The e-commerce industry has grown into a behemoth in recent years, and it just keeps expanding, thanks to growing consumer trust and the improvements in technology around mobile, shopping, and even logistics and shipping. In fact, according to eMarketer, e-commerce is the only trillion-dollar market that is projected to grow by double digits for the foreseeable future, following a track that started in 2010.
Whether your business is aiming for the $1 million milestone, or you’ve crossed the $10 million mark, you’re a part of that growth. Generating that kind of revenue is an accomplishment that should be celebrated every day, but you may not always feel like popping a bottle of bubbly when growth slows to a crawl.
Despite consistent growth in the industry, there’s a good chance you’ll eventually hit plateaus in revenue growth that will challenge you – even if you’ve crossed a major milestone like $10 million in revenue. That’s not necessarily indicative of a problem; it just means you need to continue to fine-tune the strategies that helped you grow to that point.
The RJMetrics E-commerce Growth Benchmark Report tracked growth across hundreds of online retailers. While it echoed the industry-wide upward trend, it also showed that some companies are outperforming others in growth and revenue earnings. That may not be surprising, but the report does reveal the major drivers that put those businesses at the top of the e-commerce food chain.
What’s Driving The Massive Growth of E-commerce Businesses
The most profitable e-commerce companies experiencing tremendous growth toward that $100-million mark typically leverage three key drivers:
- Strong product/market fit
- Streamlined acquisition
- Effective customer retention and churn reduction
1. Product/Market Fit
Product/market fit typically happens one of two ways. Either your research helps you create that perfect fit when you launch, generating accelerated revenue growth right out of the gate, or, you deploy what you have and validate the product/market fit directly from customer response.
Whether they’re strong at launch, or spend months (or years) validating a product, companies that take the time to create the right product/market fit typically see more loyalty from customers, larger order volumes, and faster customer acquisition – all of which drive growth.
2. Streamlined Acquisition
Companies experiencing more gains than a bodybuilder chugging protein shakes know how to leverage that product/market fit to improve their marketing and streamline customer acquisition.
For marketers, this means identifying content more likely to attract prospects to your funnel, as well as developing higher-converting ads that align with customer wants and needs. Beyond inbound marketing, top companies are also finding ways to leverage loyal customers to transform them into referral-generating brand ambassadors.
3. Effective Customer Retention
One key finding from the RJ Metrics report is the rapidly-declining rate of growth based on the size of annual revenue. Through the early stages of growth, acquisition is a key focus. As growth slows, it’s important to put more emphasis on customer retention. This includes proactive programs designed to delight current customers or campaigns that bring back lost customers.
Rather than pushing hard to acquire new customers, which can cost up to 16x more than retaining existing ones, focus on building relationships with the customers you have. Those loyal customers are worth up to 10x more than their first purchase, and reducing customer churn by as little as 5% can lift revenue by as much as 125%.
The Tactics to Grow Beyond $10 Million
Companies pushing through the $10-100 million leg of the race don’t maximize customer acquisition and suddenly see delighted customers by happy chance. There are often very deliberate strategies involved, from leveraging a hero product for elevating brand exposure and customer acquisition, to placing a greater focus on direct customer engagement.
Growing beyond the $10 million mark requires playing the long game, with strategies that focus on getting long-term results, as opposed to early-stage campaigns designed for a quick return. Highly successful e-commerce companies, like those we’ve featured in this article, continue to find success by driving forward with small wins and steady gains based on the idea that a steady, average speed yields above-average results.
Try to sprint the whole way, and you’re done before crossing the finish line.
Here are some of the tactics these companies have used to reach the $100 million milestone and beyond.
1. Make a Real Connection with the Customer
Consumers purchase products for a variety of reasons; the novelty of the product, an emotional connection, to solve a problem, or to meet a need. Regardless of the drive to purchase something, a customer is less likely to buy from a brand they don’t trust, or one they dislike. That’s why forming a real connection with people is important.
I’m not going to buy from you if your company is just another copycat trying to sell me something I can buy from 30 other copycats. If you want my business, make the same connection with me that I can get from the guy at the corner store who sees me every time I stop in for gas. He takes the time to create a relationship with me even though I’m just another customer.
That’s the way a lot of customers feel. According to a study from Nielsen, 60% of consumers prefer to purchase from a brand they’re familiar with rather than switch to a new brand.
