Is the gold-rush of the e-commerce market over? Just recently, the German Retail Association (HDE) adjusted its sales forecast for the German retail sector , predicting an actual decline of 4 percent in 2023. The main reason: the lower purchasing power of German households due to inflation. The market has become more difficult. This is also evident from a look at the headlines in the trade press. The toy retailer myToys had to close its online store in the first quarter and fashion retailer Hallhuber has also been hit.
German retailers have invested a lot in their online shops – on the one hand to stand up to the likes of Amazon and on the other hand to cope with changing consumer behavior since the pandemic. But even the big players have now understood that e-commerce is not easy. Even established giants such as Peek & Cloppenburg are now reverting to a “stores first” model.
While some players are closing their stores, online retailing remains a lucrative business for others. Young companies in particular are repeatedly demonstrating the potential that lies dormant online. That’s why Warehousing1, together with etailment, selects the top 100 e-commerce startups in the DACH region every quarter.
Despite these great successes, the market is competitive and not every online shop will emerge victorious from the upcoming battle for the e-commerce market. Especially companies that focus on direct-to-customer business (so-called D2C stores) and for which e-commerce is not an afterthought have a good chance of holding their own on the battlefield.
For those who want to know exactly, we have collected 3 tips that will make any e-commerce strategy a success.
Table of contents:
- Tip 1 – Build a flexible and scalable fulfillment setup
- Tip 2 – Market products innovatively and via the right channels
- Tip 3 – Improve customer experience – with the latest technologies
Tip 1 – Build a flexible and scalable fulfillment setup
By far one of the most important levers for the success of an online shop is its logistics setup. Everyone knows logistics is important – after all, without it, the product won’t arrive anywhere. But the right fulfillment setup entails even more. It’s essential for a store’s cost efficiency, it enables long-term growth, and it makes the business more crisis-resistant.
Logistics accounts for a significant portion of the running costs of any online shop. Depending on the industry, logistics costs swallow up 9 to 35 percent of online retail revenue Retailers who pay attention to costs from the get-go increase the profitability of their shop. In particular, fulfillment networks like Warehousing1 can offer fast-growing e-commerce startups cost-effective logistics solutions that also meet high quality standards.
Focus on scalable fulfillment
Online shops that set up their fulfillment so it is scalable can be more relaxed about the future. For one, a scalable setup offers the ability to keep up with the coming growth of the online shop. This is especially relevant for fast-growing e-commerce startups, as they run the risk of outgrowing their own logistics capacity very quickly. At the same time, scalability is key for startups that regularly expect demand to fluctuate, for example due to the seasonality of their offering. If a company sells a particularly large number of products around Father’s Day or Mother’s Day, for example, this can easily be taken into account when planning capacity. In this way, retailers avoid having to retain logistics capacity themselves. This also saves costs. This flexibility makes it possible to maintain service levels and satisfy customers even when demand increases.
Making logistics crisis-proof
A cost-efficient and flexible fulfillment setup brings another key advantage. It makes the business basis of your own online store more crisis-proof. The online market in recent years has been lucrative, but at least as volatile. Even experts have difficulty predicting strong market fluctuations. When demand drops unexpectedly, stores with flexible and crisis-resistant logistics are in a much better position than those that have relied on rigid structures – such as in-house logistics. Retailers who have opted for on-demand fulfillment only pay for the logistics services they actually use – a major advantage in a crisis.
Tip 2 – Market products innovatively and via the right channels
Even the best product will remain on the shelves if no one knows where to find it. That’s why it’s important for online shops to think carefully about which channels are relevant and how best to market a product. The first step is to know your customers in order to know where best to reach them. After that, there are a variety of ways to get your message out to the world.
Discover social commerce as a sales channel
Germans spend an average of 89 minutes a day on social networks – and even more among younger users. This is where social commerce – the sale of goods via social media platforms – comes in. The most important networks for so-called social selling are Facebook, Instagram, TikTok, WhatsApp and Pinterest. E-commerce brands can bring customers to their sales channels via their social media pages. But careful: Those who sell directly via the platforms should keep an eye on any fees that may be incurred.
Social media thrives on images and videos. Shops whose products can be showcased particularly well should think about social commerce. Tutorials and videos that create value for the viewer are also a good way to attract potential customers. In recent years, fashion, cosmetics, outdoor and food brands in particular have made a name for themselves in social commerce. Retailers should also pay attention to which social media channels are particularly suitable by taking a look at the average age of their customers. For more on social selling and how to find the perfect sales channel, check out our blog post on social commerce.
Focus on your own online shop
The own website is at the same time one of the strongest and most difficult sales channels. The big challenge is to bring customers to your own site. This can be done via online marketing channels, traditional offline advertising or the social media sites mentioned above. But once the mammoth task has been accomplished and the new customers have landed on the website, the strengths of this channel become apparent. On their own site, brands have almost unlimited autonomy over their brand presence. That’s why a brand’s own website is essential for setting the tone as a brand – and for focusing on topics such as sustainability or proprietary content. Here, brands can forge a direct connection to their customers.
Diese Autonomie ist ein starker Kontrast zu den starren Regeln, mit denen Händler auf Marktplätzen zu kämpfen haben. Darüber hinaus sind die Gebühren, die Marktplatzanbieter wie Amazon verlangen, dieses Jahr erneut gestiegen. Inzwischen diversifizieren selbst Unternehmen, die zuvor komplett auf eine Marktplatzstrategie gesetzt haben.
Tip 3 – Improve customer experience – with the latest technologies
A core aspect of competing for e-commerce market share is the customer experience that online shoppers have with a brand. Customers are used to perfectly smooth processes from Amazon, Zalando and the like. Logistics is a key part of this, but also to the technology behind it. Fortunately, there are now cost-effective SaaS solutions for everything from shop systems to logistics software, thanks to which e-commerce startups can compete with the big players. Technical aspects that retailers should consider with an eye on the customer experience are:
Shop system integration: Shop systems, such as Shopify, should be perfectly integrated into the website and also connected to the logistics provider’s warehousing management software. This guarantees that all orders are also processed promptly.
Inventory management: To avoid annoying stock-outs, retailers must make sure that everything works out when it comes to inventory. New SaaS-based logistics solutions, such as WH1+, help companies optimize their inventory management processes. Users can track their inventory, manage their supply chains and optimize warehouse management. The status quo is always visible on the dashboard.
Empowering customers: Online stores can give their customers the opportunity to easily manage orders themselves via an customer portal The pleasant side effect for retailers is that they can significantly reduce their service costs. Customers can process orders all by themselves. This also includes initiating a return. Customers appreciate this.
The e-commerce market is more competitive than ever. Even the established brands are no longer sure whether they will emerge unscathed from the great battle of the e-commerce brands. But instead of sitting idly by, retailers should gear up for the times ahead. With the tips we’ve compiled, any brand – startup or online veteran – can face the competition with confidence.