The importance of an ecommerce strategy is clear. What is not clear is how to develop a good one. Some strategy statements do not provide a lot of direction, such as “we want to be number one in our market” or “we work harder than the competition.”
An effective strategy focuses on the areas where you get the most returns. It becomes the basis for growth. It helps to focus limited resources on the most important and productive activities for the business.
Every year at overstockArt.com we have a strategic planning session. At the end of last year’s session, I realized that we essentially decided to do more of the same but to do it better, faster, and stronger. That troubled me, for these reasons.
- It was not sustainable.
- It lacked a direction — i.e., no strategy, just tactics.
- We didn’t focus on certain areas.
In other words, we had no real strategy since we didn’t make meaningful decisions about what to do and what not to do.
So I wrote a strategy document. It took six months, including reading books and articles. In 2017 I shared the document with our management team. They recommended some changes that we adopted. A meaningful strategy has to have buy-in from key players. In our case, input from our management team had tremendous value in specific areas.
What are the elements of a good strategy? First, a strategy is specific to your business and customers. (Don’t download the first template you find and answer a few questions.) Second, many business owners produce a strategy by focusing on financial projections. But projections and budgets, while important, are not a strategy. The strategy and its implementation will dictate financial projections, not vice versa.
My goal in this article is to start you on the path of creating a strategy for your business. It will require additional reading. It will require additional time thinking about your business and generating ideas that drive growth. It’s hard work. But it’s also rewarding. Some ideas can be implemented along the way.
Where to start in building a strategy? For most ecommerce retailers there are two areas of consideration. The first is the product or service you’re selling. The second is the go-to-market approach. Once these two are clear, the rest falls into place.
For both of these to be successful, you need information. Not data, information. Start with customer interviews. You’ll likely receive spoken and unspoken feedback.
Here are the questions we used.
- Why did you buy from us?
- What did we do that others didn’t?
- What value did we provide?
- How did you make your selection with us?
- What almost prevented you from making a purchase?
- What do you dislike about us or our competitors?
- How can we improve?
- What alternatives did you consider before buying from us?
- What words or phrases would you search to find us, if you weren’t familiar?
- What price range did you consider while making your choice?
- What can we do to increase your purchases with us?
- What other needs do you have that our company could provide?
I did the interviews myself. After about 50 interviews we also surveyed customers and non-customers. All of this provided the information for the strategic plan.
The next step is to read anything you can find about strategy. Here are three of my favorite books on that topic.
- “Good Strategy Bad Strategy: The Difference and Why it Matters”
- “The Discipline of Market Leaders: Choose Your Customers, Narrow Your Focus, Dominate Your Market”
- “Scaling Up: How a Few Companies Make It…and Why the Rest Don’t”
For “Scaling Up,” I especially benefited from the section about strategy.
Finally, it’s time to start writing. The format I used may not apply to your situation. Nonetheless, here are the key points for my company.
- Define the problems. A strategy is about solving problems. If there are no problems, there is no need for a new strategy.
- Market analysis. The best tool for this is “Porter’s Five Forces Framework.”
- Actionable policy. This is the policy that the company will pursue. It is the heart of the strategy and will impact almost all other decisions. For example, if a company decides to compete by providing better products, it will not focus as much on price.
- Core competencies. This could be competencies you already have. If they need to be developed, include a plan.
- Policies not chosen and why. This section is not essential. But it’s good to include it as it will clarify for you, your team, and potential investors.
- Objectives. These are milestones or specific accomplishments that indicate that you are on the right track. This is key for the execution process.
- Coherent actions. A set of coordinated actions that build on one another and support the guiding policy. Each activity supports another.
- Short summary. This is important to ensure all employees have access.
Producing an ecommerce strategy is not simple. But the rewards are great. We implemented our strategy in 2017. We then experienced the best financial results in our history. And 2018 to date is exceeding 2017.