“Innovating on established brands that are already trusted by consumers can be a powerful strategy,” says Rob Wengel, senior vice president of Nielsen Innovation Analytics. “Companies spend millions of dollars on new product innovation, yet two out of every three new products will not be on the market within three years. Marketers and retailers can deliver successful new products by ensuring they uncover unmet consumer needs, communicate with clarity, deliver distinct product innovations, and execute an optimal marketing strategy.”
No matter what stage of growth you’re in, you’re never too big to engage customers on a personal level. Letting size disconnect you from your audience is one of the greatest mistakes a brand can make.
That’s something Nasty Gal quickly learned during its meteoric growth. Founded in 2006, the unique fashion and apparel company that began within the digital confines of an eBay vintage shop has grown through disruption. Social savvy, understanding customers, and focusing on great service have helped Nasty Gal grow its empire to over 350 employees. The company grabbed up the title of Fastest-Growing E-commerce Retailer in 2012, and became a $100 million dollar global brand by 2013.
Nasty Gal recognized that in order to make a real connection with its audience, there must be consistency in the voice of the brand and how it presents itself. That consistency is what allowed the company to reach over 1 million Facebook fans and 2.2 million Instagram followers.
“From our photography to our design to our copywriting, every small choice is an opportunity to either strengthen our brand or fall flat,” says Nasty Gal’s founder, Sophia Amoruso. “I’m so fortunate to have an incredible team around me who not only sustain the voice that I incubated over so many years, but who can truly evolve it.”
When you’re pushing to connect with a very specific niche audience through social media, authenticity is a must. Your audience knows when they’re being sold to; they know when you’re being authentic, when you genuinely care, or when you’re just that brand making eye-rolling small talk while elbowing them to just buy something already.
“This generation is super savvy – it doesn’t matter who you hire to run your social media if the person behind the scenes pulling the strings is far from the customer,” says Amoruso. “Using social media allowed me to have a conversation with our customers – I would say it was the number one reason we created awareness. Every other fashion brand out there – including those that I call competitors – are run by mostly old white men, and the customer knows it.”
That’s one of the keys to making a connection with your audience: you need to have conversations. You cannot expect growth from posting at them, speaking vaguely in their general direction, or pushing product promotions.
Knowing what appeals to your customers can also help. Rather than posting product shots, Nasty Gal won over customers by using social media to shape the view of the vintage lifestyle. For example, the company’s Instagram posts are often stylized with models and designs that “you can’t find at the mall” in order to appeal to a specific type of woman.
Marketing isn’t a one-way channel anymore, and it’s certainly not a one-way conversation. Every day, brands should be connecting on a personal level with their customers to build loyalty and bank on affinity.
Companies like Nasty Gal, or even Zappos, aren’t great companies because they sell a product customers love. They’re not the first ones to do that.
They’re succeeding because of how they connect to their customers, from direct social engagement, to providing a unique experience that goes beyond the product.
There’s no comprehensive guide to follow for perfect engagement with your customers on social media; your audience is unique to your business, and every audience needs something different. Still, Neil Patel has created an intensive list of what it takes to form a strong emotional connection with customers that’s a great starting point.
2. Never Stop Market Testing
It’s been said how important product/market fit is to the success of an e-commerce brand. The most successful companies have it on lockdown, but even then, it doesn’t mean they get it right 100% of the time. No matter how successful you are, you can never assume that you know exactly what customers want or need to see.
Early research will establish how well your products fit the needs of the customer and the market overall, but factors like politics, consumer interests, the economy, competition, product innovations, and technology can create subtle or dramatic shifts in your market over time.
Rather than continue to operate based on that early research, you should revisit your customer and market analysis regularly. It’s the only way to ensure that the products you intend to launch fit, or align with, customer needs.
Part of Nasty Gal’s success was the company’s willingness to continually run experiments with each product, using consumer reactions from the outcomes to refine product/market fit.
According to Forbes, in a feature article covering Nasty Gal’s success, Amoruso’s experiments were often tightly controlled:
“Amoruso also tried a controlled experiment. Selecting her best shots for eBay, she also posted them on MySpace to get a more qualitative feel. If the bids were lower than she expected and the comments on MySpace were negative (‘That model looks angry,’ for example), she’d ditch the model and try to sell a similar item on someone new. When she wasn’t fine-tuning online selling, she was trying to expand her reach with friend-finding software that instantly sent out friend requests to, say, ‘friends of Nylon magazine’ (a fashion rag).”
