Scaling E-Commerce Channels

Part
01
of two
Part
01

Scaling E-Commerce Channels, Part 3

Over the past few years, the biggest trend in the retail sector has been the emergence of e-commerce as an unstoppable juggernaut, and the hard figures prove this fact. In 2017, about 1.66 billion shoppers (worldwide) spent $2.3 trillion purchasing goods online. E-commerce retail sales are expected to reach $4.48 trillion in 2021, while retail sale through e-commerce is growing at 15% to 17% every year compared to 5% for the retail industry as a whole. Such massive growth presents operational challenges to the companies planning to scale e-commerce channels for their business, and this inevitably results in mistakes. Two such mistakes include poor customer service and not having a presence on mobile platforms.

Poor Customer Service

  • Customer service is a broad term that encapsulates the entire life cycle of the customer's experience on the e-commerce platform. Research has shown that customer satisfaction and the sustainability of an e-commerce brand largely depends on the quality of customer service. These actions include engaging customers with swift responses to their queries, offering refunds, and providing exceptional after-sales service, among other parameters.
  • Research by Guardian has shown that by 2020, customer experience will become the most significant brand differentiator, overtaking the quality of the product and price.
  • A survey by Forbes has shown that 80% of businesses consider that they are providing excellent customer service to customers, but only 8% of the customers agree to this claim. Thus, there is a considerable gap between perception and reality when it comes to customer service.
  • As per a report by Internet Retailer, e-commerce companies that have strong customer support channels retain 89% of customers, while companies with weak customer support channels retain only 33% of customers. Hence, to scale an e-commerce channel for their business, companies should develop an excellent customer service team at all levels.
  • To create excellent customer satisfaction that improves the e-commerce brand's chances to scale, businesses should be proactive in their customer approach. They should make themselves accessible to their customers' queries and needs at every step of their online journey. Another great way to improve customer satisfaction and engagement is by introducing relationship marketing and quality loyalty programs.
  • As per a study, 49% of consumers surveyed stated that they spent more money on an e-commerce website after joining a loyalty program.

Not Having Their Presence on Mobile Platforms

  • A common mistake by companies while scaling their e-commerce channel is not having their e-commerce site optimized on mobile platforms as an application and mobile apps like desktop websites.
  • As per a report by OuterBox published in January 2020, 79% of the smartphone users in the United States made online purchases using their smartphones during the previous six months.
  • Another survey indicated that 89% of e-commerce customers prefer using apps on their smartphones instead of desktop websites.
  • Having mobile apps lead to customers making faster purchases on the apps (1.5 times faster than desktop websites), having a better customer experience on their user-friendly apps that focus on a particular service and minimal content, using the app offline, having tailored content, and utilizing push notifications for making faster purchases.
  • To scale the e-commerce channel for their business, e-commerce companies should have mobile apps that have the following features: user-friendliness, enhanced security, push notifications, product personalization, greater product availability, access to social media, and various purchase options that are quick like cashless transactions and mobile wallets. Also, mobile apps should ensure that they work seamlessly with mobile e-commerce API solutions such as Moltin, Contus, and Elastic Path.
  • As the technology for mobile platforms develops further, the latest trends for mobile apps indicate the need for the following features as well: interactive chat, voice search, AR/VR features, bots or digital assistants, predictive search, and integrated payment systems.
  • For example, Exxel Outdoors, an e-commerce company that specializes in outdoor recreation products, witnessed online sales on their mobile platform jump by 272%, while their mobile revenue rose by 193% after they re-platformed their mobile application to BigCommerce.

Research Strategy

Our research began by trying to obtain publicly available information on common mistakes made by large companies that generate annual revenues ranging from $100 million to $900 million, but we could not find such data, even after an extensive search. As per a report, only 0.04% of all companies manage to generate $100 million in annual revenue in their first few years, and hence, our search field became very narrow. To avoid this bottleneck, we expanded our search criteria to include companies that generate annual revenues below $100 million. By doing this, we managed to identify that poor customer service and not having a presence on mobile platforms are two common mistakes made by such companies while planning to scale e-commerce channels for their business. Industry experts in the field of e-commerce and marketing like Magento, E-commerce Nation, and GrowthRocks commonly identified these mistakes.
Part
02
of two
Part
02

Scaling E-Commerce Channels, Part 4

A common mistake that large companies make when planning to scale e-commerce channels is a lack of sophisticated fraud controls to avoid cyberthreats for the company and its customers. Another common mistake is not having a strong brand presence in its online channels that fails to compete with more established e-commerce brands. Information about these common mistakes is provided below.

