Starting an ecommerce business, or adding ecommerce to your existing one always sounds like a good idea. Given the growth rate of online businesses clicking at 10% per year or more, ecommerce is a valid consideration for a wide variety of reasons. Ultimately, the one reason that defines it as a good business decision is that it can make money.
There are many pitfalls that many businesses can fall into when venturing into the ecommerce territory. As you might expect, most online business fail to deliver. Because they are relatively easy to set up compared with their brick and mortar counterparts, the risk is lower and the loss is palatable.
If an ecommerce business has a good product and is competitive in the market, why would it fail? Most owners of failing online businesses have no idea how to answer this question. The answer almost always is that they “winged” the business. They may even have a beautiful website but forgot to implement the basics of business planning.
Very few business succeed without a business plan. Ecommerce planning is just as much a requirement although developing a plan for an online business requires a different approach. Sadly, if most ecommerce failures had established a plan starting with the following guidelines they would probably not have failed. Some may not even have ventured online as a result of understanding the challenge ahead of them.
Ecommerce planning begins with this simple approach to developing a plan for a predictable ecommerce business. Begin with the end in mind.
1. ESTABLISH YOUR REVENUE TARGET
If this is a new ecommerce site, be realistic. How much revenue do you need to turn over in the first year to produce a profit? What would you be comfortable with? I don’t know what a good number is because it depends on the product. ,000 might be a great number if you’re selling an e-book but might not carry your overhead if you’re selling physical goods that you have to stock and inventory. In any case, know your target. Let’s use ,000 for this example.
2. ESTABLISH YOUR SELLING PRICE FOR YOUR PRODUCT
A little research is in order to make sure your price is consistent with your competitors who are already selling on the net. You are always in a better position if you are selling unique products but we don’t all have that luxury. In any case, once you’ve established your price, you can by simple division know how many units you need to sell to meet your revenue target. So far, so good. For this example, lets use per sale.
Revenue / Product Price = # of Sales required
,000 / = 1000 sales required
3. ASSUME A CONSERVATIVE CONVERSION RATE FOR YOUR WEBSITE
E-Books usually have a conversion rate of 0.5 – 5 percent. More expensive could have lower conversion percentages. Also, and very importantly, how the visitor got to your site has a dramatic affect on the conversion rate. If the search terms that your site gets ranked for are very closely related to the product or services being sold, it is likely that your conversion will be higher. If you know personally some of the owners of competitive sites, broach the conversation and ask what a good conversion rate is. Whatever you establish, make sure it’s conservative (a low number). So now, you can calculate how many visits your site will require to meet your revenue target. Let’s use 1% conversion for this example.
Visits = sales required / conversion rate
Visits = 1000 / .01
The website needs 100,000 visitors to meet plan.
This is where the rubber meets the road. The challenge is to figure out how to get 100,000 visitors who need your products and services to visit your website. For many clients, this represents the 1st time they’ve been able to express definitive business goals and requirements for their ecommerce solution.
CHOOSE KEYWORDS THAT DELIVER YOUR TRAFFIC REQUIREMENTS
Your ecommerce solution involves a website that is optimized for keywords relative to your market. Basic keyword research will highlight whether there are enough searches in your business category to meet your goals. Choosing the correct keywords, ones that you know you can rank for is extremely important especially for start-up ecommerce sites. New sites won’t have the momentum to compete with the established players! Carefully select your niches (keywords) or you won’t get your site noticed by the major search engines and you won’t hit your visitor targets.
Ultimately your ecommerce solution needs enough funding to support a well thought out website and an on-going search engine optimization plan. Skimp on the SEO and the money you put up for the website will in all likelyhood have been wasted. Build the SEO into the marketing plan of your ecommerce site (or learn how to do it yourself) and your online business should be predictable and profitable.
By: Greg Newell
Posted: Aug 03, 2009
