What is your eCommerce business strategy? (And why you need to know it)

Running a business is the act of creating value for customers, and capturing it for shareholders, through a sustainable competitive advantage.

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The key to developing and sustaining a competitive advantage is to pursue a specific strategy. In the classical definition, Michael Porter broadly outline three different strategies: Differentiation strategy, low-cost strategy and focus strategy. All your tasks, activities and actions are defined by and aligned with the strategy you commit to pursue.

And the important term here is ‘commit’. Flip-flopping between different strategies does not help develop a competitive advantage, actually erodes an established competitive advantage and leads to a mediocre business. Most great businesses commit to one of these strategies very early in their life and drive all their decisions in line with their strategy. Lets take a brief look at what each strategy entails, what are the general themes of each strategy, identify (retail and ecommerce) businesses that pursue such strategies and see how mixing two strategies is not consistent.

Differentiation strategy

You differentiate your business, product or service from others in the market. Typically your target market is not very price sensitive. Differentiation allows you to charge a premium for your product/service. To sustain this advantage you need to either continuously invest in creating and maintaining this differentiation or introduce barriers for other folks aping your differentiation (aka patents). Apple is a fine example in both, the retail and online space that follows this strategy. They invest heavily in both – product innovation and patents. Zappos is another example of how a company follows this strategy in customer service. There are several online stores you can buy footwear from but Zappos differentiates themselves by investing in their people.

Very few small/medium online businesses follow this strategy. Typically they are a single product business that have some barrier that prevents copycats (patents or exclusive suppliers). Dodocase is one such example.

Low cost strategy

You commit to having the lowest cost for your product/service compared to your competitors, continue to lowering the costs and invest in operational efficiencies. Large scale and low-cost strategy go hand-in hand. Scale enables businesses lower their cost in a couple of ways. One – it helps spread fixed costs over a large number of units – the larger the scale, the lower the fixed cost per product/service. Scale also helps negotiate better terms and costs with vendors.

This is a very difficult strategy for small/medium online businesses to pursue. Mostly because of the fact that they are small/medium businesses and to succeed at this strategy the business implicitly needs to be big. Since scale is a major factor in success of the low cost strategy, for a given industry, the winner takes all. We see this in the online marketplace (Amazon), big box retail (Walmart), online search (Google), etc.

Focus strategy

You focus on a specific niche and build a relationship with your market. This involves immersing the businesses in and around a specific niche. Create a reputation in the niche by building expertise, speak the same lingo and provide help to folks in the niche. This is typically done by generating content, participating in forums, speaking at engagements, sponsoring relevant events, etc. Some examples of businesses who have done this (in the home improvement industry) are Houzz.com for ecommerce and Homedepot for retail stores.

Most small/medium online businesses pursue the focus strategy. They focus on a specific community or interest group. Generate content about their niche and build a recognizable brand around it. They show up as top results for Google searches in their niche. As a matter of fact the whole SEO industry enables niche businesses.

Summary

It is important to at least think through what strategy you want to pursue with your business – as this influences the decisions you make everyday, helps them stay consistent and builds a business that is successful in the long term. Very few companies are capable of successfully pulling off two strategies at the same time. All small businesses must pick one strategy to build a solid, sustainable competitive advantage.

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New: FedEx One Rate, Saturday Delivery, Hold for Pickup and more!

Some exciting enhancements that our product team has been working on to bolster our shipping capabilities. Lots of good stuff in here to learn about, so let’s dive right in!


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FedEx One Rate

You can now use FedEx One Rate as a shipping method in Ordoro. What is Fedex One Rate you ask? It’s a flat rate shipping method that lets you ship in one of 12 standard Fedex box sizes as long as the package weighs less than 50 lbs. It’s a nice option to have if you’d like to set a flat shipping rate on your sales channel.


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FedEx Saturday Delivery

When you are creating Fedex Home Delivery shipments, you can now opt to get them delivered on a Saturday rather than waiting until the following Monday. Just choose the Saturday Delivery checkbox while creating your Fedex shipping label in Ordoro.

Create FedEx shipment with a future ship date

Want to create the labels today, but ship the packages out later? No problemo! Ordoro now allows you to set the actual ship date to be anything in the future, while creating your label and the tracking number right then and there.