Some companies are able to achieve a fit for their product in one fell swoop before the product launches, but for most companies it’s quite the opposite. Like Nasty Gal, they get there through small creative fits, listening to customers, working through snags, and testing product iteration or positioning. For many businesses, testing and finding product/market fit is a never-ending activity.
Marc Andreessen of venture capital firm Andreessen Horowitz, best defined product/market fit as being in a good market with a product that can satisfy that market.
“You can always feel when product/market fit isn’t happening,” he says. “The customers aren’t quite getting value out of the product, word of mouth isn’t spreading, usage isn’t growing that fast, press reviews are kind of “blah,” the sales cycle takes too long, and lots of deals never close. And you can always feel product/market fit when it’s happening. The customers are buying the product just as fast as you can make it – or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You’re hiring sales and customer support staff as fast as you can.”
Andreessen’s original article provides direction on product/market fit and is a necessary read for anyone in e-commerce.
Tommy Walker, marketer and editor for Shopify, has also written a terrific guide on how to find and establish product/market fit in e-commerce.
3. If You Can Leverage User Generated Content, Do It First
While more consumers are shopping online than ever before, they’re getting savvy about how and where they spend their money with online retailers. They know they have choices, which is why the average consumer visits at least three websites (with 51% visiting four or more) before making a purchase.
Sure, the majority (94% according to the e-tailing group) are trying to find the lowest price. Customers are also trying to weigh how trustworthy a brand is, and if other customers are satisfied.
Comparison shopping helps narrow the choices. Consumers also rely heavily on product reviews to help them make a buying decision – seeing how others react to and use products they’re interested in can influence that purchase.
This is backed by Nielsen’s study showing that more than 90% of consumers trust the reviews and opinions of their peers over traditional brand advertising.
Some companies leverage that fact by prominently featuring customer testimonials and reviews in their online stores. Others acquire and republish user-generated content on company social channels in the form of pictures and videos.
A few, like Threadless, have built an entire business model around user-generated content (UGC) and giving customers a voice and identity with their brand.
Threadless developed a model to crowdsource T-shirt design, using the designs of customers which are then voted on by other customers and members of the community. The winning selections become permanent products available in the Threadless store, and the original designer gets a commission from the product sales. The idea was born from a gap in the market that founder Jake Nickell experienced when he was younger.
“When I was growing up, my only options for clothing, especially T-shirts, were to wear big corporate logos and brand names across my chest,” says Nickell in an interview with Teehunter. “Threadless is all about art on tees. There are no logos, no branding… so I find that really exciting, that you can wear T-shirts that just have amazing art on them, you don’t have to wear a logo.”
That was the first factor in the company’s success, but what really propelled it to the top was timing; its business model hit the market during a time when user-generated content was becoming the norm. Customers were looking for a stronger connection to peer interests rather than having brands sell to them incessantly.
“With our company it’s all about trust and honesty and we just don’t like the idea of pushing our brand on people who otherwise wouldn’t hear about it,” says Nickell. “We like the idea of it spreading via word-of-mouth, organically, naturally. It’s not that we don’t market, we just don’t advertise. I’d rather somebody hears about Threadless through an article in a magazine than an advertisement in a magazine.”
The best thing about user-generated content is that it costs virtually nothing. Your customers are providing proof that your product is great, it works, they love it, and they want to share it. The more you leverage that, the greater the influence it will have on new customers, and the more you’ll expand your reach.
While Threadless built an entire business model (and a massive community massive) around user-generated content, you don’t necessarily have to go to that extreme. UGC takes a lot of forms and can be leveraged in different ways. How you use it is less important than the act of using it. The opportunity is there for virtually every e-commerce brand to leverage UGC to stand out.
Remember, if you don’t create a unique difference between your products and the competitions’, then your customers are going to comparison shop based on price. User-generated content pushes customers to compare the experience and the delight of the product first, rather than price point.
Dom Garrett, Marketer at BTC Revolutions (one of Inc’s top 500 fastest-growing private companies in America), Social Media Manager at CMX, and Managing Editor at The Only Colors, has personally witnessed the power of user-generated content in action for some of the world’s top brands. He sat down with Buffer to talk UGC in detail during a Science of Social Media podcast you won’t want to miss.
