Want to improve your eCommerce offering? Key factors to consider.

Written by Joe Wilde, eCommerce lecturer at UCD Professional Academy

Many organisations are now focusing on eCommerce as a critical strategy component. Some might be at the start of that journey; for others, eCommerce might be a part of the business they want to grow. One of the key considerations when embarking on an eCommerce journey is to consider the business impact it has across the organisation.

In his 1985 book Competitive Advantage, Porter explains that the value chain is a collection of activities a company performs to create value for its customers.   This value chain looked at those activities as a series of primary and support activities and is a powerful tool to focus on the sources of competitive advantage. 

The primary activities include;

• Inbound Logistics 

• Operations

• Outbound logistics 

• Marketing and Sales, 

• Service. 

Secondary activities are;

• Procurement, 

• Human Resource Management 

• Technological development, 

• Infrastructure.

The eCommerce Value Chain 

I consider an adapted model of Porter's value chain when looking at eCommerce. Many companies need to consider the broader impact of eCommerce and fall into the trap that pertains to sales and marketing. The eCommerce value chain allows you to strategically look at aspects that need to be considered by the business. It applies as you start your eCommerce journey or develop your current strategy.

Let’s look at each of these areas more closely;

Primary activities

• Upstream supply chain

• Downstream supply chain

• IT & Technology development 

• Marketing 

• Customer Success 

Secondary activities

• Infrastructure

• Human resources

• Procurement

Primary Activities

Upstream Supply Chain

Moving towards (or improving existing) eCommerce drastically impacts your supply chain activities.  The nature of customer demand and the raising of consumer expectations via the likes of Amazon.com has ensured that we need to align the actions of our upstream supply chain tightly;

• Real-time inbound inventory information must be available to our operations team to ensure timely production and delivery of our product to a customer or third-party resellers.

• Close alignment, integration and strong relationships are required with suppliers to ensure the smooth running of our eCommerce business.

• The existing suppliers you use for our offline businesses may not be the correct fit for eCommerce for various reasons; lack of agility, systems integrations etc.

• Transport and Warehousing of upstream supply chain activities need to be revisited.

• Questions need to be answered about the management of inventory.  Do your eCommerce sales from the same stock as offline sales?  Do you need additional warehousing capacity?

• Close management of direct and indirect suppliers is required.

Downstream Supply Chain

Potentially more important is the management of downstream supply chain activities.  These include the following aspects;

• Delivery options:  What delivery options are we offering to customers?  Click and collect, home delivery,  or delivery to a local third-party retailer.  Similar to how you can brands like Decathlon UK off delivery options to ASDA via ToYou.  Tightly controlled cost management is required when considering delivery options offered;  How much will delivery direct-to-customer cost?  Over what value can you offer free delivery? MandMDirect has raised the threshold for free delivery on orders from €50 to €100. 

• Final Mile delivery relates to the last leg of the journey from you to your customer.  This can be a pain point for many businesses. It is the most expensive and critical part of the journey from a customer experience point of view.

• Delivering customer value on the final mile will be crucial in structuring delivery and linking to the options above.  Can you deliver yourself, or must you engage a third-party logistics provider? Which option gives you the best chance of outstanding customer experience within budget?

• Reverse logistics have become a hot topic in recent times.  During the CV19 pandemic, we saw a move towards free returns, and many organisations offer the same. However, current inflationary pressures have made this extremely difficult to offer. Statista's (2022) research suggests that  48% of UK consumers return online purchases ‘some of the time’ and outlines variances across different industries, with 35% of respondents saying that clothing is returned the most. Anecdotal evidence suggests that returns in categories such as denim, return rates can be 60%+. 

It’s interesting to note that Primark has only trialled eCommerce recently in the UK. This is a click-and-collect only; all returns must be done in person. 

It is vital to map out your supply chain activities and define your eCommerce supply chain for upstream and downstream activities. Given the nature of the industry today, this is likely to be ever-changing, so close monitoring is essential.

IT & Technology Development,

A vital aspect of a successful eCommerce venture is building it on a solid technology stack. This has broad implications right across the organisation.  

• Integration with existing ERP and other current systems; Organisational eCommerce development must be done in conjunction with existing systems. At the most basic level, ensuring alignment with stock-keeping systems. It is not uncommon for smaller businesses to keep some stock aside if they make sales via their website without a clear data-led integrated system. As your eCommerce functionality develops, it's essential to consider integrations across CRM, marketplaces (Amazon, eBay etc.) and any other functionality required.

• When considering payment gateways, consider both the UX (user experience) for your customer and integration with current finance and accounting systems.

The choice of your eCommerce platform is an essential one. If you plan on selling vast amounts online, consider Shopify Plus or Magento. In contrast, a smaller retailer may consider Squarespace or a simple Wordpress website.

