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Building an e-Commerce business – the concept

“Oh yes, e-Commerce, I know all about it. I could build an e-Commerce business overnight, with my eyes closed. It’s as easy as drawing an owl!”

 

An e-Commerce business is not an easy thing to build. It takes time, money, wisdom and all the support you can get. If you want to turn your vision into a digital success, you’re gonna’ need a hell lot of good advising, a strong vision, good sourcing, a skilled team, a realistic budget and, most importantly, a reliable plan.

You don’t just draw some circles and then design the rest of the f**king e-Commerce business with an immaculate development plan for the next 3-5 years.

Because of the complexity of these businesses, people can fall into one of two traps: they either fail to see the enormous effort it takes, which gets them believing they can build a scalable business in a blink of an eye, or they do see the real effort but become so overwhelmed with the number of things it involves, that they end up abandoning the project and run off like a scared little girl before they even get the chance to put it on paper.

Throughout all the years we’ve spent developing e-commerce businesses we’ve learned that you can benefit from a clean start if you divide and develop your e-business in two phases:

1. the concept, which walks you through the early stage of an e-commerce business (be it a start-up, an existing online player who wants to open a new business line, or a retailer who wants to start an online division for their offline business). By the time the concept phase ends, you should have all the answers to these questions:

  • who am I (as a brand)?
  • what am I selling?
  • why am I selling it?
  • who am I selling it to?
  • where am I selling it?
  • how much is it going to cost?

 

2. the execution plan, which should help you answer these questions (if built correctly):

  • what are my business pillars/ what departments do I need in my company?
  • what tasks must be fulfilled by each department?
  • what are the flows and processes in my business?
  • what systems and tools do I need in order to grow my business?
  • what roles do I need in my company?
  • how much can my business grow?
  • how long is it going to take for me to reach that growth?
  • what crucial indicators must I follow to keep everything under control?

For the execution plan, we’ve created a framework for business growth. It’s called Critical Me and it has proved to be very efficient in all of our projects. Critical Me is meant to help you get the big picture of your business and to help you develop and prioritize the growth plan for your business. If you’re curious about how it works, take a look at this article here, or reach out to us and we’ll discuss all about it.

Today we’re gonna’ go through the first phase – the concept – which is a process that helps you define every detail about your future business: what’s your brand gonna’ look, feel and sound like, who’s your target audience and how are you going to communicate with them, what is the promise of value you make to your customers, what’s the best platform to sell your products on and last, but definitely not least, how much it’s going to cost you to transform your dream into a profitable business.

1. Brand identity

Your brand is the reflection of your business. Everything that’s inside of your company, including your processes, organizational culture and core values, will be translated into your products and services. You should know that there are some efficient branding frameworks out there you can use to build a powerful brand identity (e.g. Kapferer’s Prism or Jung’s archetypes).

Company (internal identity)

Before sharing your identity with the world, you need to share it with your team.

  • Vision – the dream. The vision must aim so high that it feels almost impossible to achieve. And it must be designed to improve, heal or change something for the better.
  • Mission – the doing. Your mission is your mean of fulfilling that vision. The vision and the mission are complementary, but while the vision strikes far into the future, the mission is a more concrete example of how to get there. E.g: “I want to improve/ change/ grow/ transform X (the vision), by doing Y (the mission).
  • Values – qualities. It matters less if they are human values (such as the founder’s strongest beliefs) or brand qualities, what’s more important is that a) they are true and b) they can be demonstrated through products and services that measure up to those values.
  • Practices – the ways in which you prove those values right. Some specialists recommend that you have 3 (or less) practices for each value. For example, if one of your company’s values is promptitude, then those 3 practices for that value could be: fast order processing, on-time delivery and fast resolution for customer inquiries.
  • Differentiator(s) – what makes you you. The differentiator shows your uniqueness and how do you separate yourself from your competitors. The differentiators can come from innovation – something you do that no one else does, or from inspiration – something you do better than others. The only strict rule about differentiators is that … they must exist.
  • Organizational culture – whatever it is that you believe in, you must be sure your team believes in it, too. Your business can only thrive if on the inside of your company there’s peace, harmony and a shared scope. You need to surround yourself with people “of your own”, that pull in the same direction as you and who work with you – not for you – in the best interest of your business. More on the subject, here.

