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June 22, 2021

Ecommerce Strategy 101: Choosing a Platform & Real KPI Metrics

Brian Dearth
Brian Dearth
Head of Strategy and Growth
choosing-a-platform-real-kpi-metrics

In 2021, there’s nothing more important than an eCommerce strategy that finds that perfect balance between content, commerce, and community. This is true whether your company is just getting started with eCommerce or has proven itself to be a leader in online sales (even omnichannel experiences). No matter the size of your business or your years of experience, these basic principles are always going to apply.

Continuing with this three-part series, let’s explore the final component of a robust eCommerce strategy: Platforms and Tracking. Taking what has already been explored in parts one and two, keep in mind the importance of people and culture as well as process and budgeting as the discussion shifts to choosing a platform and establishing real KPIs.

Choosing a Platform

Why cover platforms first—because the type of platform, the level of effort of the project (customization), and thus the criteria for success may be different depending on the platform. But let’s not get ahead of ourselves—technology is never REALLY the main factor in having a successful (or unsuccessful) eCommerce implementation. Today, there are more eCommerce platforms than ever to choose from. The most important aspects still drive back to the business basics . . .

But why choose a platform before establishing KPIs? Well, before you can establish those key performance indicators, you must first choose the platform that best suits your business model. That’s because many of the factors that go into establishing those KPIs depend on the eCommerce model you are using—each platform has different strengths and weaknesses in delivering against specific models, which means each eCommerce model/platform combination demands unique KPIs that can’t be determined until the platform is chosen. 

The Business Model

In today’s day and age, simply saying you want to move your business “online” is no longer enough. There are many different types of business models to choose from, and the choice is an extremely important one. The most common models are B2B, B2C, D2C, marketplaces, and hybrid models, each with its own set of unique attributes and go-to-market strategies for your business. No one model is inherently better than the other, because it’s all about your business goals, your vision, and the eCommerce strategy that will enable it. 

Following this same line of thinking, many eCommerce platforms are better suited to a few unique business models. Some may cater to B2B, while others are better choices for “going direct” with a D2C model. It all depends on the platform itself. For example, VTEX is an expert at Marketplaces. Adobe Commerce has a sweet spot in B2C or B2B multi-country, multi-language, multi-currency model. And finally, others are going beyond just eCommerce. Now that eCommerce 3.0 is here (more on that in the upcoming post on eCommerce business models), there are platforms that have combined capabilities for B2B, B2C, D2C, and Marketplaces that also include OMS, Marketplace, CMS, and PIM. This provides a seamless end-to-end customer experience. Ultra Commerce is one of the up-and-coming platforms in this space.

Deciding on a platform must be based on your chosen business model—an imperative component of your eCommerce strategy. 

The Strategy

Once you’ve chosen a business model, next is your eCommerce strategy. To best define how to approach these, here are some questions you should answer: 

  • Is your site heavily transaction-oriented or is it more content-driven?
  • How much does community play into your future plans or do you have a community that you want to operationalize? 
  • Who is the audience you're targeting? 
  • Based on the above, what categories make the most sense considering the community and your target audience?

Notes on categories: if these are more “technical” products, such as in automotive/powersports aftermarket, performance wear, and gear for outdoor use(hiking, sailing, skiing, etc), content to contextualize the product is often required.

In the end, this kind of brainstorming will lead you right to the front door of your business strategy, and it will help make each of the following steps more straightforward.

The Technology

How forward-thinking do you want your eCommerce platform to be? Here are some additional points you’ll want to answer: 

  • Do you want maximum development flexibility with things like Headless, Microservices, and APIs?
  • Or do you want an all-inclusive, template-based approach?

Some platforms today offer additional capabilities over and above the core eCommerce engine, such as order management, PIM, and lite CDPs - but with that being said, advanced technology doesn’t always fit with every audience. 

Defining the above and how that technology fits in with your business model and strategy will be crucial.

The Internal Capability

While it might sound obvious, it’s still worth saying: your business can’t do this alone. You can’t do this alone, either, and it’s more than just people, too. Key questions to answer here are the following:

  • What do you have in place for People & Process?
  • Does your internal development talent have the bandwidth and experience to execute the required developmental needs?  
  • Do you have solid program management that could drive an eCommerce implementation from A to Z? 
  • Do you have other platforms that need to be integrated, like an ERP? 