Lack of Sophisticated Fraud Controls

  • Research found more than 40% of e-Commerce digital transformations fail due to digital fraud, and this threat prevents businesses from expanding into new digital channels and services. The most innovative businesses face the biggest threats to such industries including the retail, restaurant, insurance, and financial industries.
  • Over 40% of retailers cite digital fraud as a hindrance to scaling an e-commerce channel.
  • Retailers and restaurants are stated to have " an increased imperative to balance fraud mitigation and customer experience", yet only 64% of their customers have confidence in the companies digital channels.
  • Businesses are not adopting proper security measures and controls at the same rate of the increasing adoption of new digital features that can be targeted and exploited. In addition, retailers that were required to accept chip cards in 2016 experienced more fraud than counterparts.
  • Retailers are stated to face the biggest risk of digital fraud due to the lack of sophisticated fraud controls, the absence of which are to provide a more seamless customer experience, but also leaves the customer most at risk.
  • Research found that 43% of retail merchants authenticate users by using only a username and password, further evidence of the lack of fraud controls. In addition, retailers identified digital fraud and account takeover as the most significant fraud threats at 34% and 10%, respectively.
  • Restaurants are one industry stated to underestimate its fraud exposure, when moving to a digital presence. Only 4% of restaurants ranked managing digital risk as a challenge compared to the average of 12% of all businesses.
  • In 2018, LexisNexus reported that merchants were burdened with $2.94 for every dollar of fraud, but this increased to $3.13 per dollar in 2019, and the fact is exacerbated by the fact that the number of fraud cases increases every year. Retailers are expected to experience over $130 billion in online fraud between now and 2023, demonstrating how common lack of fraud controls are.
  • Apparel is a popular category for fraudulent transactions because the criminals can resell the items on their own platforms.
  • Restaurants and retailers are advised to consider fraud and cybersecurity teams into development stages before digitally transforming, identify key risks, and minimize user friction, while maintaining protective authentication processes.
  • MasterCard is exploring one way to avoid digital fraud by acquiring Ethoa, "a global provider of technology solutions that help merchants and card issuers collaborate in real-time to quickly identify and resolve fraud in digital commerce". The Ethoa network identifies fraudulent transactions almost real-time and stops potentially fraudulent transactions and false declines.
  • Capital One is one company that experienced a huge data breach after an employee breached the company's cloud data storage and stole customer information affecting tens of millions of people.

No Strong Brand Identity

  • Many legacy brands and retailers that are attempting to move to e-commerce channels "misguidedly" treat the online channel as another sales channel and neglect to also transition from a product-centric model to a customer-centric model of marketing.
  • Native e-commerce businesses have an advantage in reaching more web customers because of creating social experiences on social media platforms, expertise in digital communication and knowledge of the importance of personalization and controlled distribution.
  • Companies, such as Dollar Shave Club and MailChimp, are stated to "exist in very saturated markets" and are outperforming their peers due to having a coherent marketing strategy and a "special brand voice". Dollar Shave Club created a strong brand identity online and was purchased by Unilever for over $1 billion, demonstrating the importance of developing a strong brand identity when scaling an e-commerce channel.
  • Refusal to evolve with the market and innovate is credited with being a reason top companies fail.
  • JC Penny is a prime example of a retailer failing to make its brand relevant to the e-commerce marketplace, due to its "identity crisis". Today, the company's online and catalog business is all that exists of the company. Sears is another company who had a tough time transitioning its brand to an online marketplace and has since failed.
  • Airbnb originally failed with its brand identity on its e-commerce channel and could not pay its rent. However, it strengthened its digital marketing and brand recognition relying on user-generated content on social media and developing its company to be a service and a travel forum. Its brand identification is evident in the 13.3 million interactions they achieved thanks to its social media influencers in 2015 alone.


Sources
Sources

From Part 01