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A Six Step Plan to be Profitable in Internet Retail


Just after I wrote my rather negative post entitled Six reasons NOT to try to be an online retailer, I read Aaron Wall’s post about how hard it is to sell yourself if you are too negative. Ouch! Good thing I am not trying to be a consultant or I would be starving.

Several people wrote interesting comments after the last post. Some of pointed out that the term “profitable” is relative and I agree. For example, if you are investing a ton of your time to make an extra thousand dollars a month, I do not consider that profitable. It is more like working for minimum wage. Also, I do not believe that those kind of sites have a future. I firmly believe that if you want an online business that is going to stand the test of time, you have to really go for it rather than just dabbling.

I think that really summarizes my belief at the moment. I am bullish on long-term strategies that call for intelligent, significant investment and bearish on the cheap “throw up a site and make a few hundred dollars a month” strategies.

All that being said, I do not mean to sound too negative on the state of internet retail. I am actually very optimistic about ecommerce in general and our business in particular. We continue to see a very high growth rate in spite of the increased challenges we are facing. I do feel that many people that want to start a online retailing business really don’t know what they are up against. If you fall into that category, below is a plan that I would personally follow in 2007.

You are not about to read much that you have not heard before. The key is the implementation. If you are not willing to invest substantially in this strategy, it simply will not work. You cannot try to do this halfway.

1) Build a content-rich site. In this respect, I agree with the consultants. I just think they tend to underestimate the quality and quantity of the content you will need. Having a content-rich site does not mean copying articles from some free article directory or even writing a dozen articles yourself. In my industry, we have WebMD. If I think I am going to steal visitors from WebMD with some limited low-grade content, I am out of my mind. Likewise, the only way you can hope to compete in your industry is to dedicate the needed resources to build a base of content that has real value. The information has to be substantial and hopefully unique in some way. Perhaps you can develop a tool to share data that is useful and unique. Be prepared to spend some serious time and/or money to get the content you will need.

2) Have a long-term strategy. Few internet retailers will like this, but it is good advice. Don’t even try to make money for a while–up to a few years if necessary. If you keep the ecommerce off the site initially, you will have a shot at getting inbound links that you will never get otherwise.

3) Invest in getting quality inbound links. Everyone in the world says this, and everyone is right. Read their tips and then get to work. Make this one of the most important things you do. However, understand that you cannot get links without being linkworthy. This step comes after you have step #1 done. If you are trying to get links to a ecommerce site, you are really trying to swim upstream.

4) Develop your own brand. It may sound easy to sell other brands because they already may be in demand. But even though it takes longer to do, building your own brand will pay off big in the long run. You will enjoy higher margins and less competition. Also, your company will be worth far more when you are ready to sell.

5) Do no skimp on design. Many people responded to my last post by saying that you could have a website designed for a few hundred dollars. Yes you can, but you will be hurting yourself. You need to look current and relevant–gone are the days when trashy sites could sell merchandise. Your site design should be scalable and flexible. You will want a way to add new products and information quickly. You will also want to make changes quickly to increase conversion. The easiest (and cheapest) way I know to implement this kind of site is by paying to have a high quality template designed and then implementing it with a CMS (content management system) solution.

6) Track metrics and focus on improving them. Test PPC, conversion, customer loyalty programs, email, and every other important factor and make the micro-improvements you need to see big results. For example, contrary to what many online experts say, adding a privacy policy is not going to make much of a difference to your revenue. However, it may make a micro-difference. If you can make a lot of micro-differences, you will eventually start seeing growth.

If you follow these six principles in an intelligent way, I can almost guarantee success. The problem is that they are very expensive, which brings me back to points I made in the previous post. It simply costs more to sell online than it used to.

So if you are at the crossroads of deciding whether to listen to consultants who tell you that a few hundred dollars will get you into the online business, listen to someone actually in the trenches. Don’t buy into pipe dreams. The industry is moving in a direction that is simply not going to benefit the small players. As they say in poker, go “all in.”

  • http://flektor-blog.com Kristen

    This is very very helpful. I am getting ready to promote a friend’s new e-commerce store that she is adding to an already beautiful, and established blog with a ton of incoming links and traffic. Just by reading through these 6 tips, I know her store will be successful. Thanks!

  • http://www.evakoss.com James Burns

    Greg,

    Much better post than the last one : )

    I would also add that many people assume that e-commerce is a product based site (hard goods or digital downloads). I see high end service based e-commerce sites as being an under tapped market. Mainly, because these services require extensive expertise and personal service and are not possible for the Wal-mart’s and Amazon’s of the world to monopolize. (at least not yet…)

    So if you’re starting a home improvement themed e-commerce site, why not sell watergarden installations, landscape maintenance, etc… in addition to your products. The market is wide open for local service based ecommerce sites.

    More and more people would love for this scenario to happen: wake up, notice grass needs to be mowed (not this part), go online and purchase grass mowing service, go to work, come home and the yard is freshly mowed. There’s a lot of people with more money than time and the majority of service contractors don’t have websites.

    Local service verticals are springing up now, but it’s not too late to capture a piece of the market. Also many of these verticals are just directories with little content. An industry expert could clearly distinguish himself as a better choice than a vertical directory that is just providing yellow page style listings.

    Also service based e-commerce sites require no inventory, just relationship building and negotiating with local contractors.

  • http://www.plumbersurplus.com Ryan

    James-

    I recently came across a site that helps bridge the gap for service contractors. It’s almost exactly what you are talking about. http://www.hireahelper.com gives service people the opportunity to use the web to gain leads and grow their small business.

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  • http://www.undergroundattraction.com ScottUA

    I’ve ready your previous post and this one is more helpful for people who’d like to venture into internet retail. Telling what to avoid and what to do instead comes across as really trying to help out and would get a lot more favorable comments like the ones above. Great stab at humor too, with regard to not trying to be a consultant, at the beginning of the article.

  • http://www.hardbodyhaulers.com/ Hard Body Haulers

    What advice can you provide for service oriented businesses