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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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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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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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eCommerce Guide SXSW 2014

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Ordoro has partnered with some of the hottest companies in ecommerce such as Shopify, KISSmetrics, and Olark to bring some serious ecommerce love to SXSW!

If you sell online and plan on attending SXSW, we have handpicked a list of events not to miss.

Thursday March 6th

  • *5:00-10:00 p.m. Capital Factory Start Up Crawl

Friday March 7th

  • 12:30-1:30 p.m. Gary Vaynerchuk Tells You How to Rock SXSW

  • 3:30-4:30 p.m. What Social Media Analytics Can’t Tell You

  • 5:00-6:00 p.m. Why Going Backward Is the Surest Path to Success

  • 5:00-7:00 p.m. #SXSMB Garden Party, powered by Bigcommerce

Saturday March 8th

  • 12:30-1:30 p.m. 4 Caffeinated Strangers Launch a Product, Live

  • 12:30-1:30 p.m. Fashion E-Commerce: Conversion Versus Branding?

  • 3:30-4:30 p.m. The Rest is Rising: Entrepreneurship in America with Steve Case

  • *5:00-8:00 p.m. Small Business Web Happy Hour

  • 5:00-9:00 p.m. Dribbble Meetup SXSW

Sunday March 9th

  • 12:30-1:30 p.m. A New Dialogue: Your Input Is Changing E-Commerce

  • *3:00-6:00 p.m. Shopify SXSW Meetup

  • *5:00-8:00 p.m. Small Business Web Happy Hour

Monday March 10th

  • *11:00-12:00 p.m. Building Six Figure eCommerce Stores Today

  • 5:00-6:00 p.m. Omni-Channel e-Retailing Meetup

  • *5:00-8:00 p.m. Small Business Web Happy Hour

Tuesday March 11th

  • 11:00-12:00 p.m. Demystify the Millennial: It’s Not Academic

  • 3:30-4:30 p.m. Building Brands Online – The Future of eCommerce

(*) Events sponsored by Ordoro. If you’re in town come meet our team at these events!

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5 Ways to Increase Your Average Order Value

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If you’re looking to increase the revenue of your online store, you can do it in a number of ways. Most online merchants choose the volume approach, meaning they try to increase the number of products or services sold to (most of the time) separate customers. But trying to increase the average order value (AOV) might work even better: if you’re selling more to the same customer, you’re saving in quite a few areas of your business as well, ranging from shipping expenses to the cost of ink and paper for printing invoices. There are multiple roads you can take to increase your AOV, but some of them seem to be worthier to take than the others. So here are five ways which we think are certainly worth a try if you’re looking to increase your AOV, revenue, and (hopefully) profit:

1. Free Shipping

According to Deloitte, 71% of online shoppers are planning to take advantage of free shipping this holiday season. For online merchants, it means that offering free delivery is becoming an essential part of business, as it not only can increase the average order value, but is also necessary to attract most of the prospective customers to even consider shopping there.

RJ Metrics recommends three ways to implement free shipping into an online store. Firstly, you can set shipping thresholds, meaning customers have to spend a certain amount to qualify for free delivery. According to Deloitte, 40% of customers will spend more to get the products delivered for free, so it’s certainly a good option if you’re looking to increase your AOV. Secondly, you can offer free shipping on a certain combination of merchandise or deliver the whole cart for free in case a customer purchases a particular item. Lastly, limited time offers for free shipping might not only increase the number of orders on calmer periods, but boost the AOV as well, as customers know they’ll have to pay for shipping in case they want to buy something else in a few days or weeks.

2. Product Bundling

According to KISSmetrics, one of the best ways to increase your AOV is to offer discounts when buying multiple products at once. You can combine a few relevant items yourself or you can leave the mix and match option to the customer, but receiving a considerable discount might just be the factor which drives the customers to buy more at once.

Bundling can cause some inventory challenges since you may sell items separately or as part of a bundle. Don’t worry about that if you’re using Ordoro to manage all your orders though, as our kitting functionality allows you to bundle products and keep your inventory count accurate at the same time.