Marketing

A vital aspect of your eCommerce journey is deciding on the marketing strategy for your website. The majority of this will be done via digital channels such as;

• Social media marketing,

• Apps

• eMail marketing, 

• Affiliate marketing, 

• Digital advertising - display, social media advertising and search engine marketing.

Depending on the brand or industry you operate in, more traditional advertising and marketing methods might be effective, e.g. Radio, outdoor advertising and TV, which have all proven successful in driving website traffic.  (Radio Centre Ireland research).

Omnichannel strategies

Your customer is likely time-poor and has a short attention span. They don’t care what channel they encounter your brand; they deal with you and your brand. Your eCommerce strategy must have a frictionless customer journey and path to purchase regardless of channel.

Data Analytics

In a world of big data, it is essential to be able to use our eCommerce analytics to;

• Know our customers better 

• Improve our products

• Develop a voice of the customer (VOC)

• Drive loyalty. 

You will have a wealth of data available to you across multiple platforms.  You can derive insights from the data and turn them into an actionable strategy.

Customer Success 

At a time when we are battling for customer loyalty, we must consider several factors;

• Knowing exactly who your customers are, when they buy, and how you can deliver value to them and, in turn, deliver value to the business. 

• Your customer relationship management (CRM) strategy is vital. This relationship strategy must be centred around customer attraction, retention and development. It can be easy to focus on attracting new customers, but retention and development are equally important and often more cost-effective than customer acquisition. 

• Linked to this is implementing a CRM system which can significantly enhance your eCommerce offering. Systems such as Hubspot, Salesforce or Monday.com and be a powerful addition to your eCommerce armoury.

• A final thing to consider is knowing and understanding your customer journey; how they find you, what reviews exist, what they see and how you can convince them that you are the solution to their problems.

Customer Experience Management,

One overarching aspect of all your primary activities that needs attention is your Customer Experience (CX). Customers (and potential customers) in most industries have a wealth of suppliers and options at their disposal, and if an experience is not to their liking, they will look elsewhere. Hubspot describes CX as ‘the impression your customers have of your brand throughout all aspects of the buyer's journey. It results in their view of your brand and impacts factors related to your bottom line, including revenue’.   A positive customer experience yields a 20% higher customer satisfaction rate and a 10-15% boost in sales conversion rates (McKinsey).

Customer Experience (CX) is not just about what happens to a customer on your website or app (that falls into the user experience domain). CX pertains to their entire journey to purchase, from identifying a need for a product or service, research phase, purchase, post-purchase phase and loyalty.

Secondary Activities 

Now that we have considered the primary activities on our eCommerce Value Chain, it’s essential to look at the secondary factors that impact eCommerce success;

Infrastructure 

This encompasses many business areas that seem somewhat detracted from eCommerce operations but should not be viewed in this light.  The core factors from an infrastructure perspective are;

Management support and sponsorship:  Initiatives from senior management are vital to ensure success. In some cases, senior management might need to be convinced about eCommerce's possibilities and its transformational impact on businesses.

Finance: eCommerce is no longer an activity that can be ‘done on the cheap’. It requires a substantial investment from eCommerce platform development to marketing activities to drive traffic to your website once the product is built and live.

Legal & Taxation: There are many eCommerce factors to consider here, including; trademarks, General Data Protection (GDPR), VAT and cross-border tax implications and consumer protection legislation.

Planning & Strategy: To do eCommerce correctly, it has to be planned carefully. The days of launching a website without a clear eCommerce strategy are long over. A detailed, customer-led, customer-centric approach is required to ensure long-term success. 

Human Resources 

Many organisations embarking on an eCommerce journey may need more knowledge to develop and implement strategies.

Accumulating this knowledge can be done by hiring and retaining the right people and your staff's professional development and training of your team. At the outset, you must undertake a skills gap analysis to understand the needs and requirements of the organisation. There are many skills required to develop and maintain a successful eCommerce business;

• IT Skills

• eCommerce strategy development

• eCommerce strategy implementation and project management

• Graphic design

• Photography

• Email marketing

• Social media marketing 

• Finance & legal

Not all will be required in-house, so a decision should be made around in-housing vs outsourcing and the pros and cons weighed up.

Procurement

Procurement is vital in the cost elements required to deliver eCommerce success. eCommerce requires a dedicated approach to procurement. This is closely linked to the supply chain activities we considered earlier in this article.  Procurement must be strategic and proactive - looking at future and current eCommerce needs  - and add value to the organisation. Carefully managed procurement allows for greater profitability by selecting suitable suppliers and driving their value. It also allows you to identify inefficiencies in supply chain activities, e.g. suppliers, software and hardware. 

Procurement also plays a role in selecting suppliers in capital and current expenditure instances and ensuring ongoing value from these suppliers.

Conclusion

There are many avenues and routes to enhance revenue and margins. An eCommerce project requires careful planning and a robust strategy across all aspects of the value chain. It also requires investment at a capital level initially and on an ongoing basis after that.

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