More customs lines for FedEx international

For large international packages, Ordoro’s Fedex International form now allows up to 25 lines to be declared. Bam!


ups-featuresUPS Saturday Delivery

Just like the aforementioned Fedex Saturday Delivery, you can now also opt for UPS Saturday Delivery through Ordoro.

UPS Standard: Certificate of Origin

We’ve also added a checkbox to the UPS label panel to generate a Certificate of Origin with your label. When would you need this? Well, when shipping internationally, some destination countries require you to include a Certificate of Origin (CO) for certain type of products. So, if you are US-based retailer shipping clothes to Brazil and the clothes were actually made in China, then you need to specify China as the country of origin in the CO.


pickup holdVoiding USPS labels directly in Ordoro

We’ve made it WAY easier to void USPS labels through our system. Just delete the label and Ordoro will automatically apply for a label refund with USPS behind-the-scenes. The label credit will appear in your USPS account once the refund is processed (typically within 10 business days).

Hold for Pickup Option

If “Hold For Pickup” is requested on an order, it’s now very easy to set that in Ordoro. Simply select the “Hold For Pickup” checkbox when creating the USPS shipping label for the order. The destination Post Office will know to hold the package until your customer is able to pick it up.

Continually better USPS rates

Ordoro is working closely with USPS to continually offer you the best discounts in the industry. Whenever we get new discounts, they’ll automatically be available to you in your Ordoro account. Use our Shipping Rate Calculator to see how much you could be saving today!

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Fulfillment Strategy – Dropship

dropshipDropshipping is the fulfillment model where the merchant has their supplier directly send out the customer’s order to them. For more details on that check out Ordoro’s dropshipping page.

The dropshipping inventory model is perhaps the most attractive fulfillment method for a new ecommerce retailer to get started with. The thought of having sales online without the baggage of managing the fulfillment is like a dream come true. And for good reason.

Firstly, you can get started with the dropship model without any upfront costs. You do not need to buy any products beforehand, you do not have to rent any warehouse space (or your living room is not cluttered with boxes), heck – you could run a dropship business from your car of you wanted!

Secondly, the dropship model lets you leverage the supplier to manage all the tasks for you. These include making, storing, packaging and shipping the products. You are in effect outsourcing your whole back-office business operation. You could even leverage multiple suppliers at the same time. These suppliers could carry the same product (so you can get all the benefits of dual sourcing) or they could carry different products (enabling you to expand your product catalog)

With all the back-office operations outsourced, you can focus on sales and marketing activities. Be it talking to customers, making sales calls or doing tasks like blogging or paid advertising to increase your site traffic.

But this model comes with its own set of challenges as well.

For one, the merchant has no control over the quality of the order. They do not have any insight or influence into weather the right products are getting into the right box. They lose the opportunity to use their brand on the packaging and have very little control on when the package gets delivered. Managing returns are a hassle as well – should the returns be going to the merchant or should it be returned to the supplier?

Another aspect of quality of the order is that selling the product does not guarantee that the supplier does have the product in stock. Unless both, the merchant and the supplier, have sophisticated systems in place, getting real-time product quantities available for sale is a difficult task. Telling a customer that the product they just bought is not available, is poor customer experience. This hurts the merchant’s credibility, especially for a fledging business.

Then there are the usual monetary disadvantages of outsourcing – margins. Suppliers do want to be compensated for all the risk they take. They usually charge a premium for storing, packaging and shipping the orders. And chances are that the supplier is also selling through other channels and online retailers. Which means the merchant is probably in price competition with other merchants who sell the same products, which in turn affects margins. To add to that, coming up with shipping costs for dropship items in never an easy task. Especially is multiple suppliers are involved in fulfilling a single customer’s order.

But the biggest risk of the dropship fulfillment model is that the merchant is giving their customer information up to the the supplier. And unless there are contracts in place that explicitly preclude this, there is nothing stopping the supplier from directlyselling to the customer.

In summary, dropshipping is a good way to expand a merchant’s product catalog. Dropshipping, at times, does givbe the vibe of being a get-rich-quick scheme. But if used judiciously, can be very effective. We have seen healthy businesses employ the dropshipping strategy for one of three reasons- To test out a new product offering before they start stocking the product in-house, an alternative to fulfill products that they are temporarily out of stock or to fulfill products that are slow moving or expensive to stock.

