Taking your business online: the benefits and pitfalls
What should you consider if you are taking your business online…
The impact on many retail businesses of the coronavirus has been crushing. This is on top of a slow but relentless trend among shoppers towards online purchasing. And understandably, many firms are looking for ways to offer their products online.
If it is a matter of survival, it is natural for businesses to want to jump into the online market as quickly as possible. Certainly, there are many potential opportunities but there are also pitfalls that can be avoided with some preplanning.
So, whether you are hoping that the restrictions on retail trading will not be long and you can return to something like business as usual or you are seeing it as a long-term business strategy, there are a number of things to consider.
There are many issues to consider, including the different legal issues for online trading and how to protect your intellectual property. This article looks at the marketing and business implication.
Step Back and See the Big Picture
The first issue to be aware of is that you are not taking your business online. You are creating a new business, with new customer segments with potentially very different needs than customers that visit your store. And, importantly, you will also be faced with a new set of online competitors. So, the first task is to evaluate the key opportunities and threats in your new business environment. This will help you to focus on the main challenges of moving online:
- What are the key trends in the online environment? Look especially at technological trends, as well as legal, cultural and socio-economic trends.
- What are the industry forces that are at play, including key competitors, suppliers and other elements in the value chain?
- Are there any Macro-economic factors, success as trends in the global markets, infrastructure etc.?
- What are the Market forces: understanding the market segments, needs and demands, profitability?
At this point, it is also good to compare these factors compare with those that apply to your current offline business, as this will show up the most important issues.
Agree your strategy for your online business
The key question here is how your new online business will relate to your existing one.
Short of going entirely online and divest your physical locations, you will need to consider how the two parts of your company will interact.
- Create separate online and offline offers.
An option that many businesses have opted for is to create a new online business which operates separately from their existing bricks and mortar businesses. Both parts of the business may have similar products or services, but they may choose to offer differently based on their respective customers’ needs (see part 3 below). - Create an online/offline business
It is more common for online and offline offers to be interdependent. For many buyers, the on-street location becomes a showroom. This is very evident in the fashion industry. Customers will start their purchase journey online and visit the store to try on the garment. If the store can supply the colour and size that they want, they will buy it there. If not, they can purchase a garment of the right size or colour online.Other stores will offer a pick-up in store option for large items bought online – click and collect. This is especially useful for large or bulky items. The advantage of the offline/online interconnectedness is that it enables shoppers to see, inspect and try on goods before ordering them, while still giving the customer the wider choice and sharper pricing than they would expect from an online provider.
Analyse your Customer Segments
Lifting yourself from the street into the cloud is not simply a matter of location. You are unlikely to be able to bring all your offline customers online with you. You will, of course, now have the chance to connect with a whole new set of potential customers. However, it is very likely that your online customer segment will have very different expectations than your offline customer base. To satisfy these customers you will need to add value in very different ways. With the ability to shop around and check different offers, pricing, speedy and reliable delivery and free returns will be big factors in buyers’ choice.
Most bricks and mortar businesses have only a limited choice of products in any category. For many customers, the benefits of immediacy can overcome this and will settle for a suboptimal solution for having it now.
When considering the needs of your online customers it is worth looking at three segments:
- What tasks do your customers want us to do?
- What benefits will they gain: monetary, time, social or psychological?
- What risk or fears? What if it doesn’t work? What will others think of me? Will I lose my money?
The Strategyzer Value Proposition canvas provides a simple visual tool for identifying customer needs. This leads to developing our proposition.
Create a Value Proposition that is a good fit for your customers
As suggested, once you have your online business you will need to look at as many options as possible for different value proposition is key to have a solid understanding of customer segments as described above. It is important that the business looks at different options for providing value to each customer segments. And may come this will require a review of your current capabilities, resources and activities.
It is important that you create a good fit between your value proposition and your customers’ needs.
The Strategyzer Value Proposition canvas provides a simple visual tool for identifying customer needs and seeing where there are gaps.
Channels and Customer Relationships
For online retailers, customer relationships are driven by clear and effective processes at all customer touchpoints. This needs to be thought through and technology employed to automate as many processes as possible. This needs to be backed by effective customer service to field enquiries and deal with product returns and customer complaints.
An online business will have a different way of interacting with its customers. The customer relationship will tend to move from a personal assistance model towards a much higher degree of self-service and automation. This change in customer relationships will be driven by the key activities of the business. Automated services will need to be put in place.
Key Capabilities and Resources
Once you have a clear understanding of who your ideal online customer and created an appropriate value proposition, you need to ensure that you have or you can obtain the resources and capabilities to deliver your online proposition.
A key task is to map the key activities that are required to operate your online business. For a retail business your key activities that are going to revolve around the management or your online platform and connected systems.
An online proposition will require a number of different key resources from an on-street business. These resources need to be matched against the capabilities of your company. The types of resources to consider are:
- Physical resources: this can include warehousing of goods for sale and machinery to manage partnerships and consumables for packing and postage.
- Intellectual: what knowledge and partnerships, suppliers will be required for your online business model as well as developing processes and systems to promote your business and manage your customers and suppliers.
- Financial: while online businesses do have an edge over bricks and mortar businesses. This is largely owing to greater economies of scale as well as lower fixed costs. In addition, the building of assets such as website and backend systems. A key requirement for financial resources will be required for marketing communications (digital advertising, SEO and social media).
- Human: What human resources do you need to provide customer service, technical, marketing and sales.
Conclusion
Every business is different, so it is difficult to provide a one size fits all approach. The important issue is to make sure that you consider many aspects of your business model. Ensure that you have a clear vision of the type of online business that you wish to create. And once you have picture of your ideal customer and create a value proposition that meets their needs, it will be important to then to ensure that you have the resources and capabilities to deliver on your vision.