How to Successfully Transition to an E-commerce Revenue Model
Reduced shelf space has spared no product category. Giant retailers like Target have been steadily reducing items they stock on their shelves to cut down on the number of items filling up their storerooms. While reducing shelf space might make life easier for retailers, it's making things tough on product manufacturers.
Manufacturers in prime categories like baby and maternity products have reason to be worried. Destination Maternity, for example, recorded a net loss of $1.5 million in its fiscal third quarter, and its revenue fell from $119.5 million in the previous quarter to $102.6 million. Same-store sales dropped by 3.5 percent, and the company’s relationships ended with Gordmans, Sears, and Kohl's due to closure of leased departments or the retailers' efforts to scale back.
Shelf space is the retail version of the "chicken and egg" dilemma. If your product sells, the retailer will stock more of it, and you'll get increasingly valuable shelf space. If your product doesn't sell, you'll be forced off the shelf. This puts pressure on baby product manufacturers to sell more product faster, bolster their sales relationships with retailers, and innovate their products and packaging to be more space-efficient. And if those measures don't work, they'll have to find alternative ways to sell.
E-Commerce Isn't Easy
The solution to reduced shelf space might seem simple: Become a dominant player online. But it's easier said than done. Making the switch to self-powered e-commerce is a completely different business. And, as Destination Maternity saw, when you're not seen in stores or online, it leads to losses.
Self-powered e-commerce success is rare when facing off against competitors like Amazon. While retailers like Macy's, Walmart, and Target are reporting weaker consumer spending, Amazon has seen growth in its apparel sales — about 19 percent in the first quarter of 2016. It's set to be the largest apparel retailer in the U.S. by 2017.
And Amazon has its own products in more than a dozen categories. The company competes heavily in categories like batteries, speakers, and baby wipes. Amazon Elements, the company's new baby product line, now has 16 percent of the baby wipe market share, and sales are growing at about 266 percent per year. Although the product is exclusively for Amazon Prime members, customers are three times more likely to buy it over other brands.
Controlling Your Brand's Destiny
When going toe to toe with powerhouses like Amazon, especially in categories like baby products, brands that don't make a strong effort to quickly drive product awareness, equity, and credibility risk a quick death.
Unless you are a house brand or control a retailer's promotion and shelf placement decisions, your product's future is completely out of your hands if you don't take action. The key to pursuing authority in the baby product category is to build and nurture relationships with consumers on every digital platform.
Parents are some of the most diligent researchers of any audience. They want the best for their children, so they incessantly scour the internet for product info, reviews, ratings, and expert and peer opinions.
Mothers, in particular, frequently use the internet as a resource. Nine in 10 mothers with children under 18 spend more time online than the general population. Digital resources can be incredibly useful, especially for first-time mothers.
About half of mothers like to research products digitally before buying them in the store, and Millennial moms are even less likely to research products in the store even if they end up buying them there. With an additional quarter of moms both researching and buying online, few mothers are conducting both their research and their purchases in the actual store.
Building Digital Consumer Relationships
Moms and babies quickly age in and out of the target market, so you don't have 10 years to build loyalty. Unless you have an unlimited budget, digital is the key to effectively moving moms down the path to purchase and achieving online dominance. Brands need to be where their education-hungry audience members are and give them what they're looking for. Here are three digital platforms to focus on:
Focus on long variations of head keywords to maximize the effectiveness of search engines. Seventy percent of all search queries are long-tail, meaning they contain a generic search term, such as "car seat," but cater to a very specific audience, such as "top infant car seat brand." It's difficult to know the user's intent behind head keywords. It gets easier when a user uses a longer variation of a search term, and these key phrases are 2.5 times more likely to convert.
If brands truly own their keywords, they can drive qualified traffic to their website to see product information and reviews. These are experiences the brand can control. Amazon generates 57 percent of its sales through long-tail product descriptions.
Long-tail keywords are one of the best ways to get an advantage over your competition online when millions of stores and sites are targeting the same keywords. Everyone is competing for the 36.4 percent clickthrough rate of the top result on Google rather than the mere 1.5 percent CTR of the second page.
2. Social Media
Social is the perfect place to get parents to advise one another, talk about products, and rate and review. This is a good opportunity for a brand to facilitate the conversation and reward parents for their feedback. If you have the budget to promote via paid placement on social channels like Facebook, Twitter, and Instagram, it's worth the expense.
Millennial moms are especially social media conscious and follow brands' social media channels. About 90 percent of all Millennial women research a product before purchasing, but that percentage is even greater for Millennial moms. They want to receive information from the brands they follow on social media and get coupons and other deals.
Nothing delivers engagement, deep education, loyalty, and sales better than email. Email is also the largest driver to social activity and brand websites, and the number of worldwide email accounts is expected to increase to almost 5 billion by the end of 2017. That's more than half of the entire world's population.
If a parent is interested enough to give personal info and permission to a brand to find out more or receive a discount, you have the invitation to connect deeply and close the deal. The world's most successful brands use email to invite feedback, drive social activity, invite ratings and reviews, reward, and sell. More than 7 percent of all e-commerce user acquisitions happen through email, and when these customers are acquired, they spend more money, making their lifetime value about 12 percent higher than the average.
Reduced shelf space is a reality, and if you don't gain online authority, you run the risk of your product not being seen anywhere. While it might seem daunting to compete with retail giants like Amazon, online success is possible through strong customer relationships. Take your brand's destiny into your own hands by nurturing consumer relationships across multiple digital platforms.
Josh Perlstein has more than 20 years of experience in the digital marketing space and is the CEO of Response Media. Response Media is a digital and direct CRM agency that combines customer acquisition and lead generation with intelligent and relevant email marketing. Its proven approach integrates data-driven strategy, performance-based media, marketing automation, and behavioral email marketing to deliver tangible results for its clients in customer growth, loyalty, and ROI. Josh has amassed diverse experience in digital media and relationship marketing for some of the world's largest advertisers and most successful brands, pioneering best-of-class consumer acquisition, brand partnerships, and relationship marketing platforms for the likes of Procter & Gamble, Pampers, Enfamil, Anheuser-Busch, Red Bull, Coca-Cola, ConAgra Foods, IBM, Disney, and Capital One.
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