Competition in e-commerce is relentless and cutthroat. From Walmart and Target to smaller, independent ecommerce retailers, everyone feels the pressure of competitors. Unfortunately, for some like KarmaLoop, ToysRus and Borders, the only option was filing bankruptcy.
The Chinese general and military strategist Sun Tzu once said “he who knows when he can fight and when he cannot, will be victorious.”
Sun Tzu’s battlefield advice can be interpreted for e-commerce strategy by avoiding competitors’ strength and attacking on their weakness. Many independent e-commerce retailers are succeeding by using exactly this strategy.
While attacking is good for the battlefield, a business has to keep generating profits while on the attack. This is where we can look to another great business strategist – Dr. W. Edwards Demming. Dr. Demming helped Japanese companies to rebuild and compete after World War 2. Dr. Demming advised that “profit in business comes from repeat customers.”
He advised companies to actively convert new buyers into repeat customers. Japanese companies used this strategy in the 60s, 70s and 80s to capture and dominate markets.
As the founder of RewardCamp, I get to see how e-commerce retailers compete and dominate. The successful ones are using both Sun Tzu and Dr. Demming’s advice. In this blog post, I share the stories of three of our BigCommerce retailers, who are operating and succeeding in very competitive industries.
A few years ago Atlanta Light Bulbs (ALB), a family run business that’s been around for over 30 years, came under attack when Amazon began selling LED light bulbs at cut-rate prices. The onslaught from Amazon and other new competitors took a toll on revenues.
Owner Doug Root came to the conclusion, that trying to compete with Amazon and others on price alone would be a fight to the bottom. Doug decided to focus on his strengths and to further invest in those areas.
His first task was to examine his customer base and understand where he could better meet their needs.
ALB has two types of customers – consumers and businesses. The business customers include contractors, retailers, and designers. Both consumer and business customers care about prices but the business customers have additional needs. They require a wider selection of products, deeper knowledge about the latest innovations in LED lighting, the need to order in large quantities, credit terms, invoicing, etc.
ALB was already meeting many of these needs through offline methods like paper invoicing, paper-based credit application, and paper-based product catalogs. Doug decided to offer these same features electronically via his online store. In order to offer these features, he had to upgrade his e-commerce store.
In 2015, Doug migrated to the BigCommerce platform and launched a redesigned website.
The new site offered a powerful search that made it easier to find the almost 9000 products they sell. Doug also introduced other new features.
One of these new features allows customers to make an offer on their cart. ALB can accept the customer offer or make a counter-offer. This feature is especially helpful to business customers, who like to get a better deal when placing large order.
Another new feature allows business buyers to generate detailed quotes right from the website. Once the quote is approved, they can convert it into a cart and checkout.
Next, Doug launched a loyalty program that offers customers cashback rewards on every order. What made a big difference was that Doug’s loyalty program was powered by an app that made it easy for customers to earn and use their cashback rewards. This got customers using their rewards, which in turn, got them to return and place more orders.
Doug also beefed up his internal sales and customer service teams to provide more prompt customer service and sales support.
Over the last year, ALB upgraded their internal ERP software. Instead of having disparate software for managing inventory, sales, and customer service, they have moved to a single ERP software to do it all. The new software from Oracle Netsuite also integrates with the ALB online store.
A single ERP system provides staff with a comprehensive view of the customer, regardless of whether they placed an order online, on the phone or the showroom. This unified view of the customer makes it easier to provide faster and higher levels of customer service.
The new ERP also enables ALB to offer advanced features like self-service quotes, account self-management, user-specific pricing to all customers, regardless of whether they prefer ordering online, over the phone or in the showroom.
The integration of the online store with NetSuite ERP means that the online store can list significantly more product SKUs with updated inventories. ALB customers can now place specialty orders right on the website, instead of having to call in or visit the showroom. These specialty orders are often in the thousands of dollars.
All these investments paid off and in 2017, Atlantalightbulbs.com was named a top 300 B2B retailer by Internetretailer.com
Rob Cook, owner of Nancy’s Floral, an 1800Flowers franchisee in Gresham, Oregon has been in the family floral business since the 90s. In addition to a retail flower shop, Rob sells online via nancysfloral.com.
Rob competes with both national and local florists. Locally, he is competing with a dozen florists in the area. Nationally, he has to stand out from brands such as ftd.com, Teleflora.com and proflowers.com.
In such a highly crowded market, Rob has differentiated himself by focusing on customer service. “We’ll make it right, whatever the case may be,” says Rob. His dedication to customers earned him a top customer service award and being named franchisee of the year by 1800flowers.com.
In addition to better customer service, Rob redesigned and relaunched his online store on the BigCommerce platform in 2015.
He noticed that many of his online customers would place an order for Valentine’s day and then forget about him. So Rob launched a cashback rewards program that would reward customers on every order. The cashback rewards gave one-time buyers a reason to keep coming back. His repeat orders from the online store have increased by over 400%.
All these improvements would be meaningless unless customers could find him easily. So Rob invested in SEO and Google ads to capture new customers.
Beyond the retail business, Rob offers additional services including weddings and weekly flower deliveries to local businesses. These upgrades and changes have allowed Nancys Floral to remain competitive and continue growing the business.
BritishFoodDepot.com is an e-commerce only business that sells food products to British expats in the United States. They compete with giants like Amazon and specialty mom and pop British stores all over the United States.
Owner John O’Reilly started BritishFoodDepot.com in 2008, when he married his American girlfriend and joined her here in the states. He was missing foods from home and could not find an easy way to order them.
John operates in an extremely difficult niche because his customers have high expectations. They want good quality food products from England at low prices and as quickly as possible, preferably with free shipping.
Because John sells perishable products, he cannot afford to hold on to his inventory for long. Adding to the complexity, is the fact that he imports food products into America, which means, he has to meet strict FDA guidelines that can slow down the customs and clearing process.
Despite these challenges, John has built a successful business by leaning on his strengths.
John used his relationship with British suppliers to get the best prices possible. These relationships are built on a track record of placing frequent orders and paying his bills on time.
One of his challenges is quickly clearing food shipments through US customs and FDA checks. Every hour that his products are stuck in customs, they are getting closer to an expiration date. John consistently and quickly moves his shipments by strictly following the US customs and FDA guidelines.
He has boiled down the sourcing and importing process into a science. He orders the right product, at the right time and in the right quantities so that there is zero or very little spoilage. It has become a key competitive advantage for John.
Another challenge for John is that many of his products are bulky and incur significant shipping costs. The high shipping costs cause havoc with his conversion rates.
To get around this problem, he has clear instructions on the best ways to reduce shipping costs. Ironically, the shipping fees have lead customers to order greater quantities.
Lastly, John implemented a rewards program to convert new buyers into repeat customers. Like Doug and Rob, John offers cashback rewards on every purchase. The rewards program has been a hit with his customers.
Delivering a product that is difficult to import, providing fast shipping and offering rewards has enabled John to thrive in his niche.
Summary
Competition for customers in online retail is fierce but the stories of the above three e-commerce entrepreneurs show that it’s possible to compete and succeed by focusing on the strategies of customer service, offering more benefits, doing the difficult things and continually building on one’s strengths.