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Effectively Managing Customer Returns

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After the holiday excitement and the rush of retail customers and sales, store employees and managers aren’t able to simply relax and bask in the afterglow of the holiday spirit. Instead, they need to stay on their game – now comes the advancing tide of gift returns!

In fact, the Christmas gift return season is just as traditional as the holiday shopping season! Even the most thoughtful gifts can be a wrong match. So how do stores handle the sudden influx of return merchandise? The same way they deal with the extra customers during the holidays: preparation.

Getting Prepared For Holiday Retail Returns

The logistics of returning massive amounts of products to the shelves is both a logistical problem and a potential drain of financial resources.  Make sure you have enough employees to accommodate the manual work you will need, and create your holiday schedules well in advance so you can anticipate any staffing issues or other unexpected problems. Make sure your return policy is posted somewhere obvious where your customers can easily see it, like at the cash register or printed on your receipts.

Remember, just because a customer returns something doesn’t mean there is no chance for another sale. Train employees to ask the customers questions and listen to their complaints or comments about the product they are returning. Maybe there is an item on the floor that is just what they are looking for. Finally, be sure to take care of your employees and pay attention to overall morale. Don’t forget to tell your team that you appreciate the hard work they are putting in. A small show of appreciation can go a long way.

E-commerce Returns

When you run an e-commerce business, you know that returns are just part of the game. Online shopping is a boon to both customers and retailers, but online goods are simply more likely to be returned because the customer cannot inspect their purchase in person before buying. This means that it is especially important for online retailers to have well thought-out return policies. Even though returned merchandise can cause expense to any retailer, many customers have reported that they simply won’t consider buying from an online store that doesn’t offer free returns.

So what does this mean for the onslaught of holiday returns? First of all, make sure your return process works smoothly before the holiday season.  Settle on a return policy that makes sense for you, and make sure that policy is effectively communicated to your customers.  If you use shopping cart software, make sure that it is set up to easily handle returns. These programs can be really helpful here, and can make it much easier to track returns and keep accurate inventory counts.

 

 

 

 

 

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Picking your fulfillment strategy – In house fulfillment

Once you launch an ecommerce store, one of the key decisions you make is how do you go about fulfilling your orders. And most business pick in-house fulfillment – because it is the obvious, most intuitive way to fulfill your orders. There are several advantages to this approach.

Firstly, it is the easiest to get started. For most ecommerce entrepreneurs, their living room is their first fulfillment center. There is no initial investment needed – to rent space or to hire people. This is the quintessential lean way to get started with a business. As business picks up, you can have friends and family help out, move your ‘fulfillment center’ to your garage. And once you do get to higher, sustained sales you can move to a real warehouse and hire some full-time employees.

InHouse Fulfillment

Secondly, this approach gives you total control of your fulfillment and consequently your business. You get to ensure the order quality, use your branding on packing slips and even boxes if you choose. This is especially important if you are looking to differentiate your business using your fulfillment process. Few examples of such differentiation include hand written notes, coupon codes for re-marketing or special packaging.

Moreover, having in-house fulfillment lets you react faster to changing demand – Llama T-shirt selling like hot cakes? Purchase more to re-stock quickly. DVDs of the latest transformers moving too slow? Run a marketing special. Notice customers buying the similar groups of products? Prepackage them together to save on packaging and even shipping.

Another (not so obvious) reason to go with the in-house fulfillment approach is returns. As any successful entrepreneur will tell you – customer feedback is very important to business, especially when you are starting off. For online retailers there is no better feedback than returns. Understanding your returns gives you valuable insights on what customers don’t like about your orders and enable you to react quickly. Damaged returns mandate better packaging, incorrect items need better quality control on picking and packing, unsatisfactory products may need you to remove them from your store, etc.

While there are several good things about the in-house fulfillment approach, there are some drawbacks that you need to be aware of as well. Having your own warehouse (apart from your living room or garage) needs some investment, both upfront (security deposits) and ongoing (rent, insurance, etc). Doing your own fulfillment is busy work and it does take away your time away from other, more productive tasks you could be doing such as talking to customers, running ads for your products, bringing more traffic to your website, etc

And just like your time, the same thing applies to your money. Having inventory in-house is like having loads of cash sitting in your warehouse. When you do buy and stock inventory beforehand, you are essentially using up money that you could use on promoting your product and website.

