Growing eCommerce businesses are experiencing pressure from rapidly increasing competition and the rising costs of acquiring customers, you can read about this in one of my previous articles. Many online companies rush to build and optimize their e-commerce sites without a proper roadmap to address these challenges. Those who are fortunate enough to have a talented team may be able to get by for a while. However, for most companies, this is a costly endeavor that results in losing market share to one of their more considered rivals. A structured growth strategy will help eCommerce businesses avoid this fate but finding where to begin can be difficult, and making the wrong decision can prove extremely costly.
Every successful strategy begins with a simple but essential concept: To get to your destination, you must know where you are. Therefore, as part of kicking off an eCommerce growth strategy, organizations must understand where they are in the growth life cycle. Being clear about where you are will help you develop a clear direction of travel with a concise set of priorities.
As part of my research interviews with product leads, managers, heads, and founders of eCommerce companies, I have defined three stages of the eCommerce growth cycle.
- Stage 1: Start-up growth
- Stage 2: Stagnant growth
- Stage 3: Scale-up growth
If you are an online business, understanding each of these cycles is critical to your plan for growth. Let’s dive into each stage.
Every eCommerce business goes through two phases before entering the growth cycle, build and launch. Unfortunately, most will not get past the launch phase, but for those that do, they will enter the exciting start of their growth journey, the start-up growth stage.
The Start-up growth stage is often characterized by joy and excitement because the founder’s concept has been validated. Real customers are coming in, and the growth rate is high, driven either by the product’s popularity or the demand from the market. At this stage, the founder focuses on increasing the number of customers, gaining traction with a repeatable customer proposition and demonstrating that the proposition is scalable. Founders at this stage don’t want to get caught up in complicated systems, so they are likely to have appointed an external development company or have chosen to use platforms such as Shopify or Magento.
Soon, however, the honeymoon period must end. That blissfully exciting, carefree customer growth rate begins to stagnate. Obviously, they need to work through some challenges, but it is not very clear what to do. This means that are headed for the next stage of the growth cycle, stagnant growth.
This stage is one of the most crucial growth phases for an eCommerce business. Overall growth has not stopped as customers are still coming in, but the growth rate has plateaued. At this point, online businesses become especially aware of the new players and competitors who enter their space because of market demand. Suddenly, that initial buzz is no longer there. Instead, it is replaced by a degree of anxiety as market share looks to be slowly eroding. It can be disheartening to deal with this growth phase after experiencing the upward trajectory of the start-growth stage.
Many business owners think that the solution to the issue of stagnating growth will be a quick fix, a change in direction or even a change in technology platform. They quickly hypothesize that the problems are with conversion rates, ads, the development team or the third-party software. While these options may indeed be the answer, this is not the time to gamble.
The cost of guesswork is high, so successful companies remove the uncertainty by exploiting their most significant asset: their data. Companies that get past this stage take the opportunity to look inwards and recognize that the time has come to analyze the data and gain insights that will help them make strategic decisions on what to focus on next.
Your data is literally a treasure map of opportunity. You have a goldmine of information about your existing customers, transactions, and behaviour. Furthermore, the constraint of needing years of data to get value from it doesn’t apply! There are enough clues and hidden opportunities that will boost sales and grow a business, whether it is a month’s worth of data, two months, three months, or five years of data.
The main challenge is that extracting these insights is not easy. It takes a lot of time and requires a specific skill set. Inevitably, founders would then focus their attention on bringing in additional skills and purchasing tools to uncover the problems and opportunities that will drive the next growth stage. Some will hire an agency, while others look for a dedicated person in the shape of a head of eCommerce or an analyst to look through the data, find those optimization opportunities and compose a plan.
Regardless of who does it, data analysis will uncover hidden opportunities to optimize processes, and improve the customer experience. Companies that survive this growth stage use their data to steer the strategy and get them to the scale-up phase.
Committing to the initiatives identified by the data in the stagnation phase gets companies to the scale-up stage, where they experience a renewed spark of growth. Companies in the scale-up phase have passed the plateau and growth is heading up again.
When companies take their time to analyze their data correctly, it will show them initiatives that may cause a re-alignment of business goals, a need to re-platform, feature initiatives, optimization strategies, and much more. A key characteristic for companies in the scale-up stage is that most new initiatives are run through a robust infrastructure that allows experimentation and testing. Lots and lots of testing.
Most companies will create dozens of randomized experiments that test two or more versions of a variable (web page, element, etc.) on different segments of website visitors to determine which version has the most significant impact on business metrics. Testing across all aspects of the business is the one way to take advantage of every visitor and spread the message of what makes their company different and why customers should pick them over a competitor.
Founders in this stage of the eCommerce growth must ensure that the attempts to reinvigorate the company’s momentum and growth are always strategic. This means that there needs to be a comprehensive analysis behind decisions to implement technology and tools. The only way to do this effectively is to hire the correct data-literate individuals.
Scale-up is the time when founders are focused on managing a rapidly expanding team, ensuring that the new hires are delivering measurable value, and concentrating on the right key performance indicators that continue to drive the business.
Getting to know these key stages of the eCommerce growth lifecycle will help you plan your brand’s growth.
Determine where you are and identify what the organization should be focusing on by asking the right questions. An increased focus on acquisition is required to build traction, grow brand awareness, and provide momentum at the early start-up stages. When growth begins to stagnate, you must look at your data. This is where you can uncover the hidden opportunities to focus on and get your business back to growth. To get to scale-up growth data must become the lifeblood of the company’s decision making. Finally for lasting success, you need to hire the right data-literate individuals who can read interpret and design an executable plan on the insights provided by the data.