Why read this? : We cover key lessons you can use to find your e-Commerce competitive advantage. Learn why knowing your customers and building your brand helps you stand out. Why creating relevant and inspiring experiences puts you ahead of competitors. And finally, why you keep winning when you keep learning. Read this to help you find your e-Commerce competitive advantage.
If you believe most of what you read online about e-Commerce, you don’t need to worry about creating a strategy for your online business. You can forget all those marketing strategies and plans. Don’t worry about working through the customer experience process.
But more savvy readers recognise this for the BS it is. We’ve ranted before about the sharks who loiter around marketplace and dropshipping forums. However, calling out the sharks only gives you a warning of what NOT to do. But, positive mindset and all that, we like to focus more on what you can do.
So, this week we focus on what you SHOULD do to succeed in e-Commerce. We’ll look at what you can take from marketing strategy and planning. And at what you can take from customer experience development.
There’s 4 key lessons across these 2 areas that’ll help you find your e-Commerce competitive advantage.
Your e-Commerce competitive advantage
Competitive advantage as a concept came out of business strategy academic literature in the 1980s and 1990s, mainly thanks to the work of Michael Porter.
It’s one of those business concepts, that people are aware of, but it’s rarely at the front of the strategic thinking of most businesses. That’s especially true in e-Commerce. Most e-Commerce businesses don’t have a clear competitive position.
So, if you run an e-Commerce business, even just starting the process of thinking what your competitive advantage is, gives you a head start on most of your competitors.
For us, it’s part of the basics of getting e-Commerce right.
The basics of e-Commerce
In our guide to how to start selling online, we outline the three basic questions of e-Commerce. What are you going to sell? Where are you going to sell it? And how will you manage payments and deliveries?
But, within that first question, there’s an implied extra question, that’s very important. If you’ve read any of our marketing guides, you know you always need to start with the customer. You always need to start with what customers want and need.
So, in fact, it’s not just what are you going to sell, but who’s going to buy it? Because, your first source of e-Commerce competitive advantage is really how well you understand and can meet the needs of your potential customers.
E-Commerce competitive advantage #1 - Know your customers
One of the easiest ways to start to learn about e-Commerce AND about your potential competitors (other than checking out their online stores directly), is to join relevant Facebook groups and relevant online forums like this one on Reddit.
Most are targeted at e-Commerce newcomers. You can learn a lot from the questions they ask, and the store websites they ask for feedback on.
Because, the number one thing newcomers get wrong is not thinking about the customer.
You see many people set up an online stores in a popular category like fashion or homewares. But then, they post on these forums saying they’re getting no sales. And when you look, it’s clear they’ve just copied other sites in the category. There’s nothing that stands out about them. Which is why there’s no sales.
Or the other common story is when someone has come up with an idea for a product or service. So, they’ve set up a store to sell it. Again, they post saying no sales. And it’s obvious, they haven’t thought about their potential customer, and what they might need.
Research your customers
If you’re new to e-Commerce, you may not have the budget to do formal qualitative or quantitative research with customers. But secondary research is (mostly) free and easy to do. Start there to try and work out who your customers might be, and what they might need.
Think about who your ideal target customer is. Think about where they hang out online. Are there specific websites, forums, social media groups that pull in your target audience?
Go check those online spaces out.
Try to understand what your target audience needs and wants. Figure out what they think, what they feel, how they talk, what they might expect of you. Because that’ll put you in a stronger place to find your e-Commerce competitive advantage.
And talking of you.
E-Commerce competitive advantage #2 - Build your brand
Standardised templates. Easy to use software, with click and drag different elements. No coding required. You no longer need a computer science degree to set up a website.
And yet, while that accessibility makes your life easier from a technical point of view, it makes your life harder from a competitive advantage point of view.
Because that easy and accessible technology breaks down the barriers to entry. And that means more people setting up online stores. The online shopping marketplace is crowded. And that means, there’s a lot of competition out there to fight against.
Your e-Commerce brand needs a clear positioning
The segmentation, targeting and positioning process helps identify different segments of the market with shared needs. It helps you decide which segments to focus on. And then, it’s the first step in building your brand identity, as you define your positioning.
The positioning process defines your target customer, their needs and the unique benefit your brand will offer. It also defines your competitive set through the the Frame of Reference.
As you follow this process, it’s important to establish your competitive strategy.
Porter’s competitive strategies
While it may seem like there are hundreds of potential competitive strategies to choose from, the work of Michael Porter suggests if looked at from a high level, there’s really only 3 main approaches.
We first covered these 3 generic strategies back in our article on price discounting. But, in actual fact, price is only part of the outcome of this approach to strategy. These strategies affect much more, including your product, price and place choices in the marketing mix.
The first of these is cost leadership, where the business decides to “go large”. It aims for scale, so it can keep costs down by buying the materials it needs to produce in bulk. Or if a service led business, it automates and scales the processes it needs, so the cost per customer interaction stays low.
Brands who follow this strategy aim for mass appeal, with a broad range of benefits.
The next generic strategy is focus differentiation. This is where brands choose to focus on a narrow range of specific benefits. They choose not to offer a wide range of benefits. This can feel like an audacious choice.
A big part of strategy is often what you choose not to do. The rationale goes that it is a better position to “own” one particular benefit, than to spread your efforts (and therefore message) across multiple benefits.
