Launching An E-commerce Strategy In An Established Company? Follow This 4-Step Checklist
There are a handful of significant things to consider when implementing (or scaling) an e-commerce strategy at a traditional, commercial company.
After working at P&G for almost 17 years, I worked with both S.C. Johnson & Son, as well as Tyson Foods, to launch and scale their e-commerce divisions—both in the United States and globally. At S.C. Johnson, I was the Global Director of e-commerce, and at Tyson I was VP of eBusiness. At both companies, our teams essentially started from zero and grew to over $200 million in e-commerce revenue through a combination of assessing different marketplaces, developing a couple critical capabilities, and slowly bringing on passionate team members that could effectively scale our efforts.
What I learned through those experiences was that designing an e-commerce strategy within an existing company (especially companies doing billions of dollars in revenue all over the world) requires a reevaluation of what your go-to-market strategy is going to be—and what new “muscles” (capabilities) are required to succeed.
You can’t just keep doing things the same way and hope to be okay in this rapidly evolving marketplace.
On the other hand, you can’t just list your products on your website and expect to win. You have to understand the rules of the game, the major players, and what levers you can push and pull in order to successfully build your business in traditional and digital channels.
Before you dive into the strategy, it’s important to get aligned with the words you’re using. The biggest one is to define what you mean when you say “e-commerce.” The definition I like to use is: any transaction that is enabled digitally (primarily a screen, but could include voice) and can be fulfilled in a multitude of ways (parcel delivery in a box, van delivery to a home, picked up in-store, picked up curbside, etc.).
What puts the “e-” in e-commerce is that the arts and sciences of in-store selling that we’ve spent decades perfecting (Category Management, displays, shelf positioning, shopper behavior, etc.) don’t impact shoppers’ decisions. The game is won and lost on the screen. Once your team has agreed on the definitions for the new digital commerce terms, you’re ready to tackle the strategy.
Here are 4 things you need to think about when launching an e-commerce strategy in an established company.
1. Are you selling directly to consumers and/or through digital marketplace partners?
When big companies start thinking about launching or scaling their e-commerce capabilities, this is always the first question they struggle to answer—and sometimes just skip over.
You need to decide whether you are going to sell directly to consumers through your own digital properties (e.g. brand website), sell through digital marketplace partners (e.g. Amazon, Walmart.com, Bestbuy.com, etc.), or a combination of both. The reason is that both have pros and cons. When you sell directly to consumers, you have the ability to capture more profit and data because purchases are happening within your closed ecosystem. When you sell to consumers through marketplace partners, you give up some of that profit, and usually the majority of the data. The upside is that you can typically reach a lot more customers more efficiently through marketplace partners than if you try to build the shopper audience on your own.
The key is to figure out which route your company can be most successful in.
Today, you are seeing some “digitally native” companies start online, optimize their product through direct feedback from their customers, and then branch into marketplace partners. For more established companies, it’s likely that you’re ready to go directly to those marketplaces. The challenge for you is how to do so and still leverage data to help you assess performance and course-correct where needed.
There are a variety of types of data you can leverage that isn’t sensitive “first-party data” that you will not be able to get from your marketplace partners. Ratings and reviews are just one example. The feedback left here by your consumers can tell you if you’ve got a hit—and can also be an early warning signal to brand teams of a significant problem.
2. Will your current logistics and packaging be able to efficiently (and profitably) service customers?
Big companies are all built on efficiencies.
Supply chain lines are designed to handle product orders in bulk. As soon as you start introducing custom builds into the mix, that’s when you begin to lose the benefits of the efficiencies of scale.
The reason the first strategic question (point #1) is so important is because, if you are a large company used to running large-scale supply chains, you are going to need to adapt some of your processes (and potentially even the packaging of your products) in order to achieve similar efficiencies by shipping directly to consumers.
For example, this was one of the inspirations behind Procter & Gamble launching those small, lightweight detergent pods. P&G (and their marketplace partners) were incurring significant expense and damage shipping those big tubs of liquid. By creating a new product form and packaging type, they created a proposition that could be produced at scale efficiently, shipped far less expensively.
