Do you realize that in 2015 U.S. ecommerce sales were flat for almost 20% of recently-surveyed retailers? Twenty percent may not sound too bad, except that in 2014 that number was less than 5%. Though 2015 U.S. ecommerce sales increased year-over-year, the growth was generated by a smaller percent of retailers, and Amazon significantly increased its market share.
What this means is that for many ecommerce brands, growth in 2016 will have to come from taking market share away from competitors.
All of us will have to continue to contend with Amazon’s impact – whether we’re Amazon merchants or not. And with that challenge comes aggressive price competition, commoditization and offering free shipping, among other things.
No doubt there will be opportunities to take advantage of, for example improved cross-device marketing and we’ll see the rise of mobile commerce. However, your competitors will be taking advantage of these opportunities too.
What’s needed is a way to identify and leverage unique opportunities for profitable growth, to leverage competitive advantage and to differentiate ourselves.
What Can You Do Differently?
Product differentiation is among the most impactful opportunities to pursue. However, it can be time-consuming and expensive.
There's also a massive opportunity for omni-channel retailing brands (the ability to shop, buy, pick-up and return online and in stores) but is still in its early stages.
That’s why so many companies are now competing on customer experience.
The best way I’ve found to identify and take advantage of opportunities for growth, differentiation and competitive advantage is by integrating the strengths and methodologies of transactional, retail store and CPG marketing models. I call this process “omni-model.”
Unfortunately, many ecommerce businesses don’t use this approach. Not because it’s too much effort. But because they haven’t worked across the business models extensively enough.
The following examples show how both small and big omni-channel ecommerce brands do this well.
Amazon, Home Depot, and Lowes
Working with a $20MM ecommerce brand that competes with Home Depot, Lowes and direct competitors on Amazon, we quickly conducted benchmarking, gap analysis and high-level market and competitive overviews.
We identified previously unidentified opportunities—including short-term and longer-term scalable “omni-model” opportunities.
Here’s another example of the omni-model approach. Working with a client selling in ecommerce and retail stores, we tested messaging on their in-store packaging and uncovered much bigger opportunities. Even though the research can be conducted inexpensively and easily, many ecommerce brands don’t test message platforms.
Though the testing was primarily for stores, we learned that ecommerce and retail store consumers had different purchase motivations, decision-making criteria and price sensitivity. Had we not conducted the research, we wouldn’t have had the opportunities to improve both retail store and ecommerce customer acquisition and profit margins by optimizing product assortments and prices.
How to Apply This to Your Business
1. Benchmarking Best Practices
Starting with benchmarking against competitors, you’ll identify, quantify and prioritize opportunities and strengths you can take advantage of short-term and weaknesses you’ll want to improve on over time.
As a result, you’ll know where to focus your gap analysis.
Benchmarking should include the following areas:
- channel mix
- channel-level performance and budgeting
- site performance such as page load speeds
- sales conversion
- shopping cart/checkout adoption and abandonment
- new vs. repeat visitors/customers
- mobile key performance indicators (KPIs)
- margins and operating efficiencies
For this, you need to analyze your website traffic, orders, average order value, revenue, spending, contribution margins and return on ad spend (ROAS).
To improve results, one initial step should be addressing major channel mix and budget allocation variances compared to your competitors.
This client was over or under allocating budgets across channels
When reporting channel results, it’s best to include contribution margin volumes with ROAS. Doing so, I’ve found low-hanging fruit reallocating existing budgets across marketing channels.
This client was under-spending in SEO and over spending in SEM
Not only can you optimize spending across transactional channels, but you may also be able to redirect budget from transactional channels to awareness/brand-building channels. As a result, you can improve differentiation and ROAS by increasing branded searches and direct traffic
2. Gap Analysis
After benchmarking comes Gap Analysis, with a focus on the best opportunities identified in the benchmarking.
Using “Competitive,” “Optimization Opportunity” and “Needs Development” rankings across user experience, marketing, merchandising, pricing, business intelligence and other ecommerce / omni-channel best practices, you’ll learn how to attack the opportunities identified in benchmarking.
For example, with the same $20MM ecommerce brand mentioned earlier, newly identified opportunities to attack negative variances were found via gap analysis. These included: marketing channel optimization, SEM landing pages, product strategies, merchandising, user experience, SEO and content strategies.
Numerous optimization opportunities were identified based on benchmarking
3. Market Analysis and Competitive Analysis
Market and Competitive Analysis complete your assessment, and often identify opportunities over-and-above those found with benchmarking and gap analysis.
Why? Because market analysis identifies growth opportunities through new channels, market segments, products and market penetration, and also identifies why different target market segments purchase specific products and how they shop.
Competitive analysis helps to identify where you’re outperforming your competitors, and how you can attack where competitors are outperforming you.
The following illustrates how to incorporate analysis used by CPG brands and retail stores – something that many ecommerce brands don’t do today.
“Category development indexes” and “brand development indexes” are used by CPG brands and retailers to identify where they over and under-perform their competitors. Shown in the chart below is an example of how. Working with an ecommerce brand, we uncovered scalable opportunities by identifying the product categories ecommerce brands performed better with than big box retailers, and the categories where the client out-performed the other ecommerce pure plays.
We identified product competitive advantages by comparing client sales with direct competitors
The competitive analysis we did for the client also identified opportunities to compete better with direct competitors and retailers through content, brand-building, user-experience, SEO, SEM and merchandising strategies.
