February - 2017 - issue > CXO Insights

Transition from Brick and Mortar to E-Business

Soumajit Bhowmik-Investor, Director – Ecommerce, Capillary Technologies
Friday, March 3, 2017
Soumajit Bhowmik-Investor, Director – Ecommerce, Capillary Technologies
‘Ecommerce’ seems to be the buzzword now days with many brands moving omni channel or online - only while quite a few aggregators and market places are in news for right or wrong reasons. While the brick and mortar model presented its own set of challenges, online shopping has come up with its own set of complexities. Mostly eCommerce site owners are at the receiving end of the Rubik’s cube, which seem to never reach the solution, making it imperative to constantly improve, adopt, learn and implement in a race towards sustainability, profitability and scalability. At a very basic level ecommerce has four levers - platform, assortment (or catalogue), pricing and channel. Platforms can be website; mobile cross browser, responsive and wap sites, or app. Channels are where you market your platform. Your catalogue or products drive your revenue. Pricing determines your brand positioning, and evolves from your customer acquisition strategy, product margins and many more. A play among these levers determines where you position yourself in the market, and the kind of scale or revenue you generate from your online store.

With out getting into platform specifics, the selection of platforms which need to be live for your eCommerce business is an output of your business goals and budget constraints. Not always does app generate more business than web or have a greater conversion rate. At scale, app does offer you greater RoI than web, but app as a platform demands more investment to become profitable than the web. Conversion Rate of platform is another puzzle which needs to be solved regularly. There is no absolute conversion rate benchmark and it needs regular improvement. For some eCommerce players, conversion rate is more than 2.5%, while some are at 0.1% or even lesser.

When you have multiple platforms, there will be one question which needs addressing - Whether one channel is cannibalizing revenue from the other? One might feel that investing in Web is of little use, or it makes sense to invest more heavily on app. But if you cut off the discovery platform, there might also be a huge dip in revenue from app. Of course you would not see the dip since transition of shoppers, who were web-only, from web to app will balance the overall dip, but new customer acquisition cost or repeat purchase rate will show some fluctuation. How then should one validate the importance of platform? The answer, to some extent, lies in seeing a unified view of customer across all platforms.

Marketing spends get split across channels for various purposes. One of them is brand marketing (offline and online), which includes display networks, banner inventory buyout, video promotions, offline marketing and Social media organic marketing. The other part of channel marketing is to drive revenue, and those channels are typically known as performance marketing channels. They include SEM, Social Paid marketing, Retargeting, Affiliates, to name a few. Spends are plotted against revenue generated by each of these channels (RoI or CIR as KPI), and spends are increased for better performing channels while non performing channels are either optimized or spends reduced.

Now if some one visited your site, added something to cart and left, there is high chances that they would anyways purchase after some time (maybe after going home or reaching office), or your Live campaigns in CRM will drive them to make the purchase. But now retargeting shows up some ad in Facebook and the user buys through that channel and you lose out on an organic sale or a CRM sale but get better Retargeting performance. Result - net revenue remain same, and spends increase. Many such similar cases can be seen regularly in the eCommerce industry. Which channel gets attributed to a sale and which channel should be scaled up are two questions very closely related and yet there is no clear answer. The most convincing solution seems to be multi touch-point analysis and understanding the customer behavior across channels.

Share on Twitter
Share on LinkedIn
Share on facebook