their sites.

But normally, your “own store”, means your own website. You dropship and / or sell direct-to consumer (D2C). 

e-commerce planning process - The 5 key steps of the e-commerce process

These different channel choices affect whether you should go with a fast or full online strategy approach.

The fast approach

When you sell online through marketplaces, bricks and clicks and pure players, you’re in essence renting the selling space on someone else’s site.

That means you give up some control over how your brand is sold. But it also means your selling model is simpler. The retailer looks after many aspects of the customer experience for you. 

You can still control key areas like what your product pages look like for example. You can feature key brand identity elements like your logo, your colour palette, and tone of voice. But you give away control over other areas like the price, the payment and the delivery.

But it does mean you can go faster with these channels.

e-commerce 5 key channel options - on a x-y graph against level of complexity and control

It’s the digital equivalent of hiring a space at a car boot sale. Someone else has already done much of the hard work for you in setting up the selling space. 

You accept the confines of what that means for where you sell, and how you sell. So, you work within the templates and infrastructure of their selling platform. And you focus on front-end selling. They do most of the back-end for you. 

Fast approach - front-end focus

The front-end of online selling is about making your products appealing to customers. You do digital marketing activities like online advertising and social media to create demand and drive traffic.

You don’t have to invest time or money in all the back-end functions like website design and order to delivery. That means you can focus on “selling”. You test out ideas, and see what works best with your target audience 

But you still need to do some planning in advance. Even with a fast approach, there’s still 3 requirements you need to meet before you can start selling online :-

Something to sell

First, you need something to sell. A product or a service

That may be something you already make or do. These could be one-off it’s sales, or something that’s a more regular purchase. 

If you drop ship or do print on demand (POD), your suppliers create the “products” and you sell them.

You take the order from the customer, but then send it to the dropshipper or POD company. They then send the order to the customer. 

You never actually see or touch the product with this way of selling online. 

Hand holding a small wrapper package marked fragile

This is easier than managing your own stock, but not without its own challenges. You’re not in control of stock levels, for example. You’ve no control over quality. And if there’s a customer service issue, the customer will come to you first, because you’re who they place the older with.

It’s a popular online selling model. On demand selling means you don’t need to manage stock, or worry about storage and unsold products.

Somewhere to sell it

Once you know what you want to sell, then you need somewhere to sell it. If you want to go fast, your main options are :-

  • marketplaces.
  • print on demand.
  • dropshipping.

Marketplaces

The easiest place to sell online is via marketplaces like Gumtree, ebay and Etsy.

The selling models vary from site to site. In most cases, they work by connecting you with customers to do one-off sales.

The buyer gets in touch and places an order. You send it out, or they come and collect it.

See our article on whether marketplaces are a good option for more details on the different channels you might choose.

Each has its own pros and cons. They’re each suited to some specific categories and types of sales. 

Ebay home page - headline says Ebay Plus - start a 30 day free trial

Print On Demand

With print on demand (POD), you create designs within their templates on printed items like T-shirts, baseball caps and mugs. 

Then, you set up product pages on their sites such as we’ve done with Redbubble and Spreadshirt, for example.

These become the storefront for your designs. You can add your logo, product descriptions, and change the colours. 

But, you hand over control of the whole order to delivery process. You don’t get access to any of the customer CRM data. And you only make money as a commission percentage of each sale. 

Screengrab of the Three-Brains Spreadshirt shop home page showing design topics for T-shirt designs

Dropshipping

With dropshipping you set up an online store website and take orders. But you then send those orders to your supplier, and they deliver them for you. You make the difference between what the customer pays you, and what you pay the supplier.

There’s more complexity and risk than selling through marketplaces. You’re very reliant on the quality of your supplier. And if anything goes wrong, you need to manage customer service issues.

The challenge of standing out

The main challenge with all these “fast” access channels is it’s harder to stand out. Plus, overall you have less control over the whole selling experience.

Because they’re fast and easy to access, there’s many other sellers on this channels. And they’re using the same templates, the same processes and in some cases even the same products you are.

You’re only real options to stand out are around having a distinctive brand identity. You sell unique products on marketplaces for example. Or unique designs on POD. Or you have an outstanding website for drop shipping.

But if you want your competitive advantage to be something else, that’s going to be more of a challenge.

Manage payments and delivery

Every order needs to be paid for and delivered. But how that works varies greatly by channel, and who you work with.