Sometimes the answer is a new box size or a different product cap. The answers will vary by product type. What’s important is that packaging and production need to be evaluated and addressed early on.
3. What sort of team and resources do you need in order to build a successful e-commerce business?
Do you set up a separate team from your existing sales group? Do you need people with expertise selling products exclusively on Amazon? Unfortunately, there is no straight-forward answer here. The team structure, capabilities, and funding needed are dependent on your approach.
If you are going to have an “owned” direct-to-consumer site, you will need to allocate headcount and dollars to that effort to be successful. This person or team will need to execute (or coordinate, if using external agency resources) and get the technology platform running, create and refresh content, read and react to data, and spearhead marketing and order fulfillment logistics.
For most larger companies, you will start by working with marketplace partners like Amazon, Wayfair.com, and Walmart.com. Typically, this will require bringing in some expertise to help manage the ramp-up and train the organization on the new skills and language of e-commerce.
For example, Amazon is largely operated via its Vendor Central platform vs. traditional “buyer calls.” Another example is content: getting the right keywords embedded in your written content and having strong product images can be the difference between the top of Page 1 (a winner) and buried on Page 348 (irrelevant).
But more importantly, the big mistake I’ve seen companies make when executing their e-commerce strategy is that they treat it as a stand-alone project. They fail to integrate e-commerce holistically into the company. While there are stand-alone e-commerce retailers (like Amazon), increasingly, e-commerce is part of retailers’ total go-to-market strategy. As such, manufacturers must understand it, and approach retailers holistically.
For example, there shouldn’t be a stand-alone Walmart Stores team and an entirely separate Walmart.com team that never talk to each other. Of course, you could (and should) resource these appropriately. But they should be working in concert with each other. As Walmart stores also become fulfillment centers for their .com and online grocery businesses, the inter-dependencies of the businesses will only be increasing.
In December 2019, Kantar forecasted that e-commerce will account for 5% of Total Food, Drug and HBC 2019 sales – with a 25% CAGR. Meanwhile, e-commerce will comprise of 25% of “all Other Goods” sales with a 15% CAGR.
E-commerce is contributing a significant amount of the growth to our categories—in many cases, to the detriment of store sales. As a growth engine for our companies (and our retailers) e-commerce should not be treated as a separate entity within a company—or “the e-commerce team’s job.” Instead, everyone is responsible, in their own way, for making this a successful part of the business.
4. Are you being effective at Attention Channel Management?
Too often, the focus is only on how we will get the product from our plant to our consumers. However, it’s just as important to consider how to get our brands into their minds.
With the fragmentation of media, the rise of social and influencers, and the impact of ad-blockers (and ad blindness), throwing out impressions and hoping is an “interesting” marketing approach.
Managing the “Attention Channel” is about being present where your consumers are engaging with your categories, and being a part of that discussion. Ideally, adding value in the form of entertainment, education or inspiration.
The opportunity we have in today’s digital world is to connect directly from that “point of engagement” directly to a “place of commerce.” Even if they don’t depart and transact, you’ve given them the opportunity, some value and, hopefully, a positive experience with your brand.
That’s why, when I was at Tyson Foods, we were piloting with companies like Chicory and eMeals to enable a consumer to add all of the ingredients they needed from a recipe on a site like Pinterest directly to the cart of their preferred retailer.
At the end of the day, for an e-commerce strategy to get off-the-ground successfully, there has to be leadership support (words and actions) that it is strategically important.
E-commerce does not have to mean a massive shift in your priorities or resources. But it does now account for at least 5% of your total categories’ sales (and, in some cases, 5-6 times that much)—and will continue adding 1-3% per year for the foreseeable future. To avoid losing significant share in the midst of this shopper shift, you do owe it to your company to at least understand what is actually happening in your categories and have a thoughtful discussion about what your response will be.