Taking advantage of the rise of Ecommerce 2.0

Aug 13, 2012

Table of contents:

Ecommerce 1.0
Ecommerce 2.0
The two pillars of Ecommerce 2.0
Social Commerce
Flash Sales
Feeders to the new wave
Lowering the barrier to entry
How to take advantage
Write a blog
Newsletters and Email marketing
Start using Twitter and Facebook
Build an awesome website
Build Social Sharing into your DNA
Scarcity (invite only)
Attract the right kind of traffic
Experiment with niche Social Media
Partner with established outlets or bloggers
Buy customers via PPC
Create a distribution strategy
Conclusion

As the Internet transitions from one wave to the next, major themes rise and fall in prominence. Two of the most prominent waves of the past 10 to 15 years were Search and Social Networking. It can be said that both these two waves have peaked, and so the dominant player is now almost insurmountable.

The third wave that peaked within this time period was Ecommerce. Amazon and eBay were the two most prominent entries in the land grab of Ecommerce during the mid 1990’s. Both companies managed to survive the dot com crash of the late 90’s and early 2000’s and have since continued to grow and dominate online commerce.

However unlike Search and Social Networking, Ecommerce is going through a renaissance period where new opportunities and new entrants are gaining ground. The entire way we shop online is transforming before our very eyes and it is creating opportunities for new entrants to stake a claim.

This post will be an overview of Ecommerce 1.0, the transition to Ecommerce 2.0 and how you can take advantage of the new opportunities that have arisen.

Ecommerce 1.0

The first wave of Ecommerce can be said to have started in 1994-1995 with the founding of eBay and Amazon. At the time, The Internet was still just a fledgling network and not many people believed that online commerce would ever take off.

However, over the next decade, both eBay and Amazon would firmly establish themselves as the giants of Ecommerce.

Ecommerce 1.0 can be categorised as “Shopping via search”. Amazon was the first retailer that could offer unlimited shelf space and eBay had a huge long tail of extremely niche items due to the market place dynamics of buyers and sellers.

There are countless other Ecommerce websites that fit into this “Shopping via search” categorisation. There were many new online retailers that seized the opportunity, and countless established retailers that ignored the opportunity and have subsequently gone out of business.

Ecommerce 2.0

As I mentioned in the introduction, over the last couple of years, Ecommerce has started going through a renaissance. Whilst the “Shopping via search” giants of eBay and Amazon are still unchallenged, a number of new and interesting new models have arisen. I think it is unlikely that anyone will ever beat Amazon or eBay at their own game as the scale of both companies is unprecedented. However, the resegmentation of Ecommerce has created a new wave of opportunity for new entrants.

It’s important to note that both Amazon and eBay have continued to innovate within their own disciplines. Amazon have Amazon Prime and eBay have recently launched eBay Now, both of which are premium delivery services that bring the online and physical worlds closer together and further destroys the old retail paradigm.

The two pillars of Ecommerce 2.0

The renaissance of Ecommerce basically comes down to two key areas, Social Commerce and Flash Sales. With the rise of Social Networking and the huge influx of new Internet users, it was inevitable that the old “Shopping via search” would be disrupted.

We are more inter-connected and influenced by our family, friends and peers through daily online interactions than ever before. Search is no longer the dominant form of product discovery. Whilst search will remain important due to the scale of the Internet, the opportunity of Social Ecommerce and Flash sales has opened the door to a wealth of new entrants.

Social Commerce can simply be defined as Ecommerce that is largely powered by Social Media. The rise of Social Media has created the adjacent rise of Social Commerce.

Social Commerce websites are growth dependant on strong Social Media presences and Social Sharing. They benefit from a high Viral Coefficients and a strong sense of community.

Some examples of Social Commerce websites are Threadless, Fab and Etsy.

Flash Sales

The second major category of Ecommerce 2.0 is Flash Sale websites. Flash Sale websites are basically daily deal offers on products within a 24 or 36 hour period. Each offer typically has large discounts and are often restricted in a members only or invite system.

Examples of Flash Sales websites are Gilt, Jack Threads and again, Fab.

Feeders to the new wave

Whilst Twitter and Facebook remain amongst the highest referral sites to both Social Commerce and Flash Sale websites, it has also created an opportunity for specialist niche websites to spring up.

Websites such as Svpply, Pinterest and Fancy. These are inspiration boards that allow users to curate content and share and recommend products to their friends and followers. This new form of content curation provides a strong referral network to both Social Commerce and Flash Sale Websites.

Lowering the barrier to entry

Of course, it is not just well funded startups like Fab or Jack Threads that are taking advantage of this new wave.

It is now easier than ever to begin selling online.

