3 things you NEED to do if you are a start-up who sell food & beverages online
I was recently asked to talk about E-commerce at an event for Food & Beverage start-ups in London organised by Bread & Jam. The event was a great opportunity to meet amazing entrepreneurs and the feedback I received was very positive so I thought I would write a quick article summarising some of of the tips I shared then. Check them out below and hope you’ll find this useful too!
1. Focus on the right metrics
One of the specificities of e-commerce is the ease with which businesses can generate customer data. Every action online generates a point of data (clicking on a link, watching a video, colsing a page…) that can be tracked and used by businesses to understand their customers and better serve them.
For early stage companies, this is both a blessing and a curse. The amount of data you can collect from your website (through Google Analytics) or from platforms like Amazon can quickly become overwhelming. It is also tempting to focus on the wrong metrics: we call those ‘vanity metrics’ because they make you feel great (“last month our traffic went up +200%..”) but they don’t necessarily help your business nor inform your strategy (“…but we don’t know why and sales stayed flat.”).
Therefore my first recommendation is to carefully think about the metrics you are trying to optimise and to initially focus only on a handful. Metrics like Average Order Value (AOV), Average Order Profit (AOP) and Customer Acquisition Cost (CAC) are a great place to start because they are relevant even if your sample of data is very small (there’s a great article about this here).
Once you have a big enough sample of data (enough orders), the key metric you should focus on is your Conversion Rate (CR). Conversion rate is the percentage of visitors who bought your products i.e. out of 100 customers who visited your website, the number of customers who actually placed an order. A solid conversion rate is the foundation of a healthy e-commerce business because it means that 1) your audience is relevant and your customer journey is working and 2) you will get the best return on investment when you start paying for traffic (which will happen eventually). The industry average conversion rate is roughly 3% but obviously higher is better. How do you improve your conversion rate?
“We don’t do things in the easiest way, we do things in the way that’s best for the customer.” Brie Read, Snag Tights
I recently interviewed Brie Read the co-founder of Snag Tights whose Shopify website converts at 10% (!) and the main thing she highlighted was their focus on giving the customers what they wanted. She told me: “I think the reason why we have such good conversion is how we look after our customers through their journey. We don’t do things in the easiest way, we do things in the way that’s best for that person. For example, we only put on our website what is actually needed to function. Until lots of people ask us for a feature and we know it’s a genuine demand, we won’t put those additional pages in.” Snag Tights’ story is absolutely fascinating (the brand went from 0 to £2.3M in online sales in one year) and offer lots of learnings for any brand selling products online. If you want to hear more insights on how they were able to achieve such success in so little time you can listen to the full interview I recorded with Brie here.
2. Use your e-commerce channel as a learning lab
E-commerce is a fast growing sales channel (+20% growth YoY vs. around 3% for brick-and-mortar retail) but it is also an exceptional learning channel, where you can get unique insights into who your customers are and what they want.
First you need to set learning goals for you e-commerce business and figure out 2 or 3 key things that you are trying to learn about your online customers. An example of learning goal could be for instance to better understand your retention rate i.e. the number of customers who come back after a first order on your website.
Once you have your goals, you need to identify a set of metrics that will help you monitor how you are performing for each of your goal. Sticking to our example of retention rate, the metrics you could use to monitor your performances would be:
- Repeat customer rate: the percentage of your customers who have placed more than one order. As always with % be careful about looking at this metric in context (especially at an early stage where orders from friends and family might skew your numbers)
- Customer Lifetime Value: the average revenue that you generate from a single customer during their ‘lifetime’ with you
- Average days between repurchase: this gives you an insight on the frequency of purchase of your repeat customers and might uncover patterns
Finally, once you have thought through your learning goals and the metrics you will use to monitor them you can start testing different actions. An example for retention rate would be to send an e-mail to first time customers with a promotional offer one month after their first purchase. For every test you run, always take a step back when looking at the results and put things back into context: Do we have enought data to draw conclusions? Were there other elements that may have impacted the results? etc.
It takes disciple to consistently test new things in a structured way and implement actions when you are able to draw conclusions from your test. Sometimes it will mean making a U- turn on something you have spent a lot of time working on (ex. your product, your packaging, your website) but what you learn will eventually help you make you business better on e-commerce but with brick-and-mortar retailers as well.
The data you gather can also help you land a listing with a big retailer. Here is what Kara Rosen, founder of Plenish, had to say when I asked her how e-commerce helped Plenish get listed in Wholefood, Planet Organic, Sainsbury, Morrisons and more: “Before we started the e-commerce website I had taken our range to few retailers who just said no and didn’t get it: the shelf life was too short, the product was too expensive, … When I went back to retail a year later after trading online I was able to say ‘look at your store in Kensignton, I’m selling X thousands £ worth of this particular juice every week to your audience in Kensington.’ It gives you the amount of insights that retailers need to have a lot more confidence putting your range in because you have a track record”.
3. Do less, but do it better
“What is worth doing, is worth doing well” said French painter Nicolas Poussin and when it comes to e-commerce I couldn’t agree more. As an entrepreneur or small business founder you will initially need to do everything yourself: product development, sales, marketing and much more. Even as your brand grows, you will most likely operate on tight ressources for a while because, well that’s pretty much what startup life is!
Therefore it’s important that you quickly identify what is essential for your business online and stick to it. It is fine to test things out (cf. point #2) but you need to quickly figure out what works and double down on it while killing what doesn’t work.
Every business will find different answers to what is essential to them but below are 4 things which I think most Food & Beverages business should do:
- Have a website: you need a place where you can showcase your brand and where people can buy your products. For certain brands there could be an argument for not selling their products there directly but generally I would recommend doing it. Your domain name is your own property (vs. Amazon or Instagram) and a place where you can learn a great deal from your customers with no intermediary.
- Sell on Amazon: the e-commerce’s giant has became simply unavoidable (for the better or the worst). Two data points to support this argument: 33% of UK households are Prime subsribers (Amazon’s loyalty program) and 52% of customers start their search for a product online on Amazon (vs. only 28% on Google). Amazon also recently acquired Wholefood and launched Amazon Fresh, both moves show the sort of ambitions the giant has for Grocery. Therefore your brand should be on Amazon. I would argue that Ocado is also a key online retailer, especially if you sell premium / organic products.
- Be Google optimised: It is great to have a website but better if people can find it. Making sure your website is optimised to be properly indexed by Google is a absolute essential. In order to do this focus on building a website which is 1) mobile firendly, 2) which loads fast and 3) which is SEO optimised. You should also have a monthly budget for Google Adwords: spending even a small budget on brand related terms to make sure you show up on top of results when people search for your brand is a great investment.
- Nail your social proof: you need to make sure you have social proof so customers can easily check what other people think about your brand and products. Social media is great for this as are review websites like Truspilot or Reviews.co.uk
These are the key essentials in my opinion, meaning that other things (including e-mail marketing, being on all social media platforms and blogging) might potentially be a disctraction at least at the beginning of your journey online as a food brand. Obviously every business is different and yours might thrive from Pinterest, the key message here is to not do things because “every does it” but instead to focus on what works for you and double down on it.
I hope you find those few tips useful. To learn more from other successful e-commerce businesses and get insider knowledge you can subscribe to my ecommerce newsletter and check outE-commerce Unboxed podcast available on Spotify and iTunes. I recently interviewed Kara Rosen, the founder and CEO of Plenish who shared with me her journey from selling detox juices online as a side business to creating a multi-million brand listed in all major UK retailers.