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Online store strategy

Why read this? : We explore different ways to build your online store strategy. Learn the pros and cons of launching fast and learning as you go. And the pros and cons of doing more planning first, so your strategy is sharper when you launch. Read this to optimise how you build your online store strategy.

Online store strategy

How this guide raises your game :-

  1. Explore the 2 main approaches to building an online store strategy.
  2. Understand the value of doing an external analysis and internal capability review.
  3. Learn how your strategy shapes your goal, business case and activation plan.

To create a successful online store, you must create a clear strategy for it. This sets out what you want to achieve and what you’ll do to achieve it. 

In e-Commerce, it normally happens in one of two ways. 

With easy access channels like marketplaces and Print on Demand, you can go online “fast” and learn as you go. You’ll make mistakes but you’ll learn and optimise how you sell from day one. 

However, other channels where you have more control (but more complexity) usually require more thought and planning.

A “full” approach to building an online store strategy has clear milestones to hit before you launch. eg. defining your goal, identifying your target audience, building your capabilities, creating your launch and post-launch plan. It takes longer, but you’re better prepared when you launch.

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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?

A key early decision in your online store strategy building then is whether you want to go the fast or full approach. 

Which way you choose depends on your category context and how you like to work. 

The fast approach keeps things simple. You focus on the basic elements of online selling. What to sell. Where to sell it. And a simple payment and delivery model. You learn as you go, once your store is live. 

The full approach focuses on being smarter. You gather more data. Build insights. Create a capability and marketing plan before you launch.

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

It takes longer. It’s harder work. But you should have a stronger and more compelling online store strategy at the end of it. 

When do you decide to go fast or full?

As per our e-Commerce planning process guide the decision 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 store means you control the customer experience. But there are different ways of “having” a store.

For example, you can set up a branded store within a marketplace and with some online retailers. But normally, your “own store”, means setting up a store website. You dropship and / or sell direct-to consumer (D2C). 

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

Your channel choice influences whether you should go with a fast or full strategy approach.

The fast approach

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

It means your selling model is simpler. Faster. The retailer already handles most of the customer experience, you just slot your products into their system.

However, it means you give up some control over how your brand is sold. You still control some areas. For example, you share key brand identity elements like your logo, your colour palette, and tone of voice on your product page content. But you have little control over areas like the price, the payment and the delivery.

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 the hard work of setting up a selling space. 

You accept the limitations of that space to get online quicker and bypass some of the challenges of online selling especially processing orders. You work within the templates and infrastructure of their selling platform and 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 a plan. Even with a fast approach, there are still 3 requirements before you can start selling online :-

Something to sell

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

It may be something you already make or do. These could be one-off sales or more regular purchases. 

The fast way to have something to sell is to drop ship or do print on demand (POD). Here, you find a supplier who creates the “products” and you sell them.

You take the order from the customer, but then pass it to the supplier. They send the order to the customer. 

You never see 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 still has challenges. For example, you don’t control stock levels. You have no control over quality. And if there’s a customer service issue, the customer comes to you first, as that’s who they placed the order with.

Despite these challenges, it’s still a popular online selling model as you don’t have to worry about storage or unsold products. You get paid by the customer before you order the product from your supplier. 

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

The easiest place to sell online is via marketplaces like Gumtree, ebay and Etsy. They welcome all types of online sellers and make it easy to sell. You post what you have for sale, and buyers come find you. 

The way the selling model works varies from site to site. In most cases, they connect you with buyers to do one-off sales. The buyer gets in touch and places an order. You send it out, or they come and collect it. The marketplace takes a fee for “hosting” the sale.

Each site has pros and cons. This is mostly to do with which categories and types of sales they handle best.

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

Print on demand

With print on demand (POD), you create designs to go 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 add your logo, product descriptions, and brand colours. 

But, you hand over control of the whole order to delivery process. You have no access to any customer CRM data. And you only make money as a commission on 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. You 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 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.

As they’re fast and easy to access, there are many other sellers. And they’re using the same templates, processes and in some cases even the same products as you.

Your only real way to stand out is to have a distinctive brand identity. For example, you sell unique products on marketplaces or unique designs on print on demand. Or you have an outstanding website for drop shipping. But making your competitive advantage something more than those is more of a challenge.

Manage payments and delivery

Every order has 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 payments. 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.

Managing deliveries and delivery costs is another tricky area. In print on demand and dropshipping, the supplier does most of the work. But in marketplaces, it’s usually your responsibility to get the product to the customer.

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

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 big investment in stock 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 has downsides. You give up control over much of the customer experience. That can make it harder to stand out from competitors. 

You rely heavily on the relationship with the marketplace, print on demand or drop shipping partner. If they change something, or let your customers down, you can’t control that. You can only access the digital data and insights they choose to offer you. And you may not have any direct contact with the customers. 

