Every year it seems that competition becomes unbearable. Shopping aggregators and even retailers such as Tesco continually use their data and muscle to expand into an increasing number of verticals and SKUs. It appears that no niche has been left untouched by their insatiable appetite to leverage their economies of scale and dominate the markets that small players have been servicing for years, if not decades.
So what can you do as a small to medium-sized online retailer to protect your current income streams?
The first point to note that not every consumer has the same priorities when they purchase. For those types of consumers wher ethe immediate gratification of a retail need is important then you are likely to be facing a difficult task.
Stores like Next, House of Fraser and Selfridges offer same day delivery. Whilst there are a growing number of logistics business and even ecommerce platforms such as Kong (disclosure: this is our sister company) offer same day delivery as an option. But with marketplaces such as Amazon offering same day delivery in the evening for £14.99 then you should give serious thought to whether you operate in a niche that retailers with same day delivery can attract your customers.
The same is also true with commoditised products – if that isn’t an oxymoron. If you have built a business retailing products that can be easily sourced from wholesalers consider the impact that a large retailer could have on your business by going direct to the manufacturer and negotiating a significant discount.
But with every threat comes an opportunity. There are still significant numbers of consumers that prefer not to shop with large organisations. The problem is how do you attract and retain their custom?
I am not a number
The big players may be able to win every battle on price. What they cannot do, purely due to their size and thin margins, is to offer a bespoke, tailored and highly personal service. Adding hand-written compliment slips with messages that reflect your deep understanding of their past purchases and notes about future products that they may like just cannot be replicated authentically by these large organisations. There may be talk of ‘big data’ and analysis of consumer purchase habits, but no-one has automated, as far as I am aware, the blending of sales data and customer communications .
It’s good to talk
It is this encouragement for customers to email in questions about your product range or industry in the form of a dialogue and getting a deep, human, and understanding of your customers that cannot be replicated by a monolithic retailer – customers will reward you for taking a personal interest in their retail welfare.
Remember that 83% of consumers will require some degree of customer support during a purchase. You could see this as an opportunity to automate the process, which is fine if you can actually use that data to improve your offering, but do seek customer feedback – especially with post-sale ‘what do you think’ emails.
When you communicate with customers you find out exactly what they want and this will help you move your product range in the right direction. It is wise, therefore, not to see customer communications as a cost to your time or a distraction. In fact, they are an opportunity to both learn about your customers and show your desire to please.
Keep them happy
Many niche online retailers retain customers at a significant rate. The data from Marketing Metrics suggest you have 60%-70% chance of selling to a previous customer whilst a new prospect may be as low as 5%. The logic here is that you should work extremely hard at keeping your customers engaged. This may mean keeping your email marketing campaign flowing at the correct rate and with the correct messaging. It also means that if you operate in certain areas where the consumer uses your site to explore a range of products that you have to keep expanding your range to satisfy their needs.
Enthuse people as well as educate them
Many very large retailers focus heavily on the product information. They allow customer reviews; add detailed photography and specific functional information but how many of you feel enthused to buy after reading a product description?
When you operate in a niche that you know thoroughly and are able to communicate that with potential customers (and current ones) then you are more likely to convert customers.
Online retail in its most pure form is a balance of product suitability, product desire, price and perceived risk. If you can enthuse a customer about the product by pressing the right psychological buttons then you can increase your conversion rate markedly. You can even use them as a method to attract links if you’re particularly clever.
Use content to reduce perceived risk
Content isn’t just about writing cleverly crafted product descriptions, it’s also about adding supplemental information that conveys your deep understanding of both the market and your customers’ needs. These needs may not only offer an insight into the industry but also matches your customers’ world view. If you can follow your customers on Twitter or find demographic data with their interests then you will have a greater ability to attract and retain customers. Large organisations have to toe a PR line, but as a small to medium you can fight a cause.
If you can ‘tell a story’ that resonates with your potential customers then you have more chance of being shared into their networks and being mentioned online. If you can combine this with appearing (read: being) an authority in your field then you even better.
Offering the ability to be unique
A counter point to the larger retailers is scarcity. Their modus operandi is to stock everything and in depth. Whereas scarcity and exclusivity for many consumers is key. Being the only people they know to wear a particular garment, for example, holds more weight to them than being one of several thousand people wearing it.
Being able to either show that your products are made by craftspeople or artisans or in small batches then you will attract to a growing, ‘anti-commercial’ group of people.
More on exclusivity
Small artisans, by their very nature cannot produce in the quantities that large retailers demand to make it worth their while. The economies of scale just aren’t there. But don’t just think about that from a UK perspective. Being able to locate, small, unique and up-and-coming producers around the world and then importing those products will push so many buttons with consumers that should be reward with their custom.
Become the sole manufacturers
If you can be the sole manufacturer of an in-demand range of products then you can choose who sells your products. The likes of Amazon produce their own hardware, such as the Fire TV for different reasons. They want a mechanism to sell their and customers to consume their digital products (NB: we have one arriving soon). The notion for small retailers is the product itself. Creating a desired brand or, at least a respected one, will allow you to create a product that could be copied, but not resold.
It is important to remember that Amazon, Tesco, eBay and other companies of their ilk are successful because they give customers access to a wide range of products, cheaply and quickly. But that doesn’t mean that they will appeal to everyone. Nor does it mean that they will ultimatley be able to stock every produt the world has to offer. What it does mean is that you should fight battles you can win. Unless you can build up a great deal of brand loyalty you will find it difficult to compete with them on commoditsed products. Your best bet is to look at markets which operate at a level where there can be no economies of scale, or for products that you control the manufacturer of.
Consumption may be a binary concept on a micro level: either people consume from you or they don’t. But that doesn’t mean that all markets are binary. Look to your strengths, build upon them and exploit them. Understand what your potential customers want and how they want to purchase.