HubSpot also has a terrific guide on user-generated content in e-commerce that’s worth the download.
4. Take Care of Customers, Whatever the Cost
Online retailers lose customers every day for a variety of reasons, from shipping costs to product and fulfillment issues. Those small transactions add up when you factor in the lifetime value of a customer, and the volume of customers lost through churn.
For example, if your average order value is $50, with customers typically returning every 60 days, a lost customer equates to a $300 per year loss in revenue.
Now factor in the referral and word-of-mouth potential for a customer advocate who is regularly engaged and helps to promote your brand online. That’s hundreds, even thousands, of customers you’ll no longer reach – all from the loss of a single customer.
Depending on your model, that could be hundreds of thousands of dollars lost over the lifetime of the average customer… per customer.
That revenue needs to be replaced, and you have two options for that:
- Acquire new customers (which means you have to deploy more expensive acquisition campaigns).
- Keep your current customers satisfied.
A focus on retaining your customers is far more affordable – in fact, it’s up to 10x cheaper than new customer acquisition. It also generates a greater return, since the probability of selling to an existing customer is 60-70%, while the probability of selling to a new prospect is just 5-20%.
To see continued growth beyond $100 million, you need to count yourself among the 89% of companies that see customer experience as a key factor in driving loyalty and retention.
There’s not much you can do with diapers outside of their intended use, so rather than dumping funds into customer acquisition, co-founder Marc Lore put the emphasis on making things easier for parents.
“Really, the fewer rules, the better,” says Lore. “The concept is just if Mom calls and there’s an issue, do whatever is necessary to make her happy and really wow her. We got into the habit of referring to all of our customers as ‘Mom.’ If we don’t have a product you’re looking for, we’ll get it from a competitor.”
Delivering that kind of service is no small feat, but Diapers.com designed and staffed its business around delighting customers in order to maximize retention. That included giving its sizable customer team more autonomy to take care of moms.
“All 25 of our customer service folks are in-house,” says Lore. “We have a 24/7 operation, and we empower the reps completely to take care of the mom at whatever cost. The day before yesterday, a mom really needed a car seat for the weekend, and there was no way UPS was going to get there on time, because UPS comes late on that particular day. But UPS comes to the customer service rep’s home in the morning. So the rep had it shipped to her house in the morning, and then she drove it over to the mom’s house. We’re doing 6,000 orders a day, but that stuff still happens all the time.”
Your customers all have a minimum expectation of customer service, and their own idea of how their issues should be handled. If you’re plugging along meeting customer expectations, you’re no different than the other e-commerce retailers serving the same market and audience.
To retain customers and get them to sing your praises (see the section above about user-generated content), you have to surprise and delight your customers. Like Diapers.com, empower teams to do whatever they can to strengthen the consumer relationship.
Parents know they can buy diapers virtually anywhere, from the corner store to local big box retailers down the road. They didn’t choose Diapers.com for the product – customers chose to shop that brand because of the experience and the care they received.
Creating a customer-centric model to improve loyalty and retention doesn’t necessarily require a complete teardown and rebuild of your service department – just a change in your approach.
Start with small things to delight your customers, like these tips from Shopify. With a few simple changes, you can begin to understand the psychology of your audience and what makes them happy, then develop your customer delight programs from there.
5. Make Your Customers Talk About You Without Talking About You
People may trust the opinions of their peers over brand advertising, but friends aren’t going to listen to a buddy raving shallowly about a product. Word-of-mouth can be a powerful marketing tool, and it’s most effective when you give customers something to talk about beyond the product itself.
Some popular brands that seemed to materialize out of nowhere found creative and clever ways to take this approach. They developed highly-effective ways to create massive brand lift and streamline customer acquisition without the multi-million dollar advertising campaigns of incumbent brands.
Dollar Shave Club is a prime example. By developing viral, humorous content, the company got prospective customers to share content and talk about the brand without specifically pushing the product. It wasn’t just comedy for the sake of comedy, though; it was smart content that told a story about the brand while emphasizing the value of the product.
It’s the same approach taken by Old Spice. The humor of its Old Spice Guy ads set the web on fire, produced massive brand lift, and repositioned an aging brand with a new generation of smelly guys.
BeardBrand, which we talked about in another post in this series, is more proof of the effectiveness of brand storytelling and word-of-mouth. More importantly, it shows that comedy isn’t necessarily required to get people talking about you.