While there are several benefits of this simplest of approaches to fulfillment, being aware of tradeoffs you are implicitly making can help you make more informed decisions when you go about growing your business.

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How to start an online business with no money?

So, you have decided to start your own ecommerce web store. You have chosen the right products to sell. How much money do you need to get your business up and running? Can you get start your business with almost no money at all?

Starting at a real small scale is often the correct way to launch your business. Minimize your early cost commitments, and spend money only on things that directly impact your sales growth. Your lack of resources at this early stage and the constraints that they impose can be used at your benefit.

Here is what Clayton Christensen, one of the greatest management gurus of our era, says about the importance of starting real small. From Innovator’s Solution

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… pay careful attention to getting the initial conditions right. The only way that a new venture’s managers can compete against nonconsumption with a single product is to put in place a cost structure that makes such customers and products financially attractive. Minimizing major cost commitments enables a venture to enthusiastically pursue the small orders that are the initial lifeblood of disruptive businesses in their emergent years.

 

Another great proponent of starting real small is Jason Fried and his fellow entrepreneurs at 37signals. Their books, Rework and Getting Real are great reads for any entrepreneur. Here is how Jason conveys the same idea that I have described above –

 Do you really need ten people or will two or three do for now? Do you really need $500,000 or is $50,000 (or $5,000) enough for now?… Do you really need to build a factory or can you hire someone else to manufacture your products?… Great companies start in garages all the time. Yours can too.

Many of the successful ecommerce businesses that I know started at a really small scale. In a garage, with less than 10 products, selling online. If you are planning to start an online retail business, don’t waste a lot of money early on building a fancy website. And don’t waste money accumulating tons of inventory when you don’t even know how well you are going to sell. Instead, embrace your constraints and start real small. Start with a handful of products and use the most economic of all shopping carts to get your minimal website running. Use your relationships to spread the word and get a few early customers. Avoid tying up too much money in your business early on.

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Push vs Pull Marketing Strategies

Knowing the difference between push and pull marketing strategies is important when considering how to market your new product. If you are not careful in choosing the correct strategy for your product, your budget could take a big hit. When used correctly, your strategy can createimages consumer demand and effectively increase revenue.

A push promotional strategy essentially means getting your product in front of customers by whatever means necessary, or “pushing” it on them. The goal here is to ensure a customer remembers your brand. Retail world examples of this strategy in action are trade shows, showrooms, package design, and brand ambassadors handing out samples in the local retail store. The e-commerce equivalents are display ads and email blasts. This is a popular strategy that tends to be very cost effective.

On the other hand, a pull promotional strategy “pulls” customers into a product. This often takes the form of motivating customers with sales, coupons, or promotional giveaways. As a long-term strategy, businesses count on good customer service and a great product to keep customers coming back after the sale or giveaway has ended. Word of mouth referrals are obviously the cheapest form of advertising, so be sure to strive an incredible experience if your business decides to utilize the pull promotional strategy. Oftentimes, customers will pay a little more for better service.

Finally, remember to make it a habit to always ask a customer how they were referred to your business, especially if you are employing both push and pull promotional strategies. Tracking and testing different methods can eventually help you decide the best promotional method for your product or service.

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How much should I charge for my products – Perceived Value Pricing

Simply put, perceived value pricing refers to the buyer’s perception of a product’s value and how much they are willing to pay for it. A customer’s opinion of your product is more important to them than your product is so knowing what your customer’s needs are will bring you a long way in understanding how to price your item or service.

Use a perceived value pricing technique in your marketing efforts when introducing your product to the market. Customers will relate with the value if they are given a list of positive points about your product and the more points there are the more value the customer associate with the price.

Don’t be afraid to give as much detail as you can. If a customer isn’t fully aware of everything they would get they are less likely to purchase. Don’t miss out on a chance to make a sale because you didn’t build up the value for your product. Which bring us to our next point.

Don’t price it too low. We’ve all heard the old adage, “you get what you pay for”; believe it or not there are customers that are willing to pay a little more for a more durable, long-lasting, enjoyable product that will make them feel like they got their money’s worth. Pricing a product too low can actually backfire because the perception will be that the product is cheaply made or doesn’t hold the value needed to spend their money.

