Practical Ecommerce

What drives ecommerce sales?

Presumably all online retailers want to increase sales. I know we do at overstockArt.com.

I came to the office on a recent Monday and, as usual, I checked our sales from the weekend. This is usually one of the first things I do on a Monday morning, as it usually defines how we start our week. On this particular morning, sales were very strong. In fact, it was the strongest weekend we had in three or four months.

So I started looking for the cause. Why was this weekend better than others? I looked at the conversions, traffic sources, and all the usual suspects. But couldn’t identify one specific reason for the increase in sales.

That experience led me to this article. While figuring out the reason for increased sales in a specific, day, hour, or even a weekend may not always be possible — in many cases it’s simply luck — figuring out what drives sales long-term is one of the keys to your success.

I came up with four reasons that are responsible for our increases in sales. While this is true for my company, it is likely true for most online retailers.

  • Inventory availability
  • Website traffic
  • Customer experience
  • Competition

I omitted some of the usual suspects, such as close ratio, dollar per visitor, and other matrices that are lagging indicators but not necessarily actions that you can take to increase sales. It’s critical for my business to concentrate on root causes.

Admittedly some of these are broad. But they can be tackled by any company, big or small.

Inventory availability

In “Secret sauce for an ecommerce supply chain,” my post in May, I focused on inventory availability. I will repeat only the main points here. The key to improving inventory availability is to reduce lead times, increase order frequency, and reduce order size. This will also result in improved cash flow, increased return on investment, and more profits.

Website traffic

At first look this seems obvious, and to some degree, it is. If we increase traffic, we will increase sales — all else being equal. The key, as always, is in the execution. Since most of us do not have unlimited funds, we can’t just buy more traffic. It has to convert at a rate that allows for a good return on investment. The main traffic sources for most retailers are as follows.

  • Direct traffic
  • Search engine optimization
  • Cost-per-click ads on search engines
  • Email marketing
  • Retargeting
  • Social media

These sources are critical for most retailers, as is keeping a good diversity of sources. I’ll elaborate on cost per click, retargeting, and email marketing here. They are mostly in your control and can be ramped up fairly fast. Two of those — CPC and retargeting — can cost money if not managed properly.

  • Cost-per-click ads. Carefully analyze how you spend money on CPC, as some keywords only cost you money and some make you money. Plus, you should develop a clear strategy. For example, if you have high repeat sales, you can likely afford to lose money on the first sale and make money and subsequent ones from the same customer. Conversely, if your goal is to maximize profit, or if your business doesn’t drive repeat sales, you have to make a profit on the first sale.
  • Email marketing. We have developed a short list of activities that greatly determine success of email marketing. Email marketing is not sexy anymore. But is still the best converter and profit generator for us and many other retailers. Our four top activities to improve email conversions are as follows.

First, use timely offers. Customers act (or don’t act) quickly on email offers. So keeping your offers available for longer than 72 hours will only reduce the response rate. We found that 24-to-48 hours works best.

Second, send more than once. It’s good to send an offer and later send it again, informing customers last chance. Many customers like to see a repetition of an offer.

Third, have a good reason for the discount. We found that the same offers on specific days of the year convert better. It may be the exact offer as other days, but if you have a good reason for the discount, customers believe it is real. It may also be that you are providing them another reason to buy. The key is to look for special occasions on a regular basis.

Fourth, change your offer or how you communicate your offer regularly. If customers see a 20 percent discount from you every week, then they realize it’s the only deal and it’s not really a deal anymore. It doesn’t motivate them. So vary your deals and call them in different names as customer respond differently to offers.

  • Retargeting can be a powerful way bring qualified traffic to your website. It is an interesting channel, as it does two things to your brand. First, it creates a mini-conversion for many of your visitors, as they see your banner ads after leaving the site. Also, it helps with brand building when the visitors see those ads.

The conversion rate on this traffic is generally very good for us, with the following caveats.

First, we use a cost-per-click model not cost per impression. It’s just too hard to quantify the returns with CPM.

