At the Department Store End of the Scale:
Department Store sellers stock EVERYTHING. Like a traditional high street department store their website is packed with all kinds of different products, but even more products than the traditional department stores could ever possibly stock. So John Lewis is less of an online department store than Tesco, Amazon or Next. The aim of firms at this end of the scale is to become their customers’ go-to destination every time those customers think of buying online.
In the Middle of the Product Range Scale:
The businesses in the middle, therefore, are not the obvious place for the consumer to go to for what they want. So they must work much harder to differentiate themselves and ensure they build and retain a good customer base and/or a strong brand.
However many products you choose to stock, you should edit those products for your customers – have a basic, better, and best of each thing – and nothing more. Consumers really appreciate being helped to find the right option. Plus it will help you keep inventory down.
So at either end of the scale your strategic plan is fairly straightforward: every decision you make is tailored towards seeing how well it fits with your overall proposition. However, it’s VERY hard to start off as a Department Store. These e-commerce businesses have grown so widely in order to maximize their customer base and brand power – so it’s almost impossible to enter the market here.
You should now be able to see which of the seven e-commerce Business Structures your business should fit into. That’s great, because now you know the foundations you are building your business on and that makes all the strategy decisions to come much easier.
You Know What You Are: What next?
Unfortunately, just knowing what you are isn’t enough: you now need to differentiate your business from your competition.
Differentiate – Find Your USP
There are millions of e-commerce websites that your prospective customers can buy from. There are probably hundreds of thousands of e-commerce websites on which they can buy similar products to yours. So you need to create a reason for them to buy from you – and to keep buying from you; something that differentiates you from all the other websites out there (and from the shops and catalogues they could buy from too).
By differentiating yourself you create a Unique Selling Proposition (USP) for your business, the unique reason customers will keep buying from you rather than anyone else. For your USP to be effective, you need to be really good at whatever you choose to differentiate in, be better than the competition: you need to be ‘best in class’
In the 1960s, Michael Porter defined three generic strategies for business:
Cost (how well in control of your costs you are, which relates directly to how much you charge)
Niche (a customer group you will focus on)
Differentiation (products, service, brand, customer intimacy)
It is still true today that every business needs to decide on which of these three it will primarily focus on, but in the 21st Century no company can afford to ignore their cost base or not understand their core customer base. So a USP needs to be more than just one of these three generic strategies.
Saying that, the three generic strategies above are a good place to start, and it’s crucial to understand if either of the first two is important to your business.
Take a look at your sector. There are sectors filled with ‘commodity’ products – here you have to be price competitive (think TVs and Laptops). Now that we can easily sell globally, even the most specialist market is big enough to have multiple e-commerce sites serving it.
Are you all about getting the costs under control so you can beat everyone on price (see Tesco)?
Are you going to focus on a single customer segment? Or consumer need?
Are you neither of these?
Whichever you have answered yes to, you still need a further point of differentiation for your USP and make sure it’s compatible to your sector.
Step 1 Complete: What next?
Identifying your e-commerce Business Structure, Product Scope, and USP has shown you what sort of e-commerce business you are going to build. Now you understand that we can start building the three Core Foundations of your e-commerce Master Plan:
Step 2 = Core Foundation 1, your Website
Step 3 = Core Foundation 2, the big numbers: Cost, Profit, and Growth
Step 4 = Core Foundation 3, products and promotions
At the Niche End of the Scale:
Niche sellers focus on a single product category – tea towels, sailing holidays, ladies’ shoes – and they create and edit the perfect range of that product in such a way that, if you want that product, you know they are the only person to go to, e.g. classicsailing.co.uk, thevacuumbagshop.co.uk, batterystation.co.uk, todryfor.com.
But don’t assume that being niche means you can’t be big.
One of the fastest-growing eCommerce businesses at the moment is World Stores, with a turnover of over £35m, and they have built their business on niches. They identify ranges of keywords that have a high search volume, with a low amount of competition from other providers and where they know they can offer a better product range and customer service than the other providers do. For each niche, they build a new website (on a central platform). Currently they have websites for products as diverse as garden sheds and chimineas, to rowing machines and cots – over 70 websites in all.