E-Commerce 101

1. E-COMMERCE 101 The things you always wanted to know about E-commerce but where afraid to ask.Paul Lepa, CEO, RedStores.com

2. Agenda Introduction Things that you will learn Fundamentals of selling Real stores how they work E-stores how they emulate real stores What makes E-stores works Ecommerce Team Suitability of ecommerce for your business Getting Started Lessons from the field Questions and Answers

3. Founders Background Electrical Engineer with Computer Minor from Canada Postgraduate work in Digital Filter Theory Valmet Automation Started as a Programmer/Analyst in automation arena Shortly moved into Sales/Marketing Support Role Support Sales Department at tradeshows, technical solutioncoordination Founded Just For Fun Compatibility at age 24 sold 2000 copies of the software Direct Mail campaigns to 20,000 schools in US and Canada Moved to Koch Oil Project Manager Executed large pipeline software automation project - $3MM budget Executed number of pipeline expansion projects - $3-5$MM

4. Founders Background Recruited by Valmet Automation to enter the sales team Became Senior Account executive in charge of large pursuits Assembled pursuit teams from cross-company Solution focused selling to Fortune 500 companies (BP, Chevron) Over 4 years, sold over $40MM of automation projects Worked with top level Fortune 500 companies C level Recruited by ABB to headed up a Global Pipeline Solution Unit Responsible for solutions for the pipeline automation worldwide Multi-country team Relocated to Mannheim, Germany in 2002 Relocated to Beijing, China in 2003

5. Founders Background 2003 Recognized opportunity for trade out of China to the western countries 2004 - Resigned from ABB 2004 2006 PearlsOnly grows from $40K to $3MM USD in sales 2007 - Begin process to convert PearlsOnly into scalable system Focus away from Pearls into scalability Invest in R&D and high level of automation Invest in high level of Business Processes Goal of scalability Invested over $500K in systems and scalability processes 2009 RedStores.com transformation completed Ready to run

7. Things that you WILL learn Learn a big picture of eCommerce Make you aware of all the areas of eCommerce Give you ideas where to look for more specific information will show you books that had influenced me Give you some ideas for your own venture Open up your imagination Make eCommerce accessible through knowledge Inspire 1 or 2 of you, to go and DO IT!

9. Fundamental Concepts We are born with inherent ability to sell.

10. Lemonade Stand We are born with inherent ability to sell.

11. CustomersLocationDraw the costumer Product to sell Store Design StaffCash RegisterFundamentals of Selling Anything

12. Commerce: Success is about 2 things Traffic Getting enough customers Conversion Rate Getting those customers to buy

13. What is traffic? Traffic is people visiting your store Traffic is the simple relatively easy to get

14. What is Conversion Rate? Numbers of Sale (CR%) = Numbers of Visitors

15. Key FocusNumbers of Sale (CR%) = Numbers of VisitorsThis is our focus getting this person to buy. Everything we do from now on is focused on him and her.

16. Interesting Fact ???? Conversion Rate in Retail world is 20% Conversion Rate in ecommerce is 2% ????

18. Welcome to the E world We must think different

19. e Lemonade Stand.com

20. Customers Location Draw the costumerProduct to sellStore DesignStaff Cash RegisterFundamentals of Selling Anything

21. Customers Location Draw the costumerProduct to sellStore DesignStaff Cash RegisterFundamentals of Selling Anything

22. Suitability of Ecommerce When does eCommerce make sense for yourbusiness?

23. Causality Success in physical space success in ecommerce Success in ecommerce success in physical space

24. Ecommerce and Retail Retail eCommerceVery different types of business

25. Ecommerce vs Web presence eCommerce is: Transacting taking orders working with customers Web Presence a web site with company info Office directions store hours product catalog eCommerce Web Presence Some businesses need only Web Presence as extension of their marketing not ecommerce

26. Vocabulary of eCommerce

27. Brick-and-Mortar eCommerceCustomers Traffic (page views)LocationServer (hosting), cartDraw the costumer Marketing PPC and SEOProduct to sell Photos, DescriptionStore DesignSite Design (Skin)Staff Customer CareCash Register Payment Gateway

29. We have unlimited traffic In Retail traffic we only get traffic within a certain radius and volumethe venue draws In eCommerce we can bring millions of people there is no limit on people BUT can we can convert them economically.

30. Differences Corporate site is to provide information eCommerce website is designed to convert a customer right there and right now Every element on a page ha a purpose to help with conversion If an element is on a site it MUST have a purpose.