Some marketplaces and almost all Print on Demand suppliers handle the payment part of the experience. The customer pays them, and they pay you.

But if that’s not an option, you need to set up your own payment gateway. That can be complex to manage.

(see our article on e-Commerce payments for more on payment gateways). 

Managing deliveries and delivery costs can be another tricky area.

Person paying for an e-Commerce purchase as they hold a credit card up in front of a laptop

In Print on Demand and dropshipping, the supplier does most of the work. But in marketplaces, it’s usually your responsibility to manage getting the product to the customer.

The advantages of the fast approach

With these fast choices, you can be online with products to sell in less than a day. There’s no long planning period where you have nothing to sell. 

The channels are all relatively easy, and low-risk / low-cost to enter. There’s no major investment in stock required to get started. You can test different products, designs and marketing activities to see what works and what doesn’t. You’ll get quicker access to digital data and insights.

If things don’t work out, it’s easy to walk away and try something different. 

The disadvantages of the fast approach

However, going fast also has its downsides. You give up control over many parts of the customer experience. That can make it harder to offer a high quality offer that makes you stand out from competitors. 

You’re really dependent on the relationship with the marketplace, Print on Demand or dropshipping partner you choose. If they decide to change what they do, or let your customers down, you have little to no control over that. You only have access to the digital data and insights they choose to offer you. And you may not even have any direct contact with the customers themselves. 

Plus, these are often very competitive channels. There’s low barriers to entry because it’s quick and easy to get started selling there. It can make those channels very cluttered with lots of competing offers. And because you’re generally working to the same template as everyone else, it can be hard to stand out. 

Finally, the profit and loss in these channels can be tricky to manage.

Marketplaces usually take commissions on each sale. For Print On Demand, you take a commission of their selling price. And for Dropshipping, you need to manage the difference between the selling price and the price you buy at. 

But out of all these commission rates, it’s generally on you to drive demand. Your commission has to pay for digital media, for example, to drive people to your product pages. You need to forecast how much you’ll sell, and how much it’s going to cost you to drive those sales. 

Example print on demand profit model

Let’s look at the finances of POD, for example.

You normally make around 20% of the sale price. On a $30 T-shirt, you make $6 per sale.

When you work out how much it costs to generate a sale, POD can start to look less attractive.

The standard sales / visits conversion rate is usually around 2%. That’s 1 sale for every 50 visitors you get.

And if you assume the Click Through Rate from your digital media to get a visit is also 2%, it means you need to reach 2,500 people with your media.

2% of those 2,500 people click though (to get your 50 visitors). And 2% of the 50 visitors buy (your 1 sale).

But it could easily cost you $30 – $40 in digital media to reach those 2,500 people. And suddenly $6 doesn’t seem such a good return.

To succeed in POD, you need other ways to drive reach. And you need to maximise your conversion rates. It’s not as “easy” a sell as it first appears. 

Instagram post saying No Network cables? Thank Dr John O'Sullivan and the team at CSIRO - with a picture of a woman wearing a T-shirt that shows a WiFi symbol and the words Australian Invention

Brand identity matters when you go fast

The best marketplace, POD and dropshipping sellers feature unique and appealing designs and products. They’ve got a strong and relevant brand identity. And they’ve built up a strong following via social media.

Digital media channels like Instagram, Twitter and Pinterest give you ways to grow your audience without spending a lot. So, it’s possible. But it’s tough. There are many more people who don’t succeed in these channels, than those who do.

While the marketplace and POD models are simple to do in the short-term, the costs of deriving sales there can be more of a challenge in the long-term.

Dropshipping is more of a halfway house option. You have more control over the front-end by setting up your own website. But you still give up control over the whole order to delivery part of the process. 

The full approach

If you’re prepared to put more time and money in up-front, you can take a more considered approach to building your online store strategy. You give up the short-term appeal of selling fast, and bank on getting a stronger strategy which pays off in the long-run. 

In most cases, you choose to have more control over the whole e-Commerce experience. You go direct-to-consumer (D2C), or dropship as your online store strategy. 

In both cases, you own the end to end delivery of the e-Commerce experience.

