We've had several journalists and new clients ask us of late to summarize some of the common challenges our brand partners face when they're trying to scale an e-commerce business for the first time. While the pat response is that every business goes about it differently and no two challenges look entirely the same, we in fact see common themes that bear some exploration. In the early stages of growing an e-commerce business, organizations often run into issues of pace and perspective.
The Peanut Butter Problem:
Unlike the brick-and-mortar environment, the digital shelf appears at first glance to be limitless. In a world where you can list every SKU in your portfolio, the easy logic says, “list all of them, and then spread your investment across them.” But not all of the SKUs in a portfolio will have the same gravitational pull for the e-commerce audience. Brands need to actively right-size and rationalize their catalog for the digital shelf based on performance and profitability of each SKU and avoid spreading their investment too thin.
The Problem of the Static Spend:
The temptation here – usually a product of the traditional quarterly planning cycle – is to bring a fixed-budget mentality to campaign management. That approach misses the dynamism of the digital channel. Part of the benefit of the increasingly tight connection between digital advertising and e-commerce point-of-sale is that brand leaders can access performance data, like campaign- and SKU-level return on ad spend (ROAS), in close to real time. Without constant competitive monitoring and dynamic bid adjustment, brands risk blowing through budgets early in highly competitive categories, or spending more than is required when competition for keywords and audiences is low.
The Problem of Context-Switching:
We often see brands try to transfer their offline strategy and objectives to the e-commerce channel, where the trendlines may look significantly different. We’ve had clients who dominate brick-and-mortar shelves find that in the e-commerce channel, their share of voice and relative search traffic make them challengers. E-commerce-only brands (including Amazon’s private label) and high-growth startups play a much larger role on the digital shelf, and when the competitive set changes, so must the strategy. Brands that don’t tune their objectives to their channel-specific KPIs, including market share, share of voice, organic search rank, competitor ad spend, and category average selling price (ASP), risk getting left behind.
If these challenges sound familiar, you're not alone! We're here to help with data and insights that identify the opportunities for smart, efficient growth.