3. Volume Discounts

It depends on what you’re selling (people probably won’t buy two same car parts when they need just one), but offering discounts depending on the amount of products bought can also considerably increase your AOV. For example, Paperstone, an office supplies company, offered their customers different prices if they bought more than 5 or more than 10 boxes of A4 paper. According to Visual Website Optimizer, it resulted in the online store’s AOV increasing by 18.94%.

KISSmetrics points out that it’s also very important to clearly show the exact amount of money that the customer might save if they’re buying in larger volumes. In fact, it’s true for all the incentives mentioned above and below – if you let the customers know that they’re eligible for free shipping only just before checking out, you’re losing on a lot of prospective purchases. Although it can certainly be a very nice surprise!

4. Cash-backs and Vouchers

Another way to increase your AOV recommended by Visual Website Optimizer is cash-back offers when the customers spend a certain amount shopping in your store. You can offer such deal to anyone who comes to the store or your previous customers only (presenting the voucher as a gift on checkout), but it works the same either way: for example, if the customer spends at least $50, they get a $5 discount on the whole shopping cart. You can even offer different cash-back levels, increasing the amount saved with every spending threshold ($12.5 on $100, $30 on $200, etc.).

5. Social Proof

People tend to hesitate spending a lot of money in an online store they barely know anything about. So unless you’re selling some well-known merchandise, you might need someone closer to the customer to influence them to spend more, consequently increasing your AOV.

RJ Metrics lists a few ways to influence the customer to buy more by using the opinions of other people: user reviews, celebrity endorsements, and recommendations from friends. According to Reputation Labs, 89% of people trust online reviews, meaning several positive ones near your product might sway them to buy it. In addition to that, Bazaarvoice notes that the AOV of customers who read reviews is 6% higher than of those who don’t. So a review system certainly seems to be worth implementing. While celebrity endorsements might not be cheap and are suitable only for some lines of business, apps and toolbars that let the customers shop together with their friends can boost the AOV up to 50% according to DecisionStep.

In conclusion, we have to note that there’s only one way to know what will or won’t work for your customers: testing. You’ll have to do plenty of tests to understand how many freebies and discounts are plausible when trying to increase your average order value. After all, a higher AOV isn’t the final objective, as it doesn’t necessarily increase your profit as well. It usually does though, so it might be a good idea to try at least a few from all the things listed above.

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How to make your products stand out from the competition

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Image credit: Jenny Downing

There are many factors that decide whether a product or a service is successfully sold on the internet, but how it is represented to the customer is probably the most important one. Everyone understands that managing to entice the customer to come to the website isn’t enough – if it was, we wouldn’t need to worry about conversion rates. But what actually does influence the customer’s decision to buy is how the product is going to satisfy their needs and why is it worth to pay a certain price for it. A lot of online merchants believe that the vague product descriptions and photos they usually get from their suppliers are enough to persuade the customer – the item itself doesn’t change after all. Well, it might work if you’re selling, let’s say, nuts and bolts, where the material, the measurements and the manufacturer are all the buyer will ever need, but when it comes to furniture, apparel, collectibles or pretty much anything else, the product representation really matters – both if you’re selling on your own online store or on online marketplaces. So what can be done to represent your products in the best way possible?

Craft the product descriptions

Before you start writing descriptions for your products, you have to think both about what exactly you’re selling and your target audience. Will a buyer of the mentioned nuts and bolts care if you write three paragraphs on how that stainless steel 3/8″ bolt is going to change their life? That’s right, they won’t, because they know exactly what they’re looking for. But if you’re selling a yacht or a sports car, you’ll have to do your best to prove to the customer that your item is actually that ethereal feeling they’ve always dreamed about in a physical form. For most of the products though, a good description should be somewhere in-between – revealing both the item’s characteristics and the ways in which it will make the customer’s life better.