31. Structure of a Site Core Commerce Structure (only 5 pages) Home Page Landing Page Catalog Page Product Detail Page Checkout Optional Trust Building Pages

32. Home Page

33. Landing Page

34. Catalog Page

35. Product Page

36. Checkout

37. Trust Building Pages About Us Education / Information Customer Care Policies References

38. Elements of Design Difference between ecommerce site and a corporate site

39. Purpose of Site ElementsWhat is the purpose of this Element? Why tell them how manyhours? People want it FAST weBeing VERY specific buildwant to let them know trust this right away

40. Purpose of Site ElementsWhat is the purpose of this Element?Why tell them savings? If others have done it, I must People go to internetbe ok to do it too. Sheepfor savings. Specific #effect.help trust.

41. Trial and Error There is no hard and fast RULES for an ecommerce design Must UNDERSTAND your customer to design a site for THEM Psychology of consumer key

42. Moral of Trials EVERY element has to be analyzed Testing with A/B trials Assumptions are good but must be tested Gut hunches are often counter intuitive Ecommerce site HAS to be designed for Conversion. EVERY little element makes a difference. EVERY little element makes a difference.

43. Factors influence CR% Testimonials from Phone Number for Customers Customer Care on site Reviews Chat function Site Colors High Quality Descriptions Trust Factor Speed of Site Free shipping Ease of use of cart Site navigation Price of product Education Pages Photo Quality and Quantity

44. Understanding Buyers Psychology

45. Meet our Customer

46. Sourcing Customer View Needs Quality Product Wants to know if the item is in stock Wants it YESTERDAY, but will settle for TOMMOROW. Needs to find what she needs and it should be in stock NOW!

47. Logistics customer view He wants to know that what he ordered will reach him. He want to know where it is When will I get it. How fast will it ship What if it gets lost. I WANT it NOW!

48. Traffic customer view Take me right to what I want to look at. Guide me, step by step dont make think too much Show up on Google, so I feel more safe Let me see your site in at least 7 difference places I will trust you then

49. Traffic customer view Show up in the place where I am looking Show up at the time Im looking to get something Remind me what your site name is again I can only remember last 10 minutes

50. Customer Care customer view To buy things, she wants an answer NOW! with no hassle. Knowledgebase. If there is a question that is NOT answered on the site customer experience already reduced because now we added complexity. BUT, if there is a CHAT she may ask a question right there or maybe CALL. She may EMAIL and be ok to wait for an answer but now our chances of sale are down by 60%. Attention span of 15 seconds.

51. Web Servers customer view My attention span is 5 sec your site better show up FAST or I will go somewhere else. If your site is down, I will just buy somewhere else. I dont want to see anything that would worry me like a warning message about security, or a broken link.

52. Payment customer view I want to pay by a way that is easy for me. Dont you steel from me I want to fill out as little as possible on a form. Is my card going to be safe?

53. Marketing customer view Does the site look nice Do you make it easy forme to find things Do you help me make a decision Am I comfortable at this site Do I trust it Are the descriptions inspiring Can I get help if I need it?

54. IT Infrastructure Customer View She would like to see tons and tons ofphotos of HER product. Tell me ALL the little details about theproduct so I dont have to ask you. She needs to READ a LOT to help herbuy the item. All this info on the site better be 100%correct or Customer Care costs go up.

55. Bridging the Gap CR%SALEDo you haveSite makes Will I get itWill they what I wantme FAST?delivercomfortable Can I find it I like the Why should I easily Do I have allpictures buy now?info I need to Is it in stock buy nowThis site sure Can I pay loads fast easilyPrice?

56. IT Infrastructure SourcingPayment GatewaysLogistics Ecommerce is: Website InfrastructureTrafficMarketingCustomer Care

57. IT Infrastructure Sourcing SourcingPayment GatewaysLogistics Ecommerce is: Website InfrastructureTrafficMarketingCustomer Care

58. Sourcing for eCommerce Has to be repeatable and consistent - because of photos Has to be managed ideally in real time avoid out of stock situation otherwise high Customer Care Costs Available for FAST shipment Need to have minimum quantities otherwise to expensive to photograph

59. IT Infrastructure SourcingPayment Gateways LogisticsLogistics Ecommerce is: Website InfrastructureTrafficMarketingCustomer Care

60. Logistics Label Printing Tracking numbers needs to integrate with website Backorder Management Invoice generation Shipping Documents Personalization certificates, letters, VIP Communicate back to the customer

61. IT Infrastructure SourcingPayment GatewaysLogistics Ecommerce is: Website Infrastructure TrafficTrafficMarketingCustomer Care

