WE’VE GOTTA GET OUT OF THIS PLACE!
I’m continually amazed how tough it is for eCommerce businesses to get accountability from their different vendors. That’s because the digital value chain is, by and large, broken.
“Broken?” I hear you ask,“what do you mean?”
Think about yourself as the owner of a brand or a retailer that needs to sell to its customers wherever they are – on the web, in a store, and so on.
You engage an agency to build an eCommerce platform (Vendor 1). The agency delivers some beautiful creative and a somewhat functional site. Perhaps even with some thought towards SEO. But it doesn’t connect with your warehouse, inventory and finance systems. Which leaves you with so many labour-intensive, manual processes that you don’t have a scalable online business. Addressing this scalability issue requires you to bring in a different vendor, working to a different rhythm (Vendor 2).
Eventually, your site works. You can actually sell something online with minimal human intervention. The basic mechanics, the design, the customer journey, UX and so on seem to work. After a year of trying and a lot of moolah, you are operational. Now you can try to work out if you are actually any good at the online game.
Meanwhile, two guys in a garage somewhere have launched and are doing things at warp speed with no budget and are eating your lunch before you’ve had breakfast. Or the Rocketeers from Germany have been in and cleaned up while you’ve been thinking about it.
You start to build your customer base, and experiment with selling online. Hopefully you’re optimized for mobile (don’t laugh, it may seem obvious to you but the number of sites we see that aren’t…).
Now you need to drive customers to your site. You seek out specialist help:
– heavy duty SEO (Vendor 3) and a paid search strategy (hopefully, the same vendor)
– affiliate marketing (Vendor 4?)
– banner advertising and retargeting (Vendor 5?)
– lead gen and database marketing (Vendor 6?)
So, you’re now driving traffic to your site, but you aren’t converting. Bring back Vendor 1 to do some UX and conversion rate optimisation work.
You now build a customer database and you start emailing your new and growing database. To do this you engage Vendor 7.
After a while you’ve tested the offers that work and the offers that don’t, and you see a pattern forming. But you’re 18 months and several hundred thousand dollars in, plus a high and growing salary count to manage everything. Your Board is hassling your CEO – and he’s hassling you.
You realise you want better engagement with your audience so you engage one of your vendors to build a social media strategy. If you’re lucky, it may be one of your existing vendors. Or, it may be Vendor 8, your new social media specialist.
You also realise that you need to look beyond the obvious and create some buzz around the brand and the offer. You engage a PR specialist to get some news coverage (Vendor 9). You realise that you’re going to need some real world events to promote what you’re doing – along comes your events and promotions agency (Vendor 10).
It’s now 18 months since you started this journey and your online sales are less than 3% of total revenues. You realise that you have spent seven figures in cash launching this online behemoth and your monthly profitability is in serious decline.
“We’ve gotta get out of this place”, you think.
You engage a BI specialist (Vendor 11) to build and configure a dashboard showing you what is performing and what is not. Except, you can’t understand the raw data – so you need to pay them more to interpret it all. And even when you can, you’ve now been going for over two years, the world has moved on, you have active competitors and the ROI of your last two years’ activities is questionable at best.
How real is this scenario?
In my day job running Asia Pacific Digital we see it frequently. Whether in reality there are 10+ vendors or five vendors, we almost never see an integrated, accountable approach being taken where decisions are made based on timely information about what is working, and what is not. We see an array of vendors billing for services without true accountability or any reference point to the real world situation the client finds itself in. Don’t be thinking about executing a holistic, digital strategy with 10+ vendors in the room, that’s just not going to happen.
And that real world situation is simple: only a handful of eCommerce players really get value out of their launch and marketing spending.
And the solution is?…
Find a vendor who will provide much or most of what you need and share the risks and rewards with you. Put them fairly and squarely on the hook and be prepared to share the upside and the downside. Align both your incentives and you’ll quickly find a newfound sense of urgency and ownership that you will never, ever get from the 10 vendor approach.
Now I’m going to talk my own book. My firm, Asia Pacific Digital, launched an eCommerce ventures model this year. We outsource the majority of a partner’s eCommerce operations for up to five years for little or no money up front. We can do this because we have most of the digital value chain at our fingertips. In-house.
In simple terms, we value your business “before” and “after”, we capitalize our up-front spend on your business to become an equity partner, and we derive our income from sharing in your revenue growth. If the venture fails, we fail. If the venture succeeds, and our partner is wildly successful, we benefit. At the end of the partnership we all sell the business, or you buy us out based on an agreed formula.
It’s not for the faint-hearted. We have hundreds of salaries, and many bills to pay. So this isn’t something we can do every day, or for everyone. We need to be very selective and demonstrate that we can add sustainable and genuine value to each venture.
This model isn’t for everyone. There are certainly other ways of skinning the proverbial cat. Very large companies may well have the smarts and the skills to execute using the 10-different-vendor-approach (but many firms can’t).
So, if you find yourself wishing you were in a better place, you may just find that this is a winning formula that takes you somewhere that you never dreamt was possible. And seriously – if we can’t succeed in building your business online…
I sanity checked this blog with a couple of major retailers before going live. Neither is a client. They both started nodding knowingly, and humming “we gotta get out of this place” as they read it…
Let’s let The Animals have the last word…