You interact directly with the customer, by running digital media and setting up your own online store website. You manage payments and deliveries. It’s down to you to make sure it’s a good journey for the customer. 

e-commerce planning process - 5 key steps in e-commerce experience

But with that control comes the complexity of setting up and running an online store. You need a clearer online store strategy and plan to make it all run smoothly. This usually means reviewing the the external opportunity more, and building your internal capability plan.

External opportunity review

The e-Commerce planning process starts by looking at the external opportunity.

And there’s some specific areas to consider which would the opportunity means you should set up your own online store. 

Target Audience 

Your start by looking at the needs of your target audience.

That means market research to find key insights about what online shoppers really want.

In Australia, 9.2m households shopped online in 2021, with 5.4m of those shopping online every month. 

Man's hand holding a camera lens in front of a lake with mountains and blue skies in the background

Online spend represented 19.3% of total retail sales, almost double what it was before the pandemic hit. Though that’s an impressive growth rate, it still means 80% of sales still happen in traditional channels.

So for e-Commerce, there’s really 2 target audience opportunity areas. 

You switch those traditional channel buyers into buying online from you. Or, you switch current online buyers who buy elsewhere into buying from your store. 

To succeed, your online store has to therefore satisfy a customer need better than traditional and / or online competitor stores. To work out how to do that, you adapt your segmentation, targeting and positioning work, to fit it into the context of your online store strategy. 

Online shopper needs and wants

So, you re-look at the segments you have. You re-do your attractiveness work on the different targets. You update your positioning statement, if necessary.

This helps you clarify the opportunity. And it usually boils down to online shopper needs and wants. 

As per our what online shoppers really want article, most online shoppers look for :- 

  • ease and convenience. 
  • access to a wider range.
  • a better price deal.

These relate to the ‘service’ element of online shopping. Your online store strategy needs to cover which, if any, of these needs you will focus on.

You segment the overall market into groups of customers who share these similar needs. Then you rank the segments to decide on your target audience. That leads you on to crafting your e-Commerce positioning statement.

That’s when you decide on your frame of reference, your benefit, your reason why and your reason to believe. 

e-marketer amazon shopper driver study

Ease and convenience

Ease and convenience for online shopper usually means removing barriers or friction points.

The less the customer has to do to place an order, the easier and more convenient it is. 

So, look at how shoppers currently buy.

How many clicks to find products, for example? How many clicks to buy? What information do they need to enter to place an order? What’s the re-ordering process like? 

The easier and more convenient you can make these interaction points, the less likely the customer is to drop out from buying.

Glass door to a shop with a sign saying "Open - Shop"

Online shopping is easier than traditional stores

So, for example, if your online store strategy is to compete with traditional stores, you could highlight the convenience of not physically visiting a store. Or, worry about when the store will be open. You can shop online from anywhere, and at any time. Plus, you can get heavy, bulky items delivered to you, rather than have to lug them home from the store yourself. 

It’s also easier to share product information online. And you can make extra relevant content like expert reviews and video content available, which you can’t do in physical stores. 

You can also build ease and convenience into the order to delivery process. For example, you can add extra payment options like After Pay, where customers can spread out payments. You can offer more specific delivery times and shipment tracking. You can make repeat purchases easier by setting up a subscription option. 

All these services make online shopping easier and more convenient. 

Example - quantitative research

To show what we mean, take a look at this example data from an e-Commerce quantitative research project. 

Customers were asked to rate the importance of a series of statements, related to different online shopping needs. 

The top answers all dealt with ease and convenience.

Being able to shop any time of day and night. Saving time by not having to visit a store. These were rated as more important than price or range needs. 

So you’d build these needs and benefits into your advertising and media plan. (which in actual fact is what we did following this piece of research).

Quantitative research results example

Range

Online stores can offer a wider range and variety than traditional stores. They don’t have the same physical space limitations. In some categories, this range of choice is key for winning customers. So fashion, homewares or DIY products comma for example. Range is especially important when online shoppers have very specific needs. 

If your online store strategy focuses on range, there are implications for how you set up your online store website. And how you set up your back-end functions like finance and supply chain. Your supply chain, in particular, will need to be able to store, pick and safely deliver a wide range of your products. 

But range doesn’t always have to be about quantity. An alternative range strategy, and one that’s much easier to manage is to focus on quality. On online exclusives.

So you limit availability of certain products, so online shoppers can only buy them from your own online store.

This can make your products more desirable by creating the idea of scarcity. The harder a product is to get hold of, the more people want it. (see our articles on advanced e-Commerce techniques and behavioural science for more on scarcity). 