62. Traffic Sources Google Yahoo SEO Blogs Social Media Repeat Business

63. Traffic Use Google and Yahoo and others create landing pages to take customers right where they want to buy its cheaper to advertise Show up consistently, build trust through predictability Natural Search Engine results give credibility BUT PPC and SEO buyers are different segmented SEO success does not mean PPC can be stopped

64. Return Traffic First time to acquire customer can be from $20 to $100. 2nd time its $2-$3. Methods to keep them coming back: Loyalty programs Newsletters Social Marketing Product rotation

65. IT InfrastructureSourcingPayment GatewaysLogistics Ecommerce is: Website InfrastructureTrafficMarketingCustomer CareCustomer Care

66. Customer Care Requires strong set of Policies and Procedures Phone support good for high ticket (VIP) customers otherwise expensive Email is very good requires a strong Customer Care Ticket Management System Knowledge Base focus to reduce Customer Care costs by constant improvement on site and FAQ Return Handling easy, traceable and care free

67. Customer Care Online Chat is good requires higher Customer Care People Outsourcing to India yes but need to be a big size and have VERY strong SOPs

68. Example of Support Suite

69. IT Infrastructure SourcingPayment GatewaysLogistics Ecommerce is: Website InfrastructureTraffic Marketing Marketing Customer Care

70. Marketing OnSite Marketing - images Traffic getting people to visit Pricing compelling prices Product Selection sufficient not to loose traffic Return per customer (loyalty) Analytics - looking at the numbers to understand behavior

71. Marketing Everything to do with user experience Colors, photos, descriptions, spe cs, ease of use, etc. Loyalty programs and CR% focus

72. Reporting Tools Poor performing product identification Total Sales Sales by Category ROAS (Return on Advertising Spent) Cost per order Profit Per Order Historical performance with tuning

73. Analytics Core purpose: to allow you to see your site. No true equivalent in real world Your eyes and ears on a site Primary tool for tuning a website Person tuning a site begins the site through numbers

74. IT Infrastructure Sourcing Payment Gateways Logistics Ecommerce is: Website Infrastructure Website InfrastructureTrafficMarketingCustomer Care

75. Web Site (Cart) Server owned, hosted or cloud Backup of server Redundancy Security Patches Performance very important Shopping Cart Software 1000s to choose from Choosing one depends on features, cost, ease of maintenance

76. Payment Need to be able to accept payment Paypal Google Checkout Amazon Checkout Many others Require integration with Cart Each payment method means higher Customer Care costs

77. Payment Chargebacks fraudulent charges Fraud Detection you are responsible Banking to accept payment especially challenging in China

78. IT InfrastructureIT Infrastructure SourcingPayment Gateways Logistics Ecommerce is: Website Infrastructure TrafficMarketing Customer Care

79. In-house IT Infrastructure Product Management Order Fulfillment Inventory Management Reporting

80. Product Management Product Management Pricing tools Image Management Integration with Web Servers Description management Specification Management

81. Product Management System

82. SourcingIT Infrastructure Logisticst Payment GatewaysWebsite Infrastructure Traffic Customer Care Customer Care Marketing

84. A Look at eCommerce Team

85. Ecommerce Team

86. Ecommerce Team In startup stages its possible to find a person that can handle multiple functions However in general, most people tend to be SPECIALIST Some positions only require 10-20% of a person hence the challenge of large overheads and under utilization of resources.

88. Suitability of Ecommerce for YOU Do YOU have the rights skills If not, can you hire the right skills:

89. Online business ideas Retail Goods if you are saturating local physical market, or not able to expand physical territory. Services booking a driver, cleaning, translation, etc. can replace office with online office. Restaurants enable delivery and market reach since restaurant radius is small. Requires AMAZING execution 100% reliability. Consulting moving services traditionally delivered in real space into virtual space.

90. Skills SetsPhysical Space eCommerce Sourcing YESYES Store Design Designer Graphic Designer Store Construction Building ContractorA whole team ProductVisual cues Depend on analytics Merchandisinguse your eyesand numbers Inventory Out of Stock Not there cannot sell it Need to have good inventory management system PhotographyNot required MUST and must be goodDescriptions Not required MUST and must be goodSpecifications Not required MUST and must be good

91. Skills SetsPhysical Space eCommerce StaffYes need trainingYes need training must be computer ableStore Security Yes physical Yes virtual hackersPaymentYes if cash low risk, credit Yes higher riskcard also lower riskAdvertisingJust being there If you dont promotegets traffic.no chance for anyone to show up

93. Getting Started Boot Strapping Scenario

94. Options to get started Entry Level Amazon Market Place, Ebay, PayPal, Amazon Shops, other low cost carts. No identity Mid-level better carts more features. Identity hard to establish High level Miva, open source carts, etc. Expert-level grown your own (Amazon level)