The recommendation here is to not cut corners by trying to do everything with an overwhelmed and overworked team. Work to your strengths and source what’s needed as needed, to accelerate your execution. 

Platform Pricing

Then, of course, there’s the cost. As with most resources, your eCommerce platform will come at a cost. Like the above, here are questions that you’ll want to answer to help you make your decision: 

  • In licensing your eCommerce platform, do you want to host or use a SaaS platform? 
  • Do you want to pay based on a percentage of GMV (gross merchandise value) or banded levels of AOV (average order value)?

 

Would you like to learn more about this topic?

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KPI Metrics

We could go on and on about the topic of KPIs, but in the spirit of brevity, we have locked on five that you should consider regardless of your eCommerce model.  And as a quick Google search for “eCommerce KPIs” will demonstrate, much has been written and while there is indeed overlap, overall alignment is lacking.  

Described below are the top KPIs to track. One you may not have thought about but it has huge ramifications for all eCommerce models. And in the end, you will likely agree that there is really only one in this list that really matters . . . 

Conversion Rates 

Without a doubt, conversion rate is the top KPI from an eCommerce perspective. 

Conversion rate is the number of visitors that take action on your website, divided by the total number of visitors. That action might not be a sale but could be an engagement measure such as a signup, inquiry, account creation, etc.

At its core, conversion rate is indicative of how aligned your business strategy is to your eCommerce experience. If conversion rates are increasing, you are likely seeing improvements in most of your other KPIs. This is easily influenced by focusing on conversion rate optimization—a more focused approach to site optimization. 

Average Order Value

Average order value measures the average amount of money spent by customers per order. Increasing your AOV can be one of the easiest ways to boost revenue. If you are receiving more money from each customer, you can afford higher customer acquisition costs while still maintaining net-profit goals. 

Additional insight and detail on website personalization can be found here: Website Personalization: Real Examples To Improve Your User Experience. 

Churn

Churn rate is a metric to track the turnover of your customers. It measures the number of users lost over a given period of time. It is directly connected to cart abandonment as eCommerce consumers migrate to mobile. Reducing the number of forms it takes to complete a purchase and thus optimizing the checkout experience is critical to preventing/reducing churn.

The simplest formula to calculate the churn rate is:

(number of churns during a certain period) / (number of customers at the beginning of that period) x 100 = churn rate %

Whatever your churn rate is, it’s important to measure and work on strategies to delight your customers when they’re around. As the old adage says: it’s always easier to resell to a current customer than to get a new one.

Site Speed

Nearly 70% of customers have stated that page speed impacts their willingness to buy online. That is why this is a KPI worth tracking. Site conversion rates drop by 4.42% with each second increase in load times on-site. 

Additionally, the highest eCommerce conversion rates come from sites with load times between 0-2 seconds. 

The best digital commerce experiences are on sites where load, search and images have been optimized for commerce.

Net Profit

From a business and bottom-line perspective, the only KPI that really matters is net profit. After all, this is the KPI that should support your business strategy and overall digital commerce roadmap.  Simply stated, this is the total money left over after subtracting all business expenses, which includes taxes, depreciation, and interest expense from total revenues received. 

Nike is a good example of a brand that effectively splits its portfolio across brand.com and retailers, with its higher-margin lines exclusive to its own brand platform and lower margin, volume driving lines also available at retailers and retail partners online stores. Andy Campion, Nike’s CFO said in an earnings call that fulfilling demand through Nike.com generates nearly twice the revenue and significantly higher margin on each transaction than through the wholesale model.

This is a great example of an eCommerce strategy in action and tracking KPIs aligned to the business objectives of that strategy. The difference in the channels is striking. And as long as Nike tracks these metrics, you can be assured that the profits will flow.

eCommerce Strategy 101: Conclusion

When all is said and done, your eCommerce strategy should be both aspirational and specific. It should focus on external customer experiences and your internal culture and people. It should encompass everything from your budget to your business processes, and finally, the technology platforms that enable it along with the KPIs to measure its success.

Vaimo believes that brands are much more than just the sum of the products and services they deliver. If you have questions about developing a robust eCommerce strategy for your company, we’d be happy to help.

To learn more about our expertise working with many of the world's top brands, reach out today.

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