A good example of this approach are alcohol brands like Bundaberg who offer “distillery shop” exclusive products. These are high value items not available elsewhere, only available in the brand’s own online store.

Not only can these drive sales, but they can help reinforce a brand’s identity and drive stronger connections with their most loyal customers.

Bundaberg rum website page showing their exclusive range of products

Price

Price is another interesting area in e-Commerce planning. It’s very transparent online. Customers can easily compare prices between different stores and products. You can also easily check out your competitor’s prices. But of course, they can also easily check out your prices. This transparency creates both opportunities and challenges. 

For example, if you sell the same products though an online retailerand through your own online store. You can set the price in your own store, but it’s up to the online retailer what price they charge. The products / prices will compete with each other. If your store price undercuts the online retailer, they’ll lose sales. They may delist you.

In these situations, you might adjust your online store strategy to offer a different range in different channels. So that they don’t compete directly with each other. 

You might want to sell larger or smaller formats in different channels, for example. Or, different colours, designs or patterns. You could look at extra services or sales promotions the online retailer can’t or won’t offer. This sort of online store strategy helps you find a position that’s different from other online retailers.

Delivery costs

In e-Commerce, it’s important to remember the total price the online shopper pays covers more than just the product. It also covers the delivery costs.

So, you can look at different delivery options as part of your online store strategy, to avoid competing directly with online retailers. As per our cost of the last mile article, this can mean giving more options in terms of delivery time. Or making delivery cheap or even free.

You can use delivery as part of your competitive advantage in your online store strategy. But that only works if you can offer better options than competitors. 

Competitor analysis

Your online store strategy also needs to define how you will compete in the market. That means looking at other online retailers who sell products which meet the target audience needs. 

You review the features and benefits they offer. Their strengths and weaknesses. You visit their website and place a sample order. Is it easy to buy from their store? Can you see ways your store could do it better? 

You want to position your store in a way that appeals to the target audience. It needs to be clear why they’d buy from you, and not your competitors. You need a competitive point of difference. 

Blond woman partially hidden behind a leafy bush

Find your competitive point of difference

Think about why the target audience would choose your online store to make their purchase.

Is it more or better content about the product? Maybe you make it easier to find products or customise products? Or, you give better options for payment and deliveries? 

You have to find something customers need, that you can do better than your competitors. To work out what that is, you look at building your internal capabilities.

Internal capabilities

Identifying the external opportunity is a good start. But you make your online store strategy happen, you need the skills, resources and systems to go after the opportunity.

It’s about having the right capabilities. 

Those could be marketing skills like brand identity and communication if the opportunity’s about building a distinctive brand.

They could be digital marketing and IT skills if the opportunity’s around the online store website experience.

And they could be in functions finance and supply chain if the opportunity is around the order to delivery process.

e-commerce planning process - 5 key steps in e-commerce experience

Who and when

It’s important to also work out the “who” and “when” of your online store strategy and plan. Who’s going to make it happen, and when will they do it. You need to know this to help build your business case. Work out your costs. 

Can your existing team do it for example? Or do you need to bring in new people? Do you need to hire agencies and other outside experts?

How long will it take to build the capabilities you need? The faster you go, the more it usually costs.

Your capability plan helps you set your online store goal and craft your online store strategy and business case. 

Online store goal, strategy and business case

Next, you need to convert all these external and internal factors into a clear goal, strategy and business case.

Your goal will usually be a sales target. You quantify the size of the opportunity. 

“We’ll sell $1m of (our product) through our online store in 2023″, for example. Or, “we’ll convert x% of our current sales into online store sales by the end of 2023”.

Your online store strategy then covers ‘how’ you will achieve your goal. It should be a short simple summary, of your target audience, their need, and what you’re going to do about it.

It should be clear why you’ve chosen that strategy, and why it’s going to work.

Value proposition

At the heart of the strategy is the value proposition. This defines why the online shopper will buy from your online store. It’s what you do for them. 

From that, you outline the key steps needed to deliver your value proposition. 

“We’ll focus on maximising the range available on our website and in our warehouse”.

“We’ll make products X,Y and Z exclusives to our store”.

Or, “we’ll work with key delivery partners to get the products as fast as possible from warehouse to doorstep”.