Second, we use only “click-through” revenue to evaluate the program. Many of the re-targeting vendors will tell you your click-through revenue is low but the “view-through” makes it worth it. Unfortunately view-through is not truly trackable. Plus you don’t know what caused the conversion. Click-through sales are clear and quantifiable.

Lastly, lower bids can backfire. If you bid a little higher, you will get seen more often, which allows the branding process to work. It will then support all of your other advertising models. You still have to monitor ROI. But you might allow a lower ROI for retargeting, to compensate for the branding effect it has on other parts of your marketing.

  • Social media. We have never had tremendous success with social media But we maintain a strong presence with the idea that it’s a good way to communicate with buyers and fans. We incorporate our retargeting efforts to our customer’s Facebook news feed and create Facebook posts echoing our email promotions, to be consistent across channels.

Customer experience

Customer experience is at the heart of increasing sales. If your brand provides a compelling experience, you will greatly increase repeat purchases and positive word of mouth.

What is customer experience? Is there a good way to measure it? The customer experience is much more than good customer service. It’s about the conglomeration of touch points or interactions you have with your customers — such as on your website, your emails, the boxes that arrive at the customers’ home, and all other elements.

It is critical for any retailer to have resources invested in making the customer experience positive and memorable. Here are some of the things that have worked for us.

  • The “Wall Art Happiness” meeting. This is a simple tool where once a month we meet to celebrate the customer experience. This is an opportunity for us to recognize employees that have done something special for a customer. This reinforces our commitment to the customer and our culture.
  • Empowering employees. We want frontline employees to solve problems to the best of their abilities. This goes to culture and trust. You should set guidelines but they should not be very complicated. Imagine how a shopper feels if the person on the other line is unable or unwilling to help? Contrast that with a customer speaking to a person who wants to help, knows how to help, and has the tools to help — on the phone as the conversation is happening.
  • Preemptive distribution. Today’s customer is on the go. She is busy, distracted, and has many demands on her attention. You should offer more than just a desktop shopping option. Your customer wants to do more than just have shopping interactions with your brand. This is where a mobile website and a mobile app come into play. Consider that your customer may have the desire and may feel it’s the right time to interact when she’s in her van picking her daughter from soccer practice.
  • Net promoter. This is a single question survey that shows the engagement of customers with our brand. It is a great tool to measure customer engagement. We use it periodically to see if we are getting better.

Competition

Most all ecommerce companies have competitors. It’s very easy for customers to go from one competitor to the next. This does not mean that you should drop your prices below your competitors, though in some industries price is a critical factor. But it means that you should know what your competitor is doing.

Look for ways to learn from competitors — both direct and indirect — and you should consider the vantage point of a customer when he considers a purchase from you versus your competitor. At overstockArt.com, we assemble a simple matrix of competitor intelligence and update it regularly. It doesn’t take a lot of work. We review it about once a month to see what our competition is doing.

In this article, I tackled an issue — what drives ecommerce sales? — that needs more than one article. I could have elaborated much more on many of these topics. Please share your views, in the comments below.

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Comments ( 4 )

  1. Joe Aro July 9, 2015 Reply

    For all we know there is too much we do not know. And what drives sales is often befuddling. If only we could rely on our Magic 8 Ball!. Thanks for this post and insights to refining our sales knowledge.

    • David Sasson July 9, 2015 Reply

      Joe,

      Thanks for the insightful comment. I agree the mysteries of buying decisions are hard to figure out.

      All the best,

      David

  2. Burc TAnir July 14, 2015 Reply

    Great set of insights.
    I can not agree more about the effect of competition on prices. Retailers should be closely watching competitor prices by automated solutions like Prisync.com but still do not need to act by lowering their prices. The optimum price is not necessarily the minimum price in all cases, and cost side of the equation should also be well balanced together with the competitor prices.

    • David Sasson July 14, 2015 Reply

      Burc,

      Hi, thanks for the nice comment. It’s interesting that you focused on pricing. It is definitely one of the keys. It is also somewhat of an underrated tool in the marketers hand, especially for smaller brands. The key, as you mentioned, is not to think that you have to beat the competitor price as long as you can justify with real or perceived differentiation the value of your product or service.

      David Sasson