 

Brand (external identity)

This is your show-off stuff. It’s what everyone can see, touch, feel, hear, smell, try and, hopefully, remain faithful to. Keep in mind that there are plenty of competent branding agencies out there that can help you attain a flawless identity, so turn to them before you set foot on the new market. There’s no universal recipe for external identity, this is definitely going to differ a lot from one brand to another. The only mention we have here is that your appearance must be authentic, purposeful and it must really, really represent your brand.

  • Logo & icons – design a logo that speaks about your brand, so that people can easily recognize it from miles away. Remember that your logo will stick with you ’till the end of days, so go for something that’s evergreen, something you consider your nephews’ nephews could still be proud of (if you’re lucky enough to last that long).
  • Colour palette – two or three complementary colors for your brand identity, tops. Do your research on the meaning of colors before choosing your palette and avoid picking a specific color only because it’s your favorite or because Pantone decided it’s the color of the year. Needless to say why.
  • Fonts – just trust your designer for this one 🙂
  • The tone of voice – bold, friendly, calm, funny or straight forward, that’s your call. Just be sure to keep that tone all throughout your entire communication, on all channels, at all times.
  • Website/ app – these two are the most popular components of your brand so they must look and work flawlessly and they must express everything your brand would want people to know, even if it were for everyone to go blind, deaf or illiterate tomorrow.
  • Packaging & stationary – you know how dogs “mark” every tree that comes their way? It might sound almost rude, but they do that for a reason. Everyone approaching a “tree” you went by must be able to recognize your brand. So go wild and print your logo on everything that’s connected to your brand: flyers, banners, advertising materials, pens or T-shirts or promo products, on the carton boxes, paper or plastic bags you ship your products in, on your business cards and in your email signature. The more visible you become, the more rapidly you’ll become famous.

2. Target audience

You need to decide who’s going to buy your products before going live. It’s a bad idea to go A/B testing only after you’ve launched your website. Building your buyer personas is something you need to do as early as possible so that you’ll know what to sell to (and how to communicate with) each type of customer.

Although there’s no particular number of profiles you should build for your customers, we recommend that you keep your profiles between 2 to 4, depending on your company’s profile and your product portfolio. When building your buyer persona/s, you should take into account that everyone has a rational side and an emotional side. Combine these two and you’ll get pretty accurate user profiles.

  • Rational side – the demographics. Start by putting a name on your persona. Then add the age, gender, location, marital status, occupation and estimated income.
  • Emotional side – the reasons to buy. This part is more sensitive, but it’s also more likely to be the one to help you target your audience correctly. The emotional side includes the user’s personality, needs, goals, preferences, pain points, motivation and spending behavior.

 

As soon as you’re done profiling your customers’ profiles, you can start planning the way you are going to communicate with each segment and you can decide the product selection you are going to include in your offers.

3. Value proposition

The promise of value you make to your customers is also the main reason why they buy from you and it’s what makes them decide if they’re gonna’ stay faithful to your brand or slam the door in your face and trash-talk you in public.

Your value proposition is the sum of two factors: your values and your key differentiator/s, and it should answer these questions:

a) What problems can my products/ services solve? What situations can my products/ services improve?

b) What are the main benefits that people get from buying my stuff?

c) Why should anyone choose me instead of my competitors?

If you need guidance in figuring out what are the hottest benefits, here are the main reasons why people shop online:

  • it’s time-saving, easier, convenient and more fun
  • special offers & discounts
  • good-quality customer service
  • free shipping
  • they can pick from a wide range of products

 

We recommend you to use the ERRC framework to figure out what you can eliminate, raise, reduce and create through your products or services, which will help you answer to question a).