Close up of woman's hands holding a bunch of dollar bills and in the process of counting them

This gives you the big choices you’ve made, and sets the direction for the rest of your plan. The details of that plan go into your business case.

Validating a business case

Your business plan summarises the relevant and important information you’ve gather from your external and internal reviews. It explains in detail what you plan to do, and why and how it’s all going to work. 

It’s a similar process to launching a new product, because in essence, your new store is a new “product”. (see our marketing innovation guide for more on this).

It identifies the target audience. The positioning. It defines the marketing plan and the profit and loss. You have a forecast. How many online shoppers you think you’ll get, and how often they’ll buy.

You often do market research at this point to back up your business case.

Business case to launch plan - marketing innovation

Use your market research to work out a forecast of demand and sales. You want to quantify how many online shoppers you think will buy from you. And, how often. You can test out particular “offers” with market research. You can generate “intent to purchase” scores which you can then apply to the total market.

So, if you run quantitative research with let’s say a sample of 200 online shoppers, you might discover that 10% of them say they’d buy at least once a month. And if you know, your actual target audience is 1 million shoppers, then your potential sales are 100,000 shoppers a month.

Brilliant.

But way over-simplified.

Interpreting market research for your business case

But of course, what people say in market research and what they actually do, don’t always match up. That’s not to say don’t do it. It helps build confidence in your plan with investors, for example.

But just remember, the best market research comes after you launch and start selling. 

Your business case needs to set clear goals and KPIs. This helps you track performance. These should prioritise sales. But, they can also include other metrics like website visits, conversion rates, delivery times, customer satisfaction and number of repeat loyal customers. 

Your online store strategy and business plan should also cover key marketing mix activities on your store. The product mix. The price plan. What promotion you’ll? And, as your online store becomes the “place” you sell, how will you optimise what you do in that place? 

You should also cover how you think competitors will react. And if there are any risks in your plan. Good business cases always have mitigation plans.

Implementation plan

It also usually makes sense to have a more detailed implementation plan with key actions.

You identify what needs to happen, who’s going to do them, and when they need to happen.

There can be lots of different areas to track. Lots of different mini-projects and actions to make sure you can bring your overall online store strategy to life. 

It can be a helpful organising tool to set up a D2C dashboard for your project.

Somewhere which collates all the key actions on a single page, and track which are going well, and where there are any delays. 

D2C Online Store Status dashboard - Four column headed strategy and plan, the store, order to delivery and operations

Our example here covers the strategy development we’ve discussed in this guide. But, it also includes other key elements. The online store website, for example. The order to delivery process. And how you will manage your own online store after it launches.

See how it all comes together - case study

To see how these different elements come together to help you build your online store strategy, check out the case study we’ve put together for a new pizza delivery business. 

In that example, we show how you can use many of the tools from this guide to build an e-Commerce strategy.

We cover an external analysis, for example. An internal capabilities plan. And how you bring these together to craft your strategy and put it into action. 

Because, remember, the online store strategy only adds value if it leads to actions which meet customers needs and help you drive sales. 

A graphic showing examples of how to do segmentation, targeting and positioning for a pizza shop company

Conclusion - online store strategy

When it comes to online store strategy, there’s a “fast” approach or a “full” approach. 

The fast approach uses channels like marketplaces or print on demand to start selling quickly. Your strategy focus is simple. Someone to sell to. Somewhere to sell it. And a process to handle payments and delivery. Your main challenge is how to make your offer stand out from competitors in a crowded market. 

The full approach goes deeper. More research. Stronger insights. More investment in your own website and the order to delivery system. What you get for that investment is usually a better quality of online store strategy. Something more distinctive and longer-lasting. 

Check out our other guides in this section like building your website and managing order to delivery to learn how to action these areas in more detail.

Three-Brains and e-Commerce

We’ve worked on many e-Commerce projects and have good experience across planning, 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. 

Contact us, if you want to know more about how we can support your e-Commerce activity to grow your business through our coaching and consulting services.

D2C Online Store Status dashboard - Four column headed strategy and plan, the store, order to delivery and operations
Click to download the pdf

Downloadable D2C status dashboard

There’s many jobs to do when it comes to D2C. You need to define your strategy and plan. Work out the sales and marketing. And also set up the whole operational side of the business. It can be complex.

That’s why we’ve used this project dashboard on past D2C projects to have a simple one-page 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. 

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