E-commerce: if you build it, will they come?
We asked that question of Grant Brown, Managing Director and Chief Operations Officer at online fashion mall, Zando. His answer was simple: “No.”
“Everyone thinks e-commerce is very easy. It’s definitely not”, agrees Tim Harper, Head of Product at Media24, which hosts fashion retailer Spree in its stable, among others. “It’s easy to get your cousin’s twelve-year old son to build a website and get the product online, but there are two big challenges that define the success of an e-commerce startup: distribution and web traffic.”
Eyeballs are everything
Unlike a physical store that has instant customer footfall, says Harper, many people underestimate how difficult it is to attract sufficient web traffic, to secure customers, to distribute the product and then do it all again just as well when the business starts to scale. “It’s about finding the sweet spot between attracting customers, building traffic with clear, singular messaging, and distribution.” But even for established e-commerce pros, attracting traffic to any new site is difficult, he says.
Traffic is key, agrees Brown. Any site needs to have a constant presence to attract the digital footfall necessary for growth. It’s a long game of getting various factors right at the same time. It starts with having a very clear proposition. To make the point, Brown relates how Zando has consciously occupied a niche that differentiates itself from other online fashion retailers: “we don’t see ourselves us as a retailer. We’re very definitely a shopping mall. It’s a very clear position for us.”
Trust trumps everything
Each element needs to come into play together. Brown adds another: perfecting the customer experience, which is central to building trust.
In e-commerce terms, South Africa is still a maturing market, explains Harper. “E-commerce is still a single digit percentage of overall retail in established markets like the US. In this country, online retailing only accounts for one or two percent of the overall retail market”. So even if the customers do come, he says, “one of the biggest challenges is to build their trust. Because trust is what’s going to convince the customer to hand over their credit card details.”
Brown agrees emphatically. “You can’t have any friction between the business and the customer, whether that relates to your return policies, or the technology you use to ensure completely secure payments. You need to have an intimate understanding of the customer journey, to get it right at every touchpoint.” Once you lose a customer, says Brown, the analytics show that they simply don’t come back.
Once the customer is convinced, the retailer needs to clear the next hurdle: distribution. “Distribution is key, especially in South Africa, which has a widespread geographical customer base. It needs to be a flawless experience,” says Harper, particularly if the business is starting to scale. This is where many retailers trip up, he explains. In the early days of Zando, Brown remembers being in the warehouse, fulfilling customer orders until 3am to ensure customers got what they wanted every time.
Consider the different logistical challenges between packing a hundred products a month in your garage — which could be quite straightforward; and fulfilling thousands of orders a week, or even a day.
“As much as startups may believe that e-commerce businesses carry low overheads, it’s actually not entirely true. You need to service the customers. You need bums on seats in the back end to make sure the customers are getting what they’ve ordered and have somebody to call when they have questions,” says Harper. This applies as much to a fashion retailer as it does to a service, such as flight booking services.
It’s hard, but easy
It’s not all doom and gloom, though. Brown is optimistic about the possibilities for online retailing and actively encourages competition. “Building an e-commerce venture is the easiest thing to do; the technology is easily accessible. We need startups to get into the market.” As more digital retailers start to succeed, he says, the more the awareness will grow and the market will mature.
“My advice to any e-commerce startup is ‘don’t panic’.” Having made some significant mistakes along the journey, Brown can say this with deep conviction. “You need to understand your offering, but also understand that it takes time to scale organically,” says Brown. E-commerce has to be a long-term commitment, he adds.
With growing smartphone penetration, mobile retailing offers an even greater opportunity. Zando, he says, has an explicit ‘mobile first’ policy. And the technology, he says, makes it easier to start up, but also to fail more quickly. “Part of the beauty of e-commerce is that you can make mistakes, conduct A/B testing, and act quickly to recover,” says Brown.
Know your niche
“Differentiation is critical to building a strong e-commerce market,” says Harper. “Larger retailers will have thousands of products on offer. So startups could differentiate on price, convenience, or offering a unique product.”
By all accounts, e-commerce is a white-knuckle ride, even for the seasoned businesses. However, as Harper says, if startups who are willing to go the distance, “It ain’t easy, but if you can find your niche, to sell the right product, at the right price, backed by effective distribution channels and solid customer support, there’s a huge opportunity.”