95. One Time CostsEntry LevelMid-LevelHigh-levelCart Software$0 $500 $200 Help Desk Software $0 email $0 - email $400 Order Tracking and Fulfillment $0 part of offering$0 spreadsheet, list, etc. $5000Site Design$0 minimal branding$1000$20,000 Product Management Software$0 web based $0 web based $5000 Customer Care Policies $0 wing it on a case by case $0 wing it on a case by case $5000 Photography$0 do it with your own camera$5/photo $2500K$7500 Descriptions $0 get creative$5/photo $2500K$7500 Product Specifications $0 bring out the ruler and scale $0 do it yourself$5000Traffic setup Google, YahooLearn the basic in two weeks Outsource to India - $500$5000StockProduct dependent - but need ProductProductsamplesDependent but need samples Dependent butneed samples Project Management $0 -Its only you $0 Its still only you$80K Development Engineers$0 no need $2000 likely need some help$100K Total$0 $8500$325K Expected Results Dont count on too much price$100K to $200K/year in sales $1MM-$3MM/yearbased marketing - $50K/yearpossible possible What you can handle5 10 orders a day10-20 orders 400 order/day

96. Operating Costs Entry LevelMid-LevelHigh-level WebMaster $0 no need $500 $5000 Customer Care Staff $0 its you $1000$3000 Fulfillment Staff $0 its you $1000$4000 Site Changes (Designer) $0 not really$500 $1000 possible Product Changes (DB Manager)$0 its you $0 its you $1000 Reporting and Analysis$0 its you $0 its you $1000 Photography $0 do it with your $5/photo $200$500 own camera Operations Manager$0 its you $0 its you $3000 Marketing Spend Learn the basic in two Outsource 15% of spend $4500 weeks- $500 COG Product dependentProduct dependentProduct dependent ShippingProduct dependentProduct dependentProduct dependent Payment Processing3% = $100$3% $500 $1500 Total $100 $4200$25,000 Expected Results80-100 hour week $100K to $200K/year in $1MM-$3MM/yearsales possible possible What you can handle 5 10 orders a day10-20 orders 400 order/day

97. Low COST site =JOB The $100-$500K in sales is a good job. You have to work at the site every day and do all the work BUT You can probably manage 50% Gross Margin ie. $50K to $250K. Low investment 1 or 2 staff. Not really a 4-hour week still have to work JOB. Need some skills BUT not necessary to be expert

98. One Page Long Copy Im a secret fan of one page long copy sites. One product One Person Outsourced everything $5K to get started Could generate $500K to $1MM in sales Example: www.easywebvideo.com

99. Easy Web Video Example

100. Mid-tier Sites Challenges Cannot do it yourself anymore HR / people / management/ reporting / etc. all the business stuff comes into play Now you are not only a site operator but also need to be a manager. High failure rate 9 out of 10 fail. Choose to grow! dont let growth happen on its own Know the risks understand your own skills

102. Lesson from the field Its about two things traffic and CR Ecommerce is 100% different than retail The work is never done ie. This is not a one time project.

103. Version 1.0 Bootstrapping PearlsOnly

110. Lesson from the field Ecommerce is efficient at small scale - $500K-$1M in sales but its a job. The $1-$5M in sales is awkward time teenage years infrastructure costs are high volume not so high. $5M+ - infrastructure costs become small compared to volume. Staying small in ecommerce space is not a bad thing its profitable

111. Retail References

112. Sourcing References

113. Sourcing References

114. Marketing References #1

117. References Web Usability

118. References for Analytics

119. Traffic References

120. Costumer Care References

123. Questions And Answers! (hopefully)

124. Presentation Available at paullepa.com

125. Thank you!

126. BackupTesting True Costs

127. Testing

128. Example Babys supposed to increase conversion rate on a site Picture of owner supposed to be 2nd best 3rd best is a picture of a smiling person Tried the PICTURE of OWNER strategy

129. Happy Girl works

130. Example of trial and Error We tried the owner angle of featuring me on the site

131. Trial one

132. Conversion Rate dipped by a LOTSuspected Reasons: - No smile - Angle head on to aggressive - Too sexy for women got distractedTrial one Learning

133. Trial two

134. Conversion Rate dipped by even LOWER Suspected Reasons: - Angle of face pushing people away from the page - The Pearls not flowing down - Pearl Strand too long Trial two Learning

135. Trial three

136. Conversion HITS BOTTOM Suspected Reasons:- Smile looks littleangry- Angle to direct- Not playful enough Trial three Learning

137. Most successful variant

E-Commerce 101

Education

Transcript of E-Commerce 101