While the client took advantage of existing competitive advantage, we addressed opportunities for additional competitive advantage
Scalable Strategies That M-o-v-e the Needle
At the end of the day, whether your priorities are growth, competitive advantage, differentiation or efficiencies, you most likely will not be able to make a significant impact with only shorter-term tactics.
That’s why you need scalable strategies. One question to ask yourself is, will you develop the strategies top-down or bottom-up?
Fortunately, the integrated “omni-model” approach gives you a bigger toolkit with which to develop strategies.
Benchmarking, gap analysis based on benchmarks, market, and competitive analysis will uncover opportunities to take advantage of the strengths of CPG and retail store marketing models for ecommerce.
For example, working with a client last year, we developed and implemented the following optimization and new strategies:
- Ecommerce and retail store-specific
- Customer journey-based acquisition
- Product, merchandising and pricing
- User experience
- Awareness and brand-building
- New markets
While working with an ecommerce brand with mostly larger ecommerce competitors, we found that differentiating products with new “driver items” was key to long-term competitive strategies, and to help offset increasing price competition.
Focusing on the four most important product categories, based on financials and opportunities to differentiate, we began line-filling with four new product assortments each.
Though I can’t reveal all the tactics, I can say we launched new products in each of the top categories that allowed us to compete on price (with decent margins) as well as offer exclusive products.
In top-down planning, strategies dictate to a large extent what opportunities and tactics you’ll pursue.
Using benchmarking, gap analysis, market and competitive analysis, you’ll have a good start on tactics.
How might this look?
Working with a client who prioritized ecommerce customer acquisition and sales conversion strategies, we implemented tactics such as prioritizing cross-channel marketing and reallocating resources for driver items, new SEM tactics, and tactics for the two biggest opportunities in the conversion funnel, all identified with the assessment process discussed above.
We also allocated resources to optimize landing pages for these specific ad groups.
For products with which the client had a competitive advantage, we leveraged existing SEM opportunities and started to fix other potential opportunities
We also took advantage of competitive analysis findings of where the client had a competitive advantage (such as product selection, price, and exclusivity) for SEM ad copy. For example, instead of saying "biggest selection" in their ads, we would specifically say "X% more selection than brand XYZ” or “X more (insert product name) than brand XYZ.”
To increase sales conversion, in addition to addressing cart and checkout abandonment, we focused on optimizing content pages, navigation to product detail pages and the product detail page template.
These were the two levels in the funnel where there was the biggest variance between the amount of traffic and the value of the traffic. So, we focused on increasing conversion from content pages and getting more traffic to PDPs.
By comparing traffic and sales in the conversion funnel, we identified the two best opportunities to increase sales
Your Most Strategy-Worthy Tactics
“Strategy-worthy tactics” are what I refer to when there’s a handful of related tactics (or more) that together can form a scalable strategy, such as improving efficiencies, optimizing existing strategies or new growth strategies.
After conducting benchmarking and gap analysis for a $500MM omni-channel brand with ecommerce and retail store sales, we uncovered sixty new tactical opportunities, including user experience, customer acquisition, merchandising, social, mobile, omni-channel, SEO and SEM.
Then, we grouped like-tactics, as shown below, to uncover as many as nineteen potential tactics in one group, with each rank-ordered based on the impact on the client’s strategic objectives and goals.
Combining like opportunities enabled scalable strategy development
By grouping the sixty tactical opportunities, we developed six strategic paths. The strategic paths maximized our chance of finding successes while minimizing the risk of having all our eggs in a couple of baskets. The paths also made scalable long-term strategies possible.
Working bottom-up, we developed efficiency, growth and profitability ecommerce and omni-channel strategies
So, Why Not Just Start with Strategies?
Based on the established strategic objectives and goals, we could have started by developing a list of potential strategies and prioritized them, for example, new customer acquisition.
But there were a handful of reasons why we worked from the bottom-up….and benefited from doing so.
Reason One: Had we started with a customer acquisition strategy instead of identifying opportunities first, we would have most likely ended up with a more narrowly defined, risky strategy. This would mean we were not taking advantage of related opportunities (such as retail stores), and only focusing on existing market segments in which the client already had a large market share.
Reason Two: We could have missed some of the best opportunities, including quick-wins.
Reason Three: The better way to find the best opportunities is to simultaneously test multiple strategies with a few tactics from each one.
Reason Four: We were able to take advantage of integrating transactional, retail store and CPG marketing models. For example, by developing a “driver items” strategy, we were able to develop customer journey strategies based on market segmentation, brand and channel preferences.
Reason Five: Another benefit from using more holistic strategies, built from the bottom-up, is we could continue to optimize over time. For example, by taking advantage of market segmentation, with each segment’s primary purchase motivation mapped to keywords and keywords mapped to landing pages, using Google AdWords we enhanced the use of snippets.
Differentiating and brand-building in a transactional channel
What to Have in Your Competitive Opportunities Toolkit
This post is intended to be a comprehensive, actionable introduction to how you can identify and take advantage of unique competitive opportunities through an assessment process that informs tactics and strategies.
If you have further questions, please feel free to contact me. Pending your level of interest, I can provide you with some if not all, of the following.
- A step-by-step punch list to identify unique opportunities and leverage the strengths of integrating CPG, retail store, and transactional models
- Templates for:
- Gap Analysis
- Market Analysis
- Competitive Analysis
- Channel Management
- A matrix of “Omni-Model” methods, tactics, and strategies including the following;
- Category Development Indexes
- Brand Development Indexes
- Driver Items
- SKU efficiency