4. Platform

This is a fervent discussion, as store owners usually don’t know what platform would be best for their webshop, and platform providers would usually sell them any crap, just to win +1 in their database.

When it comes to picking the right platform for your web store, the question is: SaaS or Open Source? It really depends on your business’ needs, time, resources and budget.

We wrote this article on Wall Street (it’s in Romanian) where we described the main qualities of both SaaS and Open Source platforms, which we hope you will find useful. Also, because we’re good guys, we’ll leave you here a sneak peek from our workshop, where we listed the ups and downs to each platform solution:

SaaS vs. Open Source platforms – How to e-Commerce workshop, theStartups.eu

5. Communication strategy

Now that you know what your customer profiles are, you can build your communication strategy: how are you going to communicate with each segment, how are your offers going to look and sound like for each type of customers, how often are you going to interact with them and what channels are you going to use to reach out to your customers?

The best way to keep up with your communication strategy is to build a media plan, where you set your objectives. Go from big to small, starting with the major holidays of the year (e.g. Christmas, Easter etc), then scale down to global & national events over the year (e.g. Valentine’s, Mother’s Day, back to school, Halloween, Black Friday) and end it with your own specific campaigns.

Here’s a good example of how your media plan could look like, build on a “fill-the-slots” matrix:

example of a media plan matrix to help you build your campaign plan
Media Plan – How to e-Commerce workshop, theStartups.eu

 

Building a communication plan is teamwork. It requires the attention and expertise of the Category Manager, Marketing manager, communication specialist, art director and last, but not least, the support team. Speaking of the latter, the support team must be perfectly aligned with your brand identity, communication strategy and tone of voice, as well as with the products you sell and/ or the services you offer.

Also, you need to make sure that your support team is constantly informed about all the news and major changes in your organization. You don’t want them to look like fools when they learn from your customers that you’ve just launched a new campaign.

6. Budget

Typically there are three major elements that swallow the biggest chunk of the budget of an e-Commerce business.

For example, a budget plan for an average of three years of activity is going to look like this:

  • the staff (salaries, bonuses, shares) – an estimated 7-9% of the budget goes to them
  • sales & marketing – that’s another 8-9% of your budget
  • transportation & logistics – 4.5-5% of the budget
  • IT development & technologies (tools, systems & platform) – 2.5-3%

 

Your budget is not only a way of moving money around to ensure a stable cash flow. It’s a complex structure that needs to be aligned with your business strategy and it must display a realistic picture of your business for the next 1-3-5 years.

The budget relies on two components: assumptions and previous results. If the business is new, then assumptions are all you’ve got. You need to set your target and use it to estimate your profit & losses, investments in teams, tools, technologies and partnerships, your income, expenditures and risks. As you move forward in your activity, you need to compare these assumptions with the actual results and make the proper adjustments on the go, in order to keep control on your budget and to be able to act on time if major changes are required.

Decide on the business model you are going to adopt, and here’s where you should know that the profit can either come from the results of the sales you generate or from the performance of your marketing activities. Depending on the model you choose, you’ll know if most of your investment is going to go into your portfolio or into branding and communication.

Here’s an overview of a 3-years budget. You’ll notice that the most expensive areas are highlighted in red. Please consider that this is just an example, and each line from this image requires it’s own calculation logic, dependencies and formulas.

Example of budget overview – How to e-Commerce workshop, theStartups.eu

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As you can see, the birth of an e-Commerce business is a complex process. It’s up to you to decide if the labor is going to be hard & painful, or if you’d rather benefit from a clean start in a controlled, safe and professional environment.

Don’t play your business by the ear. Do your research, ask for advice, then ask for second and third opinions, be opened to hearing and embracing different perspectives and make sure you have all the resources and wisdom to run an e-business.

Authors: Vlad Diaconu, Andreea Mares

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