Shopify allows anyone to open a fully fledged Ecommerce website in minutes, Etsy is a market place for buyers and sellers of hand made and craft products and Kickstarter has created a system for funding a product before it has even been created.

Another very interesting website that has sprung up in the last year is Gumroad. Gumroad allows anyone to sell digital items by just uploading and sharing a link. This is great for people with big Facebook and Twitter followings, but without a dedicated Ecommerce website.

How to take advantage

Now that you can see the opportunities of this new wave of Ecommerce, it’s time to plan your strategy for making the most of it.

Don’t worry that you are not a household name, or you do not have a large Social Media following, everyone has to start somewhere.

Write a blog

So if you are a regular reader of Culttt, you will have heard me say this before.

If you are trying to build a business or create a following online, it is imperative that you start a regular and high quality blog!

In the early days of your fledgling attempts to become a global brand, your blog will likely be your only source of traffic. People are not interested in your company or what you have to sell, but a blog is an opportunity to inform, educate and delight your potential audience without giving them the hard sell. You need to be building value before you can ever expect to take value, and so a blog allows you to incrementally build up this respect and credibility over a sustained period of time.

Writing a regular blog is incredibly hard work, and I’m sure you have a lot of other extremely important things you should be doing. But it is important that you get the most from your business blog as it could be the difference between success or failure.

Newsletters and Email marketing

It has been proven that Newsletters and Email Marketing return a much higher level of engagement than Social Media. It’s very easy to miss a Tweet or a Facebook update or to not engage with it at all. The huge amount of email that is sent every day means that it is now an honour to be given permission to deliver email newsletters to interested users.

Companies like Threadless and Fab have grown so quickly and prolifically in large part to an effective email marketing strategy.

If you can create a high quality, regular email newsletter of new products on your website, you are far more likely to get repeat buyers and a larger base to promote offers to.

I’ve written previously on The value of email lists, but it is important to make the point again. Nearly all of the Ecommerce 2.0 examples mentioned above have been successful because of this strategy. If you are aiming to do the same, creating a email list will be imperative to your success.

Start using Twitter and Facebook

Starting out on Twitter and Facebook is hard. It’s even harder for a new company trying to find an audience. In the early days it is important to remember that you must go out of your way to create value for your potential followers. If your stream is just non-stop self-promotion, no one will follow you because no one is going to be interested. Share your blog posts and find other sharable content that fits with your theme and your products. The content you share should be heavily weighted to other people’s content that your audience would be interested in, rather than your own.

Once you begin to make sales, use Twitter and Facebook to provide customer service and answer questions.

Twitter and Facebook are huge, far too big for any company to widely target. Find a very specific demographic to target, and forget about everyone else.

For example, perhaps you are targeting young mums in their 20 - 30s. Search Twitter and the blogosphere for communities of these like minded people and try to provide them with value in the form of recommendations, answers to their questions or advice on their problems.

If you target a particular niche, you will find it much easier to begin building traction and engagement.

Build an awesome website

If you really want to take advantage of the new opportunities of Ecommerce 2.0, you need to make the right investment in your website. Your website will be your entire business. From sales and marketing, to customer service and fulfilment, this is not the time to cut corners.

If you are not a technical person, you need to partner up with a strong technical co-founder. You should never outsource this kind of work to a web development agency as it will require constant, iterative improvement for the entire lifetime of your company.

If you have no budget and you haven’t found a technical co-founder yet, Shopify is a fantastic platform for getting off the ground very quickly. If you are developing a new product, or a new range of an existing product, it is important that you test your market first, before you make the big investment. Shopify can be the perfect platform to test your assumptions and get real market feedback and data.

One of the points on my post on Finding your Viral Coefficient was that you need to build Social Sharing into your product’s DNA.

By this I mean, you need to create a product and a platform where people want to share it with their friends. Success in Social Sharing really comes down to creating something that people feel they should share with their friends. Sharing is implicit in trust and so people will only share things they feel that will benefit their friends or followers.

You must strive to create products that people want to share. This might be a unique twist on the traditional form, or a completely new product that solves a great problem. If you are just selling another me-too product, this probably won’t be a profitable avenue.

Next, you must create a platform for sharing. Ensure you have Social Sharing buttons on your product pages to make your visitor’s lives easy. Simple things like pretty URLS, clean and simple design and logical navigation and categorisation can go a long way too.

Scarcity (invite only)

As I mentioned in the examples of current companies that are already taking advantage of Social Commerce and Flash Sales, scarcity tactics and invite only lists have proven to be a successful tactic.

The Internet is a big place, and it is now almost possible to buy just about anything you could ever imagine. By limiting your product, and making it exclusive, you restrict your sales, but you also increase the perceived value of your product.

