The fearsome truth about e-commerce

That “thin”? red line. Part 1, of a series of articles around the pain points for e-commerce.

You spend a lot of money on marketing to get people to visit your store.

But you do not make the best use of the result that you get from the marketing activities.

In this article I will tell you how e-commerce companies improve their conversion, lower their marketing cost and increase their cost per new customer.

The core problem with e-commerce is that we have basically ported the standard retail store to the online platform.

The first e-commerce site was launched back in 1984 by CompuServe. E-commerce did not take off until a couple of years later in late 1990 where we wanted the consumer to feel that they already knew how to behave and made the experience similar to a normal retail store.

But things have changed and we have especially seen a dramatic change in consumer behavior online compared to offline.

The entire model around how we shop online is different nowadays as our world has changed but the e-commerce sites have not been able to keep up with the rapid change.

The problem with e-commerce is that you don't earn even close to what you have the potential to earn.

The global average e-commerce conversion is 2-3%, that's right 97-98% of the visitors to an online store leave the store without making any purchase. Yet every customer that you get to the store cost you money in terms of marketing and the marketing costs trend show us that prices will keep on increasing. Back in the early days, a Google AdWords could be purchased for cents but today the average cost is over $2.

Let's keep that in mind, that every customer that you attract to the store cost you over $2 even if they don't buy anything from you.

Early on customers were acquired for next to nothing; now acquisition costs can easily exceed more than $100 per new customer.

Obviously, this depends on the type of store your operating and even if we cut that in half and go for a cost of $50 its still not solving the problem and I will explain why.

So let's have a look at that for a second, you're a smart person but I don't want you to get me wrong here. CAC or Customer acquisition cost is the price you have to pay for every person that finalize a purchase in your store. So if you have 2% conversion but you pay $2.14 in Google ads for every visitor that enter your store. Let's just make a number up and say that you have 10 000 visitors per day.

That means that you have to pay $21 400, per day in google ads. Now, obviously the average order value does differ a lot depending on the industry but the current global average order value from search result generated traffic is $101. You see at this early stage that the numbers don't add up, you can't be paying close to $100 for orders that are on an average $101, so how does this work? Hold on for a second and we will have a look at that also.

That means that with a 2% conversion on your 10 000 visitors you have 200 paying customers: 200 * $101 (average order value) = $20 200.

But you have to pay $21 400 for the traffic and are left with a loss of -$1 200.

The rescue here is that when you have a customer buying from you once you do all in your power to get that customer to become a returning customer to even this initial cost out.

But if we do as we propose and focus on your visitors, and improve the conversion from 2% up to 3% conversion.

A quick headcount gives us a totally different scenario. 10 000 visitors still cost us $21 400. Now we have 300 paying customers, paying 101 per order = $30 300 and you are left with $8 900.

So what I wanted to show you is that by increasing your marketing budget you will only gain more traffic, but if you don't start to focus on your conversion you will reach to a dead end eventually.

We are the leading experts in targeting visitors to build long-term conversion and dramatically improving conversion for stores all over the world. We have currently helped over 3000 stores increase their conversion.

Lizer Group is the winner of Global SaaS award for the best e-commerce solution and named by CNBC as one of the world's 20 hottest startups.

If you want to read more about how you can rescue your company from the largest risk that any e-commerce company stands in front of you are welcome to contact me [email protected].

If you found interest in this article I believe that you also will be interested in reading the other article series that I'm writing about the future of e-commerce, you can find it here --> https://www.dhirubhai.net/pulse/future-e-commerce-part-1-consumer-relationship-karl-lillrud

Don't forget to like this article so that I know that its worth the time writing them for you, and be sure to share it with your network.

I could talk for weeks about the many areas that we can improve in and that's exactly what I'm going to do, so make sure that you don't miss the next article here on LinkedIn.

Join me in this red line series of articles and reach out to me. Yes, send me a message and we will talk about your current situation and how you can improve by targeting your most important pain point.

I like to ask for two things from you:

1. I love feedback, just hit the like button or write your feedback either in a personal message or in the comment field. It could simply be that you agree with me, or you can point out things that you like me to elaborate on or perhaps what you hope to read about in the next article.

These articles are meant to help and educate you but if you think I'm shooting too high or too low I need to know so that I can finetune the aim for the next article a little so that it fits you perfectly.

2. I want your help to spread the word, I have been working in this business for many years already but I rarely see these type of articles, and to me, that's an alarm bell going off. The things I talk about are to a large extent things that almost everyone in the e-commerce business should know about but most people don't. So help me help your friends, help me spread this article so that we start solving these major problems and if you're interested in talking about it more I am here, just give me a call +46733133600 or send me an email [email protected]

If you like me to come and speak at an event, a seminar, a school, or in your office just reach out to me.

About the author:

Karl Lillrud, a serial entrepreneur with 21 years of experience from this segment.

Founder of one of the first interior design stores online in the Nordic countries where he back in early 2000 learned about the many challenges that e-commerce struggle with even today.

That's why Karl with Lizer Group help companies overcome these hurdles and focus on what matters most, keeping customers happy and helping them get a firm grip on that market position. Being a public speaker and entrepreneurial mentor Karl love to share his experience and knowledge with the one goal to help others reach their success easier and faster

Karl Lillrud

CEO of Lizer Group

[email protected]

www.lizergroup.com

+46733133600

Source:

https://www.lizergroup.com

https://www.hochmanconsultants.com/cost-of-ppc-advertising/

https://www.forbes.com/sites/stevendennis/2017/08/31/unsustainable-customer-acquisition-costs-make-much-of-ecommerce-profit-proof/#2c8a9d663e77

https://www.statista.com/statistics/325384/online-shopping-order-values-traffic-source/

Original article:

https://www.lizergroup.com/single-post/2017/11/06/The-fearsome-truth-about-e-commerce