Don't know what to do about e-commerce? Having problems making money from e-commerce? Worried that you can’t compete with Amazon? If any of these describe your concerns about your e-commerce business, Neil Ackerman, Global e-Commerce Director at Mondelez International, has some simple advice.
“Amazon is not the master of the universe, you can beat it,” he said speaking at the P3 Future Trends Conference in Prague. “Calm down. You can be successful in e-commerce there’s nothing complicated about it." Ackerman believes that all a company needs to succeed in e-commerce is to follow a strategy similar to that employed by Mondelez – an approach known as the e-commerce flywheel. Getting it right might well be the decisive factor as to who will succeed and who will fail in the future.
The first of the five pillars of the strategy unveiled by Ackerman during his presentation to the Conference is selection. Nobody wakes up in the morning and says,,"I wish I didn't have so many choices." Every consumer wants to have as many choices as possible. That's why a successful company must not limit the scope of its e-commerce portfolio. However, he also highlighted the need for quality over quantity, offering relevant products and making sure that you are able to ensure that are in stock and available to purchase.
Price is another key factor customers consider important. The lower the better of course, but Ackerman also recommends removing purchase barriers such as excessive shipping fees and minimum order requirements. Ackerman's portfolio at Mondelez includes such brands as Oreo, Cadbury and Milka – products for the end purchaser only pays a few dollars. That’s good news for consumers. At the same time, however, buyers are very sensitive to any changes in these products, especially changes in price or packaging. Sales margins keep falling – is it even possible to make profit?
Like others, Ackerman has faced this dilemma. ""It was clear that from a profit point of view our online sales of cookies had to be by the box, the way they arrive at the warehouse. At the beginning, however, our eyes were bigger than our stomach so to speak, because only a monster would buy a 12-pack of Oreo cookies at a time. Over time, we found that the optimal size is four units. That allows vendors like Amazon or Walmart to earn their margins and but is also good business for us." Nonetheless, this has meant that Mondelez has had to change the packaging system across its portfolio of 147 production plants.
The third pillar of a profit-making e-commerce strategy is content. This might come as a surprise to many, but it is very logical. In e-commerce, merchants are not limited by shelf space; they can offer essentially an endless selection of goods. But in order to sell, they need accurate, complete and current details of what’s on offer across all communication channels in order to allow consumers to make informed buying decisions.
Ackerman used the Mondelez example to highlight the fact that it pays to invest in e-commerce content. Using integrated content, his team has been able to increase the conversion of Oreo cookie sales by 12%. In a business worth billions of dollars, such a figure translates into a huge surge in sales.
Search is the fourth pillar of the e-commerce flywheel, particularly optimised key word searches. According to Ackerman, it’s important to keep in mind that 88% of the world's population seems to be unable to spell correctly or do not know the correct brand names of products. "You wouldn't believe how poorly Americans spell. They spell the word "cookie" in hundreds of different ways and forms, in fact – and this is really shocking – only 11% spell the word correctly in searches," he said.
Companies should regularly review, enlarge and modify keyword lists for their products according to customers' knowledge and lifestyle. So for Mondelez to succeed it needs far more than just the word "cookie" in its key search lists, it needs to ensure the customers find the desired product even if the word cookie is spelt with two ks or the product described as “double chocolate wafers”.
Traffic is the final pillar of a winning e-commerce strategy. In this respect, Ackerman places emphasis on using merchandising promotions to generate higher product conversion that both allows companies to move surplus stock and creates a “halo” effect which impacts on regular sales. Ackerman also points to the importance of convenience, making things as easy as possible for the customer, including online shopping lists, wish lists, regular items lists, pick up and delivery options, and, of course, payment options.
Ackerman's inspiring presentation ended with a simple tip for success, "Buy cheap and sell where a given product is unavailable. And don't let anyone scare you with drone deliveries because they are still far from being a cost-effective transport method."