Plus, these are often very competitive channels. There are low barriers to entry as it’s quick and easy to start selling there. It makes those channels cluttered with many competing offers. And because you’re generally using the same template as everyone else, it’s hard to stand out. 

Finally, the profit and loss in these channels is tricky to manage. Marketplaces take commissions on each sale. For print on demand, you take a commission on their selling price. And for dropshipping, you have to manage the difference between the selling price and the price you buy at. 

From all these commission rates, it’s generally on you to drive demand. For example, your commission has to pay for digital media 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 print on demand, for example.

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

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

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 through (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 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. Many more people 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 process. 

The full approach

If you’re prepared to put more time and money in up-front, you can take a more thoughtful 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. 

That usually means you choose to have more control over the whole e-Commerce experience by going direct-to-consumer (D2C) as your online store strategy.

You interact directly with the customer. Run digital media. Set up your own online store website. Manage payments and deliveries. You take control of making 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 a deeper review of the external opportunity and building your internal capability plan.

External opportunity review

The e-Commerce planning process starts by looking at the external opportunity. You start by looking at the needs of your target audience. 

Target Audience 

You should do market research to find key insights about what online shoppers want.

For example, in Australia, 9.2m households shopped online in 2021, with 5.4m of those shopping online every month. That gives an idea of the size of the total potential market.

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

Online spending represented 19.3% of total retail sales, almost double pre-pandemic levels. It’s an impressive growth rate. But it means 80% of sales still happen in traditional channels.

Broadly, that means there are 2 main opportunity areas in e-Commerce. You switch 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 satisfy a customer need better than traditional and / or online competitor stores. It means adapting your segmentation, targeting and positioning work to fit 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 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 shoppers 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.

For example, how many clicks to find products? 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

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. (See our example product pages article for more on this). 

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 is what we did following this piece of research).

Quantitative research results example

Range

Online stores can offer a wider range than traditional stores. They don’t have the same physical space limitations. In some categories, range is key to winning customers. For example, fashion, homewares or DIY products comma. Range matters 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. For example, you’ll need to be able to store, pick and safely deliver your full product range.

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. You limit certain products’ availability, so online shoppers can only buy them from your 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 advanced e-Commerce selling techniques and behavioural science articles for more on scarcity). 

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

Not only can these drive sales, but they can help reinforce a brand’s identity and drive stronger connections with its 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 via an online retailer and through your own store. You can set the price in your 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. 

For example, you might want to sell larger or smaller formats in different channels. 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. 

Food delivery cyclist on busy nighttime street

Competitor analysis

Your online store strategy also has to define how you will compete. You analyse online retailers who sell products which also meet the target audience‘s 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 has to be clear why they’d buy from you rather than 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? Making it easier to find products or customise products? Giving 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 is about building a brilliant brand.

They could be digital marketing and IT skills if the opportunity is around the website experience.

And they could be in 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

You should work out the “who” and “when” of your online store strategy and plan. Who’s going to make it happen? When will they do it? You have to know this to help build your business case. Work out your costs. 

For example, can your existing team do it? 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 2024″, for example. Or, “We’ll convert x% of our current sales into online store sales by the end of 2024”.

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 case summarises the relevant and important information from your external and internal reviews. It explains what you plan to do, and how it’s all going to work. 

It’s a similar process to launching a new product as, 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

This helps you 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

Of course, what people say in market research and what they 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 remember, the best data comes after you launch and start selling. 

Your business case should set clear goals and KPIs. This helps you track performance. These should prioritise sales. But, they can also include 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. The product mix. The price strategy. The promotion you’ll do. And, as your online store “place”, how you’ll optimise the experience. 

You should also cover competitor reactions and any other risks. 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 tracks 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 most of the topics from this guide. But, it also includes other key elements. For example, the online store website. The order to delivery process. And how you manage your 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. 

It shows how you can use many of the tools from this guide to build an e-Commerce strategy.

For example, we share an external analysis and an internal capabilities plan. Plus, how you bring these together to craft your strategy and put it into action. 

Remember, the online store strategy only adds value if it leads to actions which meet customers’ needs and help you grow your 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 website and the order to delivery system. What you get for that investment is usually a better quality online store strategy. Something more distinctive and longer-lasting.

Which you choose depends if you prefer to keep it simple, or are prepared to put in the time and effort to make your online store strategy smart. 

Check out our building your store website and managing order to delivery guides to learn more about how to action your online store strategy. 

Three-Brains and e-Commerce

We’ve worked on many e-Commerce projects and have good experience across strategy and planning, working with online retailers and building D2C stores. We know how to optimise these areas to drive your brand marketing and grow your salesGet in touch to learn how we can support you with 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 are 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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