Every successful company starts with a simple but vital concept: brands must know where they are in order to achieve their target. To develop an eCommerce development plan, brands must assess their current position on their growth path. A clear understanding of your current position can assist you in deciding which route to pursue and what your priorities should be.
We have identified four phases of the eCommerce growth cycle based on our extensive research and discussions with product leaders, managers, and founders of eCommerce businesses. Early-stage (0-1 million), Scale-stage (1-5 million), Consolidation-stage (5-25 million), and Expansion-stage (25+ million) funding. Each stage has a distinct set of objectives, necessitating using distinct strategies.
Typically, the initial stage or early stage is the most difficult. Numerous obstacles exist, including product development, inventory limits, brand playbook formulation, and tech stack selection. Venture capital-backed businesses are diligently meeting these expectations. Conversely, Bootstrapped owners have their own challenges.
1. Construct a defendable offering and get your first set of clients
The majority of businesses at this point will be required to overcome the obstacle of market acceptability and seek a niche opportunity. Do not overextend your financial and time resources.
2. If your argument supports returns, raise funds
Monitor your return on media expenditure if you are attempting to raise capital. All too frequently, businesses spend more than required to progress their KPIs. If your Cost Per Acquisition or Return On Advertising Spend is not where it needs to be, you should slow down and address these issues before proceeding.
3. Focus on client acquisition while maintaining cash flow control
While paid marketing is the primary growth engine at this time, it is necessary and prudent to establish channels that permit organic traffic so long as you produce excellent content for your prospective consumers.
At this point, the emphasis should be on creating a devoted client base and a market presence. Some firms tend to address business issues via marketing. Remember that sponsored media is the megaphone for your brand. Your megaphone will struggle to attract customers if the brand’s voice is fragmented.
Facebook, pay-per-click (PPC), and email marketing are often the only channels used in Stage 1. Besides the Cost of goods sold (COGS), advertising expenditures are the highest item on the Income Statement (P&L). Facebook and Instagram are projected to account for 80% of the media mix in order to stimulate demand. In performance marketing, creativity is the most crucial lever to pull. Therefore, dedicate a portion of your media budget to content and design production.
If you’re just starting and don’t want to raise money for your company, you may develop an e-commerce brand by doing these six simple steps. Companies with financial resources may use these methods to expand their organic reach.
In general, your return on paid media should adhere to the following guidelines:
Excellent Zone (0 to 3 months): You are performing well. As the conclusion of the month approaches, move more quickly. Slow down as you approach three months.
Safe Zone (3-6 months): Caution is advised.
Risky Zone ((6+ months): It is a warning symbol for Danger Zone (6+ months). The founders will continue to fundraise.
As you go through stages 2 and 3, the significance of these indications increases. Since most direct-to-consumer (DTC) brands trade on EBITDA, establishing a solid foundation in the $0 to $1 million revenue stage may help generate substantial value in succeeding stages.
You have successfully completed the most challenging portion of the process and are now prepared to go on to the next step: developing your brand. It would be best if you had achieved product-market fit by now. This indicates that the number of new consumers, recurring customers, and revenue will increase. Here, profitability is key.
The channel mix is the same as in stage 1, but a more established media strategy supports it. After $3 to $5 million, creatives, audience segmentation, and message become more manageable. The relevance and significance of influencer marketing increase. Utilizing paid media to amplify influencer or user-generated content is a sensible approach.
In this industry, the following alternatives are accessible, emphasizing online platforms.
From design to inventory, you should have a birds-eye perspective of everything. Demand planning should always be at the forefront of your thoughts, mainly if your suppliers demand 90 days or more. Stage 2 will need brand leaders to develop their organisational structure, and great brands are concerned about being flexible and agile.
This phase has the greatest rate of failure. At this moment, the notion of scaling seems like an exciting challenge. There are times when companies seek expansion too aggressively and hit an inflection point, and it is not undesirable. Knowing when diminishing returns will occur may be useful, as it enables you to reduce your efforts and then increase them again.
Wholesale and retail are getting increasingly profitable. Once a brand’s sales hit $10 million, the strong foundations will begin to bear fruit, but the organization’s mechanics will change.
Simply monitoring numbers is insufficient; action is required. The importance of loyalty programs, community building, exclusive items or features, and enhancing the consumer experience by providing individualised alerts, material, etc., grows. Invest in brand loyalty and enhance consumer involvement on direct channels such as the mobile app, social media, and the community.
At this juncture, examining how CAC will decline with time is essential. This is uncommon among digitally equipped businesses. CACs increase at the channel level and channels degrade with time. Cohorts run the danger of becoming stale if the product catalogue lacks diversity or retention efforts are insufficient. Over time, the blended CAC follows the leading channel.
Brands should also begin to watch copycats in the marketplace. When you reach stage 3, which is difficult to achieve, you will witness product imitations of your brand. There are methods for escaping velocity and skipping to stage 4.
The consolidation stage is vital; however, most businesses get stuck here. Over ninety percent of e-commerce companies are in stages 1 and 3. E-commerce in general, DTC in particular, is very fragmented, and the long tail grabs the vast majority of businesses and brands.
As the issue of consolidation enters the discussion, there will undoubtedly be a great deal of M&A activity in e-commerce in the future. In the second phase, there will be lots of activity, but small holding companies will head it. The most substantial opportunities will be identified in stage 3, and companies in stage 4 will likely acquire stages 2 and 3.
In this phase, organisations that have made significant progress in implementing their business concept consolidate their revenue and staff growth. A successful business model enables the company to contemplate more ambitious objectives, such as globalisation, development into other product lines, and the hire of more personnel.
Here, businesses will use a diverse channel mix. However, corporations can spread their risk over 8-10 channels. Stages 1-3 necessitate that brands be millimetres wide and miles deep in each aspect. At level 4, players must stretch out and delve deeply, and they must have the persons, processes, instruments, and friends essential to support this growth.
And now your new product line or efforts fall under the heading of early stage. Have a staff capable of managing your first product and beginning from scratch. Your new offering may be a novice, but you are not. You would have mastered e-commerce by this point.
Now that you have mentally traversed the full lifetime in 10 minutes, we are certain you will have many questions about strategies and tactics at each stage, which will be addressed in our subsequent blog postings.
At Apptile, our goal is to empower you to create personalized experiences that showcase your brand in the best possible light irrespective of your business size or budget.
Get started now and create stunning mobile apps in seconds without any coding. Book a demo with our team to see how Apptile can help you transform your business for the mobile era. We would love to hear more about your brand’s mobile app vision and help you bring it to life. Also, follow us to stay ahead of the eCommerce game and join the conversation today!