Though Aussies historically prefer brick-and-mortar shopping1, the pandemic has forced business owners to rethink products, services and how they interact with customers.
More than one million new households shopped online between March and September, according to Australia Post. The organisation is now prepping for a record-smashing Christmas period with more online sales than ever.2 Small businesses can’t afford to ignore the likelihood that at least some customers will retain a taste for shopping from their couches or phones.
That’s why our latest instalment of the Amex Idea Exchange Master Class Series, Digital Dollars, focused on helping small business owners understand e-commerce, tap into new revenue streams and plan ahead. Our helpful presenters led the way:
- Lielette Calleja, founder and director of All That Counts, which advises small businesses on managing their cloud technology and accounting management needs
- Mark Bouris, businessman, author and the executive chairman of Yellow Brick Road, which provides financial planning and wealth management
Mark and Lielette talked through everything from e-commerce basics to more advanced planning and forecasting, including some meatier questions from viewers. Here are some of the highlights from their discussion of the “whys” and “hows” of e-commerce.
Start by understanding the metrics
All businesses need some sort of metrics to stay accountable and decide where to invest resources. But with so many small businesses struggling with cashflow, it’s important to understand the e-commerce metrics that will improve customer experience and help you anticipate business stress.
As Mark put it, e-commerce metrics and cashflow planning go hand-in-hand. For those doing business online, how you track your digital dollars will significantly impact your overall forecast. But what exactly are some of the metrics you should be considering and why do they matter?
Lielette cautioned that there were probably a hundred different metrics and each business has unique measurement needs, but gave a quick crash course on some of the most crucial ones. Perhaps the most foundational is the conversion rate of your website:
(Number of visitors / Number of conversions) x 100 = Conversion percentage
“Again, every business is different,” explained Lielette. “But this can act as a rough template. The industry benchmark is about 10% which should give you a starting place.
“After all, there’s no point in people coming to your site if they aren’t converting.”
Focus on customer experience before, during and after the sale
Lielette warned that business owners were mistaken if they thought e-commerce would simply eliminate traditional overheads. Instead, these tend to be replaced by different overheads specific to digital channels.
One example is replacing foot traffic with a digital presence, which requires ongoing digital marketing, including social media and content marketing. Another is creating a seamless customer experience that prevents customers from simply switching to a different website if they encounter a speedbump in the buying process.
Both presenters agreed that customer experience held greater importance without a brick-and-mortar presence. In a traditional shop, an attendant can easily direct the customer to what they need or even sell them a different product if the desired one is unavailable. In an online environment, customers rely on social media, search engines and websites to find what they want, making it a far more transactional and competitive landscape.
Lielette had some quick tips for keeping customers happy throughout the buying journey:
- A fast, responsive website. “People have a short attention span and will leave if a page takes longer than a few seconds to load.”
- A compatible shopping cart. “Businesses’ websites and shopping carts need to be compatible, and they also need to integrate with your accounting system.”
- Lots of payment options. “It’s critical to let customers pay their way.”
- Clear next steps. “After a sale, who doesn’t love being able to check the status of their order online? And make it easy to ask for help – keep your contact number or email address front-and-centre in communications.”
- Ongoing engagement. “Keep promoting, even after the sale. It’s not enough to send an email or posts on social saying ‘buy from us.’ You have to stay front-of-mind until someone is ready to buy – or ready to buy again.”
Build a well-oiled machine
Mark pointed out that successful e-commerce depends heavily on whether you’ve systemised processes. This will be especially important for businesses who rely on investors.
“When you’re selling items online, much of the risk tends to be in the execution,” he said, going on to explain that part of mitigating that risk means ensuring processes are systematic. Everything needs to be written down and repeatable, even if you aren’t there.
“This is important for investors – they need to know that this business can keep going with these processes in place.”
Keep stock control and forecasting under a tight watch
When always-on marketing needs to replace foot traffic, effective promotion can backfire if businesses don’t have the stock to meet demand.
“Data is to stock control as cash is to cashflow"
said Lielette. “Use the analytics: what are people buying? Are patterns seasonal? Are people returning a certain type of product?
“Depending on your industry, most businesses can’t afford aged product. That cash becomes tied up in your balance sheet.”
She advised frequent inventory counts and even investing in an inventory forecasting tool.
“A lot of people don't realise they can see stock levels in places like Shopify or their e-commerce systems. If that's not sophisticated enough, it's time to move to an inventory management platform that will automate this stuff for you and tell you what you need to buy.”
Depending on how quickly your products move, Lielette recommended weekly forecasting. She also recommended aligning this forecasting with cashflow planning, since the two tend to work hand-in-glove.
Regarding the latter, Lielette said it was important to remember that “profit is not cash and money in the bank is not all yours.”
She went on to emphasise the difference between budgets and forecasting, and that businesses need to forecast a best-case scenario, a worst-case scenario, and something in between.
“Don’t underestimate the cost of an online business.”
When asked about resources, Lielette pointed to a variety of free forecasting tools, including those on government websites and even free advisors. She also pointed out that accounting software can provide options for very small e-commerce businesses looking for cost-efficient inventory management tools.
“Still,” she warned, “any good advice will cost money.”
For the full discussion, metric formulas and slides, access the masterclass replay.
Takeaways
- Identify the metrics most important to your business and how to calculate them.
- Online businesses depend more heavily on marketing and seamless customer experience, so be ready to invest in them and factor those costs into your planning.
- Ensure you’ve systemised as many processes as possible.
- Lean on data, weekly revisits and various tools to help you forecast for stock control and cashflow.
1 Monash University. Shoppers return to bricks and mortar – but Aussie retailers missing out
2 Australia Post. Inside Australian Online Shopping: October 2020 update