With this approach, your brand only attracts customers who really value the specific benefit you offer. So, your “universe” of potential customers will be smaller than the mass appeal approach of cost leaders.
But, those customers who value the benefit, will feel more strongly about the brand that offers the benefit. They’ll be willing to pay a premium for it. And, they’ll be much more loyal.
The final competitive strategy is to really find a strong niche position.
This is where you find a unique offer that no-one else can match or copy. It might only appeal to a small number of customers, but it has very high appeal to those customers, because of its uniqueness. You sell fewer units. But each unit sells at a much higher price.
What do Porter’s strategies mean for e-Commerce?
There’s a good chance anyone reading this with a business or marketing degree has probably had to write a long essay on the work of Michael Porter. There’s a lot more in his work, than we’ve covered here, but this one is very important. We’ve given you the gist of his most important work on competitive strategy.
And the reason we did that, is you can look at those three strategies to help you find your own e-Commerce competitive advantage.
For e-Commerce, the cost leadership approach is best suited to “generalist” stores with a wide range of products and the ability to keep costs and prices low. It usually requires higher level of initial investment to attract a wide range of customers.
Focus differentiation in e-Commerce means you need you to work out what exactly it is you can offer as a specific benefit, ahead of any of your competitors.
And niche positioning, takes that to another level where you need to find something unique to offer, that can’t be copied by your competitors.
Your choice of e-Commerce channel
For marketplaces, particularly options like Etsy, niche positions may be your choice of e-Commerce competitive advantage. You can create specific and individual products that are hard to copy.
For print on demand (POD) though, you only really have control over the design that goes on the products, not the actual products and delivery itself. When you sell via POD, your design and brand identity drives focussed differentiation.
With online retailers, you have the option of any of these competitive strategies. But your actual e-Commerce competitive advantage is mostly in the hands of the retailer.
Where you actually have the most opportunity is when you set up your own online store. As per our online store benefits article, with your own online store, you have the most control over what you do. You can choose any of these 3 strategies. Which you choose then shapes your online store business model.
Stand out from the crowd
Your brand positioning is a key part of your e-Commerce competitive advantage. To make the biggest impact, it needs to be consistent with and reinforce your brand identity.
Your brand identity is a collection of tangible and intangible brand assets, that define who your brand is, and what it stands for.
For e-Commerce, your brand is how people find you, how they remember you, and what persuades them to buy. That makes it important to help you achieve your e-Commerce objectives.
As we cover the process to create brand identity elsewhere, we won’t repeat it here. But for this article, we wanted to call out one specific element of brand identity that’s super important for e-Commerce. And that’s the need to be distinctive.
Online selling is very competitive, so it’s important your brand stands out. As we covered in a previous article it’s well known in psychology that people tend to focus on the “odd one out” from any group.
Von Restorff made this point almost 90 years ago. Smart marketing and e-Commerce people understand the value of distinctiveness.
If you want to grab attention online, you can’t be a “Me 2”. That just doesn’t work. You need to look at where you interact with customers and make those interactions distinctive.
This means your advertising needs to stand out. Your online store website might start from a standardised template, but you should look for ways to make it seem more distinctive and stand out. That can be both “front-end” in terms of the design style and tone of voice you use. But it can also be “back-end” i.e. how you manage the order to delivery process.
Your online store brand is what your target audience will notice and remember. To build your e-Commerce competitive advantage, you need to build a distinct and relevant identity for your brand.
E-Commerce competitive advantage #3 - Create relevant and inspiring experiences
So, knowing your audience and building your brand are where you start to build your e-Commerce competitive advantage. But where you really close the deal, and drive the sales is in what you do with that knowledge and those assets.
One of the big benefits on online selling is that you can sell 24-7, 365 days a year. Online stores never close. And that means you need a lot of brand activation. This is what drives people to your store. It’s what engages and influences them when they visit. And it’s what keeps them coming back for more.
As per our online store strategy guide, a good place to start is to think through all the actions that need to happen to drive an online sale.
For each of those actions, think about what you can do to make your brand stand out from competitors.
When customers visit your online store, think about how to make the shopping experience better.
Once an order’s placed, think about what you can do with your order to delivery process to make the “service” feel better than competitors.
And that’s just the thinking to drive “one” online sale. With e-Commerce, and particularly with your own store, you have great access to online data about your customers. You can combine this insight with marketing technology to set up a CRM system that keeps your shoppers loyal and coming back for more.
E-Commerce competitive advantage 4 - Keep learning
Which brings us really to our last source of e-Commerce competitive advantage. Which is, that you can never have enough knowledge about your customers and what they want. There’s always more to learn. You’ll always have new e-Commerce issues to deal with. And you have to learn from your mistakes.
The basic processes and techniques we’ve covered in this article, and in other guides give you a good start. If you use them, you’ll sell more online than if you don’t.
But every market, every business, every shopper is different.
Conclusion - E-Commerce competitive advantage
In most competitions, the “winner” is the one who’s left standing at the end. But, in e-Commerce, the “game” doesn’t have a clear end. It just keeps going.
And though you might see off some competitors, the ease of entry to online selling means there’s always more competitors waiting in the wings.
But, if you’ve built your audience knowledge, have a strong brand, and create great experiences, then you’re well on the way to playing the e-Commerce game for a long time.