Keep in mind real value, which is the costs associated with how much it takes to produce to the product and how it will benefit the customer, when setting a price point for your product. You will set yourself up for a financial fall if you place more value on your product than your customers do. Keep it reasonable. You may think the hours and detail put in are priceless but eventually you do have to put a price tag on it.

So just how do you set your value? Evaluate your position in your niche market and consider your customer’s perceived value. Don’t buy into the hype that you have to set your prices to compete with other companies. You’ll set your business apart by providing detailed product information and setting the value you want customers to perceive. They will follow your lead naturally but be careful to not hype up your product to being more than it is.

Be honest with your product and it will reflect through to your pricing.

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Where do I start selling online?

Excited about starting a business, but overwhelmed by all the decisions you need to make?

Don’t worry – you are not alone!Selling online

Starting a new business has become easier than ever. With the convenience of buying online, more people do a majority of their shopping on the interwebs. This has spawned a massive growth in online retail which in turn has led to numerous channels and options for selling online.

Figuring out what online channels to sell on can be confusing and even intimidating for someone who is looking to start an online business. Here’s our take on it to help you make an informed decision.

We segment online sales channels broadly into two categories:

  • Marketplaces – that have several multiple sellers. For example Amazon, Etsy, ebay
  • Branded web-stores – that have a single seller. For example bonobos.com, gap.com

Let’s take a look at some of the major factors to consider while deciding where to sell:

Audience

Marketplaces: The biggest advantage of selling on marketplaces, is that half the marketing job is already done for you. Millions of buyers visit Amazon, Ebay, Etsy and buy billions of dollars of merchandise every day. So getting an audience is not a problem at all when you start selling on one of these.

Web-stores: Having your own branded web-stores on the other hand puts the onus of doing the marketing and spreading the word on you – the entrepreneur. Which is not a problem, if you are Gap, Bonobos or Target, as you already have a brand presence. But for most fledging businesses this means spending a lot of time and money on raising awareness or generating traffic to your web-store.

Buying Experience

Marketplaces: Selling on a marketplace gives you very little, if any, control on your customer’s buying experience. Marketplaces like to keep the buying experience of their buyers consistent and this leaves very little room for businesses to tailor their buying experiences.

Web-stores: Selling on your own branded web-store, gives you complete control over the experience of your customers. All the way from choosing the color pallet of the web-site down to the shipping options you would provide to your customers.

Branding

Marketplaces: If you do decide to sell on a marketplace, you would be one of thousands if not millions of businesses selling there. This means you are competing with several other folks in differentiating your product and brand when you are getting started.

Web-stores: Since you are the only business selling on your own web-store, once people do find your website, you have a much bigger opportunity to build and establish your brand.

Margins

Marketplaces: Although marketplaces do get you access to millions of sellers, them come at a price. Marketplaces take a percentage of your sales which effectively reduces your margins on the products you sell and hence your overall profitability. To add to that, competition from other folks selling the same product does influence your margins

Web-stores: Selling on web-stores not only lets you take your entire order price to the bank but it also gives you the freedom to set the list prices for you products.

Customer ownership

Marketplaces:  Marketplaces have very strict policies that prevent sellers from contacting the buyers. Marketplaces invest a lot of time and money to build their audiences and do all they can to protect that investment. This does not gives the entrepreneur much opportunity on building a customer base.

Web-stores:  When someone buys merchandise from your branded web-store, or even visits you store, you have complete ownership of that customer – their contact information, buying patterns, etc. You are free to re-market, re-target and re-sell them.

Final thoughts

You could even start selling on multiple places at the same time. But of course, the more places you sell on, the more time and money you spend on managing those. As an online retail entrepreneur, you need to think through such trade-offs.

 

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$25. All you can ship. ‘Nuff said.

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We’ve got some exciting news to share with you about our shipping-only Ordoro Basic plans. Starting today, you can create shipping labels for unlimited orders, connect unlimited sales channels and add unlimited users for just $25 monthly! You read that right! Our Unlimited Basic Plan now just costs $25 per month. And to top it off, you also get access to the best USPS rates in the industry – up to 67% off for most shipments. What’s the catch you say? None! Just don’t stop shipping – Not even when you add more sales channels, have more sales or get more people to help you ship!

Not only has our pricing become more awesome, but we’re constantly adding new features to enhance our shipping and inventory management services. Just sign in, start a new 15-day free trial and see for yourself.

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