E-commerce is the biggest business story of the pandemic as companies shift from brick-and-mortar to online in order to stay in business. The pandemic has accelerated the shift away from physical stores to digital shopping by roughly five years, according to data from IBM’s U.S. Retail Index. Retailers need to quickly pivot to omni-channel fulfillment capabilities in order to meet the needs of consumers during this pandemic.
However, online sales change the economics of a business as it forces modifications in processes like health protocols, telecommuting, in-store pickups, home deliveries, and digital marketing.
According to an August 2020 McKinsey survey, more than 77% of Americans are trying new shopping behaviors during the crisis “including new methods, brands, and places, with the intention of sticking with them in the long-term.” Let’s look at common challenges for companies that expand e-commerce operations amid the worst recession since the 1930s.
Metrics And Margins
There are two critical metrics in e-commerce: customer acquisition costs and customer lifetime value. Not knowing either of these KPIs jeopardizes one’s bottom line. A company with high acquisition costs (relative to customers’ lifetime value) may not be a sustainable business. According to e-commerce provider Nexcess, customer acquisition can cost up to seven times more than selling to existing customers. A successful online business must have less resistance in attracting consumers, otherwise it’ll run out of cash.
To grow a business, digital marketers must find profitable buyers online, as well as run promotional campaigns on affordable but effective channels. For example, a combination of high traffic, high conversion rates and inexpensive advertising on Instagram and YouTube can lead to high, profitable growth. Whereas in brick-and-mortar locations, businesses rely on foot traffic, brand awareness and traditional advertising to generate sales.
66% of Facebook users say they like or follow a brand on the platform, according to SproutSocial. And 80% of B2B marketing leads come from LinkedIn.
Large corporations such as Amazon and Walmart have benefited greatly from this new normal and the shift in shopping habits, making it tougher for smaller businesses to gain online market share.
Amazon reported sales of $88.9 billion, up 40% from $63.4 billion a year prior and well ahead of Amazon’s prediction of $75 billion to $81 billion.
Walmart’s Q2 earnings reported its U.S. e-commerce sales were up 97% – an increase attributed to more customers shopping online during the pandemic, stocking up on household supplies, and shopping for grocery items online.
This disparity between large corporations and businesses that are new to the e-commerce world makes entry into the space very challenging, at an already difficult time.
Motivating Stay-At-Home Employees
According to June 2020 research at Stanford University, 42% of the U.S. labor force work from home full-time. Unfortunately, employees often lose productivity at the house. According to Stanford’s researchers, only 51% of respondents worked at an efficiency rate of 80% or more.
That means salespeople aren’t calling enough prospects, staff members aren’t fixing operational issues, and managers aren’t attending to the needs of VIP customers.
“With work-from-home (WFH), it’s important for leaders to maintain high standards across an organization and ensure employees pursue excellence amidst changes in workplace processes and norms,” says Luke Acree, President of ReminderMedia, a marketing agency that specializes in acquiring repeat and referral business for clients. “In our organization, we teach four pillars of leadership: set a vision, motivate your team daily to move toward that vision, practice leadership by getting in the trenches, and hold your team accountable to help them achieve their personal goals.”
There can be many causes of lost effectiveness due to WFH. Managers have a responsibility to sustain a high-performing culture even if there are blurring lines in a home-work space. Kids, spouses, and roommates can cause interruptions too often. Internet speed can be slow. And it can be distracting to share a workstation with cousins or neighbors. Key solutions include outlining performance expectations for virtual teams, as well as suggesting WFH designs so that home life doesn’t interrupt during business hours.
“Virtual teams must collaborate from afar and there’s a temptation to accept mediocrity since it’s not possible to have physical meetings at the office,” says Acree.
Execution excellence, discipline, and effective collaboration are what differentiates successful online businesses who compete in the new norm. Consumers may have altered buying behavior but their expectations have not – they will always gravitate towards companies that over-deliver and meet their needs.