“I’m not going to call ourselves a content company,” says Michael Dubin, CEO and resident funny guy at Dollar Shave Club. “That would be arrogant. But whether it’s video, or Facebook content, or other kinds of content, we are going to make a strong commitment to telling strong stories in creative ways and just giving our audience and our customers fun stuff to play with. That’s part of the fun of being an Internet brand.”
If you can create content that connects with your audience, that they’re willing to carry and spread, you’re going to see a dramatic drop in marketing expense and the cost of customer acquisition.
For BeardBrand, it wasn’t just the storytelling, it was the approach to sharing knowledge that aligned with the brand. CEO Eric Bandholz personally creates helpful content that is frequently shared by the brand’s audience. That’s just one more example of people spreading the brand through word-of-mouth without hard-selling a specific product.
“I was also involved on various communities online, from Reddit to Beardboard.com and BeardedGents.com,” says Bandholz. “I think it helps that I’m passionate about what we are building and people see that in me. With my YouTube videos, I’ve made a lot of how-to videos that people have really liked.”
Unilever acquired Dollar Shave Club in July for $1 billion – and it all started with a piece of content.
If you want to increase word-of-mouth, expand reach, and reduce that customer acquisition cost, focus on building content that tells a story or provides real value to your customers.
Give them something to talk about other than your product, and they’ll carry that message far and wide.
The key is to understand what your audience wants and needs. Their personalities, behaviors, cultural influences, interests, biggest pain points, and unsolved problems all provide clear direction for the type of content that will resonate with them.
Avoid targeting topics related to what you know; find the topics your audience wants.
Start with this hefty guide from Buffer on finding amazing content for your calendar.
For crafting your content complete with clever storytelling, check out Content Marketing Institute’s 10-step guide to telling your brand’s story, which is a great supplement to Yotpo’s guide to word-of-mouth marketing.
6. Do What Other Companies Are Not
It’s not uncommon for companies to play it safe, relying on standard and proven marketing tactics. Countless resources point to the reliability and return of marketing on the top social channels, marketing via email, creating a blog, and guest blogging, etc.
That’s not to say those channels aren’t effective. This series previously touched on using those same organic channels, along with paid advertising like Facebook ads, to reach growth milestones. Those are proven and effective ways to grow revenue and reach a wider audience.
But they’re also safe.
If you want to expand your reach and revenue potential, you have to be willing to experiment. Do what other companies are not, and position your brand where competitors have yet to go.
That means staying on top of new technologies and leveraging new platforms before there are case studies telling the world “It’s safe to try making money here.”
Case in point: Adore Me is a subscription service that introduces its customers to new, stylish lingerie. The company wanted to find and experiment with new ways to engage Millennial women. Rather than leveraging existing, frequently-used marketing channels, they focused their attention on Pinterest.
“Pinterest is a perfect fit for us given the audience and creativity on the platform,” says Gabriela Parada, Adore Me’s social media manager. “Given the very visual nature of e-commerce, Pinterest is one of our most prioritized channels.”
By creating highly-targeted Buyable Pins for its audience, Adore Me reached an expansive new audience that generated a 4000% increase in revenue from Pinterest alone. The company also found that customers on Pinterest were spending 20% more than customers referred from other channels. Not only was the company earning more, but that targeted promotion was also saving it money.
“It’s not uncommon for our CPA on Pinterest to be 10-50% lower than it is on other advertising channels at any given time,” says Parada.
That targeted advertising continues to pay off: Adore Me grew its annual revenue from just $16.2 million in 2014 to $43 million by the end of 2015 and was ranked 14th on Inc’s list of fastest-growing companies.
Stay abreast of new trends in technology, as well as platforms that offer new opportunities to connect to your audience. While your competitors are limiting their exposure, you can supplement the tried-and-true marketing channels with rising apps, platforms, and communities that let you connect with your audience in new ways.
While each of the companies above used very different tactics to reach their audience and see results that propelled their revenue to new heights, each technique points back to one of the three main drivers of growth: ensuring product/market fit, streamlining acquisition, and customer retention.
Rather than simply creating campaigns to reach a desired number of customers or hit a revenue goal, build your strategy around those three primary drivers. From there, develop your campaigns and techniques that help you achieve those driver-related goals.