Why are our online product sales so low? An insider's guide
09 Nov 2012
With the hype surrounding the massive growth in online product sales, many business owners feel conned when instant profits are not quickly realised. The truth is that creating a successful online store or e-commerce website is incredibly challenging, particularly with a shoe-string marketing budget. Success depends on picking the right niche, product innovation and a unique online content strategy.
Since launching our web design and web marketing business in 2006, we have worked with hundreds of businesses and startups to promote and sell their products online. In this article we present our hard-earned tips and strategies for online success.
Types of Online Business
We have broadly grouped online businesses into the following categories:
Type 1 - Product based businesses - product small enough to ship nationally / internationally. Sales are made directly on the website. There is access to a massive potential customer base, but with no geographic protection from competitors.
Type 2 - Product based businesses - product too big to ship economically outside the local area. The website is typically used to show-case products and attract leads into local business outlets (website visit, phone call or email resulting in visit to store or local delivery).
Type 3 - Service based businesses. Most service based businesses require face-to-face contact and/or local infrastructure. As such the website is used to attract leads into a local business / outlet (phone call, email resulting in consultation).
Type 1 online businesses are the most challenging, but with the greatest potential payoff, in that the Internet provides access to a massive new customer base; but with a correspondingly large set of new competitors. The strategies that made a store-front business successful do not necessarily translate into online success, given the hugely differing market conditions. As such a change in marketing strategy is almost always needed for Type 1 online businesses.
Type 2 and Type 3 businesses can usually succeed online with less effort than Type 1, as these businesses are protected by geographic boundaries and the website is often best used to attract new leads into existing business structures and shop-fronts/offices. Type 2 and Type 3 businesses still require an online marketing strategy and budget, however in most cases online marketing can usually be carried out systematically and a return on investment achieved. Marketing for Type 2 and Type 3 businesses is actually becoming easier with the event of location based search and mobile device search (mobile, ipad, iphone, GPS, etc).
Type 1 - Product based businesses - product small enough to ship nationally / internationally
Given the large size of the global online market, Type 1 businesses clearly require a higher level of innovation to achieve success. To compete effectively often requires a totally new business model, one that accounts for the high levels of competition, the wide distribution area and the potential for scaling the business globally.
Fundamentally, it is as easy for a customer to visit your website as any other to purchase a product. For small products, the cost and speed of shipping is not always a factor in the purchase. With no geographic boundaries, non-unique product offerings face massive levels of online competition. As competition increases, consumers make purchase decisions based on price, shifting products into commodities. In our opinion, this is one of the fundamental reasons most online product based businesses fail. Most products are simply not unique enough to stand out in the global market.
Need for (greater) uniqueness
Given the high level of uniqueness and innovation required, the success rate of Type 1 websites is low. Most are not turning a significant profit, with the majority of online sales going to the larger and established online merchants. If the product or offer to the customer is not unique in a significant way, small or new businesses find it near impossible to achieve profitability. However, if you have a unique product offering backed up with rapid service and a great web presence, the potential for access to new consumers can scale a business rapidly.
Given the different market conditions, marketing strategies used offline typically do not translate well into the online space. A new approach is needed to attract customers to purchase.
Creating a successful online marketing strategy
Typically a unique online marketing strategy is based on a unique product, unique website content or unique offer (ideally all three). We provide some examples below.
Unique and Relevant Products, Services, Experiences
e.g. Apple's iPad - tablet computer.
Entertain your customers
e.g. YouTube - hundreds of millions of videos watched per day.
e.g. eonline.com - hugely popular celebrity gossip website.
Push boundaries (bigger, faster, cheaper)
e.g. amazon.com - the largest collection of books online.
e.g. dealsdirect.com.au - biggest Australian online store with 7,500 bargains.
Give back to the community through philanthropic donations and services
e.g. toms.com - Every pair of shoes sold, one pair given to a child in developing world.
Offer world leading content and advice
e.g howstuffworks.com - easy-to-understand explanations of how the world works.
e.g. farnell.com.au - datasheets of every item they sell.
Profoundly solve customer problems myob.com.au
e.g. MYOB accounting software.
Communicate your remarkable strategy using online content
In the online space you are operating in a world of free information and entertainment. To attract attention your business needs to transform itself into a content producer. This approach needs to be core to your online business model. This is a fundamental step where most new online businesses fail. They do not produce rich content or interact with their new online customers in a meaningful way. Apart from content attracting visitors to your site, great content is crucial in gaining the attention of the search engines and boosting your search engine rankings.
Online content can be broken into the following mediums:
Content Mediums: written text, audio, graphics, video, software, ebooks, press releases, web applications.
How does remarkable content help my search engine rankings?
The more remarkable your content, the more web-users that become interested in your content and link to it. The search engines pick-up on links to your content and treat them as positive votes for your website. In turn they boost your search engine ranking. As a result more users find your content and the process multiplies.
Test the Market first!
It is relatively easy to conduct market research online prior to the launch of your new product based business. We recommend the following to businesses launching an online or product based online business:
1. First test your product sales on ebay.com.au or etzy.com
2. Create a basic web-page and setup a Google adwords campaign. Measure the traffic to your basic page for various keywords. Is there suitable traffic to your site? Are you paying a fortune to rank against online competitors? Are there straight-forward two or three-term search phrases that customers can use to find you online?
3. Investigate the cost of sending your product to different geographies - local / state / national / international. Australia post provide a calculator here. Do these costs obstruct you from competing with other businesses in different regions? If the cost of postage is greater than 10% to 20% of your product price, you need to reconsider if you can compete in the given geography for this product type.
Creating a successful online business is a significant challenge, but one worth undertaking given the potential upside and the growth in online sales. To succeed in a competitive global market it is essential to use innovation to create a unique product and business model, promoted by unique, rich and relevant content that attracts potential customers through search and social media platforms.
We would love your feedback on this article. Please contact us with any questions or comments.
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