Risky business ideas in eCommerce

Picture of Tomasz Karwatka
Tomasz Karwatka

Supervisory Board Member at Divante. Leading industry voice who believes eCommerce can improve our world. Co-founder of Vue Storefront and Open Loyalty, angel investor, and founder of Tech To The Rescue. CoFounder at Catch The Tornado eCommerce Startup Studio

Care to share?

Having taken part in eCommerce Projects for more than 12 years, I know that this is a really tricky business. Sometimes you engage in new ideas so deeply you cannot see the drawbacks. This is where I can help :)

Which ideas should you think twice about before implementing?

Let’s measure the ROI

Measuring the ROI of each marketing action sounds like a reasonable idea, right? It depends on what you do with this knowledge. I remember one shop owner that consistently eliminated all unprofitable (in the short term) sources of acquiring new customers. Without a strategic marketing vision, the company had completely lost its idea for attracting new customers. The customer base gradually decreased due to churn and after several years the store was in trouble.

Let’s stay with the current technology because it just works

I know a store owner who has talked about upgrading to a new engine for 10 years but he hasn’t done it yet. On the other hand, the creators of Basecamp declare that every four years their application is rewritten. They do it to preserve the freshness of technology and discontinue the technological debt. The longer you wait, the more difficult the migration process is, but maintaining the current technology is even riskier. Components are no longer updated and it’s increasingly difficult to obtain resources for developing old technologies. Keeping up to date with the market is a must, whether you like it or not. For example, all Magento-based store owners have to begin the process of moving to the new version 2. Ignoring this change will make conducting business safely next year almost impossible. Of course, the old technology can work, but if you’re stuck with it, over time you will lose security, flexibility and the possibility of using ready-made modules, plugins, etc.

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Let’s add new products

The marketplace business model is growing and everyone wants to build a marketplace. One of the larger stores I worked on kept on introducing new product categories. The idea was correct and based on the new categories being a method to increase their margin. Unfortunately, from a simple online bookstore, the store has become a bizarre mix of books, tires and pet food. Customers felt increasingly alienated. They didn’t buy other categories as they didn’t correspond in any way with what they liked about the bookstore. The idea of a marketplace is tempting, but extending the offer has to go in line with retaining the brand consistency and honesty of communication with customers.

Let’s focus on acquiring new clients

Customer acquisition is almost always unprofitable in the short term. It’s the returning customers that generate profits. I knew an online store that acquired a lot of new customers. Each of these customers generated a loss with their first purchase. The e-store owners believed that they would start earning after a second or third purchase. Unfortunately, they failed to get customer loyalty. If they had built their business more slowly, they would have seen that the forecasted revenue from loyal customers is missing. Unfortunately, they spent their whole budget too quickly, attracting hundreds of thousands of customers, each of which generated a loss, and the whole business failed despite its initial rapid increase. Monitoring loyalty and building loyalty programs are crucial to aggressive marketing campaigns.

Read also: Why do you implement a B2B eCommerce system wrong?

Published June 27, 2018