How to build a successful eCommerce business

Selling online has never seemed easier. All you need is a mobile phone, an Internet connection and a way to deliver goods. And off you go.

Many people have launched social media shops because of this simple idea. We have all encouraged our friends to do so with their businesses. I know I have.

People and businesses have lost lots of money and time trying to replicate the success of Amazon.

While posting products online is easy. Building a successful online business is a lot harder than it looks.

High-level research points to logistics as the main challenge. But, it is worth noting that logistics only becomes a challenge when the customer has bought. There are many other challenges to be overcome before and after the purchase.

So what does it take to succeed online?

There are many ways to go about this. But, in this post, I want to lay the framework that I will frequently use in learning how to build better online businesses.

The eCommerce Sales Funnel (The Flywheel)

The usual sales funnel moves in one direction. Top to bottom. Mapped to the classical decision-making model (AIDA).

This is true for most traditional businesses. The common sales funnel also replicated in the design of large shops, with designed entry and exit of customers.

This classic funnel assumes customers will navigate through the process sequentially. It also downplays their influence with other customers. Thereby reducing their perceived power to increase or slow down growth.

The sales funnel for an eCommerce businesses looks something like this:

The main differences here are:

1.Bi-directional funnel at every point

Bi-directional here does not only mean the client can move backwards in the funnel. It also highlights the influential nature of customers to encourage or discourage others.

That means the eCommerce funnel has acceleration or deceleration built-in—a flywheel.

Either it will get easier and cheaper to get customers in the long-term or get harder and more expensive. Most eCommerce ventures fail because the flywheel grinds to a slow crawl or a halt. The cost of acquiring new customers becomes higher than the profits. Eating into their cash flow and driving them out of business.

2. Nested funnel (two funnels in one)

There are two distinct goals online.

• The first is to get the user to sign up or create an account. For repeat customers, this is the login process.
• The second is to get the customer to purchase something. How you design the flow between these two is crucial to your success.

PS: Some business attempt to unify these two funnels. There are pros and cons to this, more on this in another post.

3. Retention is critical

While all businesses aim to keep their customers and work towards it. Retention is crucial to long-term success for online businesses. Besides amplifying the flywheel as discussed earlier, a great retention strategy helps to:

1. Justify customer acquisition costs --> eCommerce shops get new customers via sales or discounts; so, they need to keep the customer to break even. Customers who only buy discounted products are terrible for business.
2. Increase Customer Lifetime Value (CLV or CLTV) -->In online shopping, first-time buyers spend a little money as they test the service. The more customers buy and have a pleasant experience, the higher the value of money they are willing to spend.

To better funnels & better businesses

In future posts, I will go through each step of the funnel and the relevant tools to help optimise each step of the process and check how some local websites are going about their funnels.