People love unique things, and it has never been more important in the modern world where just about everything has become a commodity.

This tactic is also a proven successful way of building a email list of opt-in people who are interested in your product. Create an invite request form on your website or landing page and you will create a list of people who are ready to buy from you. You can then target them with emails, invites and offers when the time is right.

Attract the right kind of traffic

Attracting the right type of traffic to your website is incredibly important as it is a complete waste of time to create demand in demographics that will never purchase from you.

In order to attract the right kind of traffic you must be fully aware of who are your target audience, what are their interests, motivations and who are they influenced by. Developing user personas can be time consuming, but it will save you a lot of time, money and resources in the long run.

Once you have found good quality sources of traffic, you must create a website that is able to convert traffic. A conversion is usually defined as either a purchase or an intent to purchase. So perhaps you aren’t quite ready to sell yet. In this case you should still be doing all of this ground work to find sources of good quality traffic. However, instead of making sales, you must convert users to signing up for your email list or newsletter so you can build a relationship with this customer for the future.

Take a look at my post How to make a home page that converts for more information.

Social Media has exploded over the last couple of years as mainstream successes like Facebook and Twitter have grabbed all the headlines. However, the internet is an extremely fragmented place and so opportunities exist in not so densely popular lands.

Attacking the niche is a very important strategy to gaining an audience and becoming a success. It is usually the case that just about every new business once started out as an extremely focused opportunity that eventually expanded out.

So for example, your target market might be girls aged 14 to 18. Whilst the potential audience on Twitter and Facebook for this demographic will be in the millions, there will also be stiff competition.

On the other hand, if you fully commit to a less mainstream Social Network like Tumblr, you will likely find that your audience is more targeted, more engaged and there is much less competition.

In order to dominate that mass market of girls ages 14 to 18, first you must dominate a niche subset.

Niche Social Networks are the perfect opportunity to build a following where there is less competition. If you put a lot of value into Tumblr, or Pinterest or Fancy you will find that it a lot easier than trying to make yourself heard on one of the more established Social Networks like Facebook or Twitter.

The Internet is an extremely fragmented place and so it is highly likely that you will find an existing and thriving community of people who are interested in your niche. However, don’t worry if there is not, this is a perfect opportunity to build a community yourself.

Partner with established outlets or bloggers

During the early days of your business, traffic and sales will likely be either low or nonexistent. Partnering with a related company is a huge opportunity to get that first kick of growth.

The great levelling effect of the Internet has meant it is not just big brands that have influence and can create referrals. Established bloggers have put a huge amount of time and effort into creating engaged audiences who value their opinions.

By partnering with either a company or a blogger with an engaged audience, you can very quickly direct a lot of qualified traffic to your website.

The lowest form of partnering online is by doing a guest blog post or writing content for a company. This enables you to share your expertise or knowledge with an established audience.

If you have a product you wish to sell, offering free or subsidised offers to an audience is a good way of creating demand. Affiliate links is another good source of traffic that is likely to convert, however you need to be prepared to sacrifice a large percentage of the sale.

Buy customers via PPC

One of the most under-rated ways of growing a business is buying customers. Companies like Netflix, Jack Threads and Go Daddy have effectively bought customers in order to fuel their growth.

This can be a scary strategy to implement, but it is really simple once you understand the mechanics of it.

This whole strategy revolves around understand the “Customer Acquisition” and “Life Time Value” of your customers. Once you have this data, you can begin to optimise to reduce your Customer Acquisition costs and improve your conversion rate. If you can effectively turn $1 into $3 (for example), you have an opportunity to grow through PPC. This then enables you to use a paid Customer Acquisition opportunity like Google Adwords to very quickly create demand for your product. Once you have your engine of growth, you can re-invest your revenue to quickly scale your company.

There is absolutely no shame in buying customers. In fact it is probably one of the most underrated forms of growth for online businesses.

Create a distribution strategy

And finally, to tie all of the above strategies together, you must form a distribution strategy that will guide your efforts.

A distribution strategy will inform and guide your product development and the way you will acquire customers. It is imperative that you create this plan alongside your early development and you don’t neglect it until the day of launch.

Conclusion

Phew! That was a long post! As you can see, Social Commerce has opened a huge opportunity for online retailers, both new and existing, to find a niche target market and an audience that loves you. Social Commerce is much more niche oriented than “Shopping via search”. Whilst this means your initial market will be smaller, it also gives you the right beach head to take on giants like Amazon and eBay.

If you are a startup looking to break in to the Social Commerce industry, the time is now to get going and find your audience. For existing retailers who want to make the most of this new opportunity, it’s not too late to pivot your existing strategy.

I hope this post was useful, interesting and food for thought.