Make sure the photos are done right

As our friends at 3dcart put it, one of the major disadvantages of shopping online is that you can’t look at and feel the product before making the purchase. That’s where the photos come in – and the better they represent the product, the more interested customers you should expect. And it isn’t as simple as it may look. First of all, you should forget the smartphone (no matter how advanced they might be nowadays) and use a DSLR camera (without flash!) for really high quality pictures. Secondly, you should photograph the object from as many angles as possible – front, back, top and bottom are all a must, and some additional photos of details may be needed sometimes as well. If a product comes in a few different colors, you should use the same angles for all of them. Finally, you’re going to need a neutral (preferably white) background for the photos to look professional. Then, when you’re uploading the photos to your store, make sure all of them are scaled to the same size, providing a uniform design throughout your store.

Present all the relevant information

Not all of the information about a product should be integrated into the description, as you can always create an additional tab for any extra info that might be relevant to the customer. Most of the time, this includes the measurements of the item (and a link to the size chart if you’re selling apparel). Product weight is also a must if your delivery fee depends on the weight of the package. Depending on the product, there might be some technical information in which the potential buyer might be interested in – in fact, if you’re selling some types of merchandise, for example electronics, it’s probably the most important part of your product representation. If you include all the necessary info and make it easy to find on the product’s page, you’ll receive less inquiries about the item from your potential customers – and let’s not forget that most of the people choose to close the browser window over contacting you if they don’t find what they’re looking for.

Maintain the same style

We already mentioned it in the part about the photos, but maintaining a uniform style throughout your online store is essential. You can’t write an engaging 300-word description about one of your items while providing no information about another one at the same time. It’s just plain unprofessional, and customer expectations are high as ever. Remember that a good-looking and professional product page can work as an advertisement for your entire store and a potential customer might just choose to browse a little more if they see a great product page, even if they don’t need that exact piece at the time.

Descriptions that are written with the customer in mind, a lot of professional photos and all the needed information should make your product pages stand out – a lot of online merchants still don’t understand the importance of product representation, so it’s a great way to stay ahead of the competition. Add great website design, customer reviews (for each and every one of your items) and smart marketing to the mix, and you’ve got yourself an online store that is ready for success.

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Customer Success: Taste of Texas

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Interview with Lisa Blackard, Executive Chef at Taste of Texas Restaurant

How did you get started with your business? What products do you sell?

The Taste of Texas restaurant has been in business for 35 years. And we would often get requests from customers all over the US to ship our items to them. Seeing how our brand had organically grown with so many customers in all 50 states, Edd Hendee (the owner’s son) who was in business school circa 2005, started exploring the idea of launching an online store.

So, in 2005, we launched the Taste Of Texas webstore (built onBigcommerce). Through our webstore we sell the same Certified Angus beef perfectly aged and trimmed steaks we offer in our restaurant, as well as merchandise and side items popular with our restaurant customers. From us, you can always expect a mouth watering, perfect steak on your backyard grill!

We launched the webstore right before Christmas gift season, and we were thrilled to do over $100K in sales our first month of online operation.

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What is the secret behind your marketing strategy? How do you get your customers?

We work hard to maintain a great brand and customer base with the restaurant. We first target our existing restaurant customers to market our online store to. During the Christmas gift season, we occasionally run national radio ads. We spend a good effort on search engine optimization. We also have a set of videos on our website where our chefs demonstrate our own grilling instructions for your next cook out!

What online channels do you sell your products through?

We only sell through our own webstore (TasteofTexas.com). We do not sell on Amazon or eBay. We’ve found that it’s not cost effective for us.

While choosing a shopping cart platform to build our webstore on, we spent a lot of time on trial and error. We went through four previous shopping cart platforms before landing on Big Commerce. From our experience with all the different systems we’ve tried, Big Commerce is the most intuitive and easy to use for our customers.

How has Ordoro benefited you?

Having a really great shopping cart software and fulfillment system is key for both your customers’ ability to place an order and your ability to fulfill it. We’ve learned this the hard way with complicated shopping cart software and cumbersome fulfillment processes. We’re very happy with what we’ve found in Big Commerce and Ordoro.

We do about 65% of our sales for the year in the month of December, which means that automation is really key during that month. Ordoro has made processing and shipping much simpler for our staff.

 

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