In the last quarter, EGO‘s cost of customer acquisition has fallen by 60%, with conversions rates nearly doubling, and monthly orders tripling. This makes EGO’s online store its best performing store (offline or online) on a Sales and ROI basis. These outcomes are of course no accident. Renowned game designer and performance marketer, Hamaad Ravda (formerly Howzat Cricket; Shopistan.pk), has been driving e-commerce and online marketing efforts at EGO and is the force behind creating a rapidly growing revenue stream. He was kind enough to share the keys to achieving these results.
What’s the uncomfortable truth here?
Offline is more amplified online, given resources are in place. Like for bricks-and-mortal retail, online sales are a function of selection, allocated store inventory and marketing/ foot-traffic/demand generation. The main reason why fashion retailers are not getting the ROI they expect is that they have set up online stores without allocating the bare minimum resources towards it.
Can you add more color on resources and ROI expected ? One of the question we often hear is “How big can this get” ?
There is evidence worldwide that online retail now accounts for up to 15% of total sales for top fashion retailers like Gap. When you look at our next door neighbors India, it is being projected that the e-commerce market will be $22 billion by 2019 – comparable numbers for Pakistan could be as high as $2.5 billion by 2019. Even today, there are players in the local market running online stores with sales volume of PKR 2 crore to PKR 8 crore monthly (including 2 leading bricks-and-mortar retailers!).
However, the majority of retailers are failing to allocate enough inventory or paid marketing spend to generate adequate demand. Most retailers I have worked with have been able to achieve sales equal to their top A-class store (2000 sq ft. and above) with the requisite inventory and some online marketing spend (some beat average offline store sales by upto 2-3x).
But this is just the low hanging fruit. They should be setting their sights much higher; with the right investments, it is possible for top retailers to create a new channel through which they can drive $1 million in monthly sales over a 9-18 month time frame (smaller retailers can do $100K-$300K in sales). To achieve that kind of scale, retailers will have to make investments in online demand generation, allocating the right inventory for the expected scale, and by implementing operational processes and software that allow for efficient and fast fulfillment of orders.
What are you doing that others aren’t?
I utilize strategies that are data-driven rather than guesswork and that gives me a significant advantage over competition. It’s just the little things on the customer decision journey that matter, for instance, an ad where the model is looking at the camera (as opposed to looking away) has comparatively higher conversion rates. People can draw multiply psychographic guesses as to why that is the case, but the data backs it up.
If I explore my store search data and incoming keywords from search engines, I can find that my target audience is using search terms like “long kurta”, “tunics” and “semi formal kurta” (as opposed to “long top” and “short top”) to find our products, . This has implications for your site navigation, product content and for SEO when Google’s crawlers index your store’s info.
You can either base your decisions on “I’ve been in the industry for X years and know everything” or follow the data. Be open to experimenting, best practice dirties the pond. And remember that online, every decision can be measured.
Most of the emerging players misconstrue user experience to site beautification, ignore the customer journey to conversion. How do you tackle this?
This may well be a cliche now, but user experience goes beyond good looks – its about the overall experience that users have engaging with your brand with a particular focus on convenience, speed, and reliability of the end-to-end experience. This includes things such as:
1) how simple is it to conduct a transaction on the website/mobile app (optimized transaction flows);
2) does your website/mobile app load quickly and provide reliable performance ? Page load times are one of the most important factors in determining engagement and conversion rates, which is why top companies like Google, Amazon and Facebook place a huge emphasis on it;
3) how easy is it for users to find what they want (navigation/search) and to learn when new and noteworthy stuff has arrived at the store (push content/email/social media);
4) does the user have useful, comprehensive product content to enable them to make an informed decision;
5) are your users being able to transact wherever they are (desktop; tablet and mobile); and finally,
6) do you provide quick cheap delivery with a reliable delivery speed promise, and easy returns (fulfillment and returns experience).
Despite the overflowing evidence to the contrary, not everyone is convinced that mobile for conversions is the way forward. What does your experience tell?
When more than 60% of the internet traffic in Pakistan is mobile, why are retailers not paying enough attention to developing mobile responsive websites? As of today, desktop users only account for 30-40% of Facebook’s daily traffic in Pakistan. Half of online sales in Pakistan are from mobile and it makes more than 60% of the total overall traffic. Moreover, mobile is the fastest growing segment of the market, in terms of both traffic and sales. In fact, it is highly plausible that in Tier 2 and Tier 3 cities, a large number of users will have their first extended engagement with the brand through mobile (Facebook and online store).
One of the first things that I did at Ego was working on optimizing the user experience, speed, and flow of the mobile website. The resulting improvements in conversion rates increased our overall sales by 30%. As a rule, retailers should invest in mobile experiences that load fast (on often slow mobile connections) and provide simple and quick navigation to enable quick transactions. Native apps generally provide an overall better experience, but retailers would be well advised to think beyond e-commerce when thinking about the possibilities of adding mobile apps in transforming the nature of their retail experience (both offline and online).
So what’s the way forward for retailers in 2015? And if they just take your advice, will it be enough?
The retailers who will win tomorrow will be skilled at optimizing the reach and impact of the marketing investments across owned, earned, and paid channels. One of the most under rated qualities of online retail is its ability to rapidly glean deep insights regarding user behavior and preferences. Modern internet retailers like Bonobos, Warby Parker, and Asos have built their businesses around harnessing these new data streams and have found huge success in the process. This will be a particularly tough change for many retailers.
The winners in this era will create dedicated strategies for each channel, find ways to maximize cross-channel interactions, and invest in software to measure and optimize the effectiveness of the online marketing investments.
And will this be enough?
No. More bidders will enter the game, conversion rates will fall and CPMs will rise since everyone is after the same “eye ball” inventory (leading to significantly higher CPA, and hence lower ROI). Brand and marketing professionals in charge of eCommerce will need to invest in understanding the customer decision journey and the tools to optimize on the digital intersections and discover their best performing marketing investments. They must experiment and be willing to test everyday.
Secondly, it will become a major challenge to fulfill orders at internet scale (think 500-1000 orders a day and beyond. On a basic level, this entails investing in technology that would automatically sync data between the multitude of back-end systems utilized by retailers in serving their customers (currently, most retailers are working with systems which require highly manual processes to transfer data between systems). On a broader level, companies will have to invest in warehousing and fulfillment systems built for scale, and workforces to support high volumes of fulfillment.
Incidentally, this also presents opportunities for start-ups to enter the market, and support retailers in scaling their fulfillment efforts.
Unilever recently took the eCommerce plunge with Daraz. What should similar marketing professionals have in data before exploring similar avenues?
Its important to remember that in some ways online buying behavior is not different from offline. They should know their customers inside out, for instance, who are their the hottest demographic segments, what they are buying, who are they buying the products for, and why they love your products. If this information is not available, companies can start accumulating this knowledge with targeted testing and investing in systems to measure and understand the data. With the multitude of cheap cloud software and pay-as-you-go marketing channels, these tests can be surprisingly cost-effective compared to what was possible a few years ago.
Any final words?
One of the most under rated qualities of online retail is its ability to rapidly glean deep insights regarding user behavior and preferences. Modern internet retailers like Bonobos, Warby Parker, and Asos have built their businesses around harnessing these new data streams and have found huge success in the process. Summing it up, brands should look to launch early (once they have decided that customers buy their products online), as opposed to spending months in planning and focus groups, and should have a data and test oriented disposition as they look to scale their efforts online.