E-Tailing’s Critical Success Factors

With six years of experience in the knowledge bank, I thought it might be interesting to summarize the key lessons that e-tailing should have learned — those absolutely critical to surviving in today’s retailing/e-tailing competition.

There are five success factors. They are simple, but critical. Yet they are too often neglected and mismanaged, which explains why only 5 percent of e-tailers survive.

Critical Success Factor 1: The Full Story

As consumers, we like to know what we’re buying. In the brick-and-mortar buying context, we can use all five senses when distinguishing between items and exercising our preferences — an essential facility when selecting anything we wear, eat, or recline on. Clothing, unfamiliar foods, perfumes, and furniture, for example, usually require the try-before-you-buy test.

The catalog of items that doesn’t fall into this category, which requires minimal sensory assessment, is limited — CDs, DVDs, books, everyday items — and defines the limits of successful trading items on the Net. In the Net-buying context, the consumer has recourse to two of the senses.

To compensate, e-tailers must provide answers to every conceivable question consumers might have about every item for sale. Pictures are an absolute must, even though the necessarily high-quality and comprehensive photo library costs e-tailers a fortune.

From which online store would you choose to purchase a shirt? The one that offers you a single picture and a short description of the garment, or the e-tailer that shows the same shirt from multiple angles and preempts your every query with a satisfactory answer? I reckon you’d opt for the latter.

Selling online is not only about attracting attention; it’s also minimizing whatever blocks the consumer might encounter, and a major obstacle is lack of information.

Critical Success Factor 2: Keep It Simple

Help your consumers narrow down their options. Don’t mistake a plethora of choice as being the best possible solution to enticing visits. By offering every available product online, you tire and confuse customers. Faced with 50 rows of CDs, for instance, it’s hard to know where to start or to end.

The golden rule is simplicity. You’re much wiser to manage a few products really well, telling the consumer everything he or she needs to know about them, than attempting to superficially market a myriad of items.

Critical Success Factor 3: Clean Up…

Turn your store’s inventory around as quickly as possible. Where a brick-and-mortar store has an inventory turnover rate of 6 per year, a company like Amazon has to demonstrate a turnover rate of 18 and has ambitions of reaching 20 before the end of this year.

Quick turnover saves money; it’s such a crucial contributor to a store’s economic health that it can determine whether a business will survive or not.

Critical Success Factor 4: Be Upfront, Even About the Bad News

The main reason consumers reject online shopping is the added cost of shipping. Many users are simply not prepared to pay an extra 10 to 20 percent to have purchases delivered when they can just as easily pick up a similar product down the street.

But don’t hide the unwelcome news till the last minute of the transaction. To your new customers, this looks like subterfuge. It’s very damaging to your credibility and dilutes your brand’s value.

Yet the solution might be as simple as incorporating the shipping price into the product price, basing the inclusion on an average purchase amount.

Studies show that there’s almost no point in running an e-tail store unless you enjoy an average per-customer, per-visit sale of $80. E-tailing graduates from just viable to attractive once this average climbs to $100.

Food for thought for a lot of e-tailers!

Critical Success Factor 5: Learn About Your Customers

Last, but not least, one of the key advantages an e-tailer holds over a retailer is the Net’s capacity to enable monitoring of consumer behavior.

Over the years, many retailers have attempted to map customer behavior, often using loyalty programs. But interpreting the gathered data as concrete, one-to-one information has been elusive. Not so for e-tailers that, like Amazon, can relate every consumer action on their Web site with a marketing-related outcome.

Amazon, for example, now runs a contextual tracking technology that enables it to see what the user was looking at/for prior to visiting the Amazon site, thereby giving the company the means of making keyword searches more relevant.

All five guidelines are as difficult to execute as they are easy to identify. But let’s not forget, it’s taken retailing a century to arrive at its current position. No wonder e-tailing has made loads of mistakes over a mere six years.

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