How to Protect Your Ecommerce Margins in the Age of Hyper-Competition

December 31, 2018 / by Tina Eaton

Shopify recently found that ecommerce sales around the globe have been growing at an average of 20 percent every year since 2014. This growth is expected to jet ecommerce sales to $4.5 trillion worldwide by 2021.

 There’s no doubt that digital brands and retailers like yourself need to prioritize ecommerce in order to survive. Unfortunately, ecommerce margins are at an all-time low in the age of hyper-competition. Even some of the biggest players in the game like Amazon, Etsy, Groupon, and others are struggling to turn a profit. 

Unfortunately, ecommerce margins are at an all-time low in the age of hyper-competition. Even some of the biggest players in the game like Amazon, Etsy, Groupon, and others are struggling to turn a profit.

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The competition is hot and the common practice of simply lowering costs to drop prices is only going to hurt your chances of staying in business.

In fact, in a roundtable discussion with senior ecommerce marketers, the marketing and ecommerce research and analysis firm Econsultancy found that the number one issue plaguing modern retailers is that price is too often the sole differentiator among brands. 

We’re with industry-leading retail technology analyst Paula Rosenblum when she says “Consumers may be sensitive about price, but no retailer, not even the lowest-priced retailer, can win on price forever.”

While the short-term gains of price-based competition might win in the short term, you’re setting yourself up for lost profits and irreparable damage to your brand value in the long run. Sure, it’s actually likely you’ll start moving more product—but how long will you be able to keep it up when you’ve cut down on quality, shaved your margins razor thin, and developed a customer base that’s ready and willing to abandon ship as soon as the next deal comes along?

Whether you call it a “rat race” or a “race to the bottom,” either way it’s a pretty undesirable race to be running. These five tactics will empower you to set your brand apart with added value and break out of that hampster wheel once and for all.

5 Ways to Add Value and Protect Margins in a Hyper-Competitive Ecommerce Environment

1. Host Engaging Experiences

Experiences are all the rage right now. What kind of events can you host to bring shoppers into your store or onto your website where your chance of making a sale is increased?

All you have to do is walk through your local shopping area for inspiration: Coffee shops hosting live musicians, athletic clothing retailers putting on yoga classes, grocery stores holding weekend cooking classes. Even Home Depot—the world’s largest home improvement retailer—hosts workshops to get new and lapsed shoppers in the door.

Experiences are all the rage right now. What kind of events can you host to bring shoppers into your store or onto your website where your chance of making a sale is increased?

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These free (or extremely affordable) add-on services cater to the interests of people who either already shop with you or just need that extra something to convince them to visit for the first time. And once they’re engaged in the experience, they’re primed to spend more time and more money with your brand.

2. Tack on Extras to Counterbalance Higher Prices

If you’d rather spend a little more money but a little less time differentiation your brand, look at the discounts or free extras you can offer.

The possibilities here are nearly endless. Offer free shipping, free gifts with a purchase, lifetime tune-ups or other kinds of warranties, and so on.

When the added value is unique and, well, valuable, your price doesn’t necessarily need to be as low as (or lower than) your competition’s. Take for example Zappos, who is often recognized for their awesome customer service, free shipping, and generous return policy. You don’t hear anyone complaining that they don’t offer rock-bottom prices! Their extras deliver value that balances out their reasonable product pricing. 

Offer free shipping, free gifts with a purchase, lifetime tune-ups or other kinds of warranties, and so on.

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3. Invest in Unique Offerings

Big-box retailers like Target, H&M, and Kohl’s have set their brands apart by partnering with recognized designers from Lilly Pulitzer to Versace to Vera Wang on exclusive merchandise.

By offering exclusive collections at competitive prices, these retailers are able to turn a profit even in the hyper-competitive mass market without having to chase down the absolute lowest price. 

And the sales bump doesn’t end when the last designer item is snapped up.

“These types of lines actually drive little in sales, but the real win is to drive people to stores and have them buy everything else they need,” said Sucharita Kodali, an analyst for market research firm Forrester.

Big-box retailers like Target, H&M, and Kohl’s have set their brands apart by partnering with recognized designers from Lilly Pulitzer to Versace to Vera Wang on exclusive merchandise.

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4. Give the Consumer Experience Your Personal Attention

In addition to the ever-shrinking prices that threaten ecommerce margins today, there are also ever-growing consumer expectations.

Online shoppers especially have some of the most powerful and elegant user experiences in the world quite literally at their fingertips. How are you supposed to compete with Amazon’s 1-Click ordering workflow or Etsy’s excellent search and filtering functionality? 

While you may never have the same resources as the world’s leading marketplaces, what you do have is deep knowledge about your user base and a personal commitment to making it as easy as possible for them to visit, buy from, and repeatedly visit your retail outlets.

Not sure where to start to make the most impact? Go mobile. Mobile devices have already surpassed desktop in internet usage. Better yet, go beyond just mobile-friendly to integrate actual apps into your sales and marketing strategy. More than 80 percent of the time people spend on mobile devices is spent in an app. The consumer preference for mobile apps versus mobile sites is clear and vital to keeping your margins healthy in the age of hyper-competition.

More than 80 percent of the time people spend on mobile devices is spent in an app. The consumer preference for mobile apps versus mobile sites is clear and vital to keeping your margins healthy in the age of hyper-competition.

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Now that you know which devices you’re starting with—review their customer experience on each channel to find where you can minimize friction.

Econsultancy recommends starting with these questions:

  • How do customers enter your website, mobile app, or other shopping point?
  • Which pages are they using most frequently?
  • How many clicks or other actions does it take for them to complete a transaction?
  • Where are shoppers leaving without making a purchase—and can you figure out why?

In addition to perfecting your digital platforms, product information management (PIM) software is a great way to boost your omnichannel ecommerce marketing strategy without turning product data entry into a grueling, full-time job.

PIM system

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And Plytix is the only PIM tool that was created by ecommerce marketers for ecommerce marketers. It streamlines your product content centralization, optimization, distribution, and analysis so you can take the time and brain space you need to stay on top of value-adding strategies. (Too good to be true? Try us—it’s free to get started!)

As the saying goes, take care of the pennies and the pounds will take care of themselves. Protect your margins by caring about the shopping experience from the consumer’s point of view, paying special attention to the small details like helpful and accurate product data, and never stop iterating.

5. Continue the Customer Journey Beyond the Sale

The transactional relationship that today’s consumers feel with ecommerce shops isn’t much of a relationship at all. In fact, if you can’t overcome this lack of connection, none of the other value-adds we’ve discussed here will have nearly as much impact. 

Instead of continually lowering prices and cutting costs and service, add value and protect your margins by nurturing the customer journey well beyond the transaction.

The first step is to start before the transaction with seamless, recognizable branding that consumers actually trust and care about. It’s sad how far today’s ecommerce companies have come from this point—but that just makes adding value in this way even easier for brands who actually care about the customer journey.

Once that initial impression is taken care of, ecommerce shops should focus on the offline execution that comes after the transaction. While most of your sales might happen online—logistics, delivery, and customer service give you plenty of offline touchpoints where you can impress customers.

Take for example Zulily’s email to first-time buyers. It isn’t just adorably on-brand, it also shows consumers that they’re interacting with a company that cares about their experience well beyond the purchase page.

Instead of continually lowering prices and cutting costs and service, add value and protect your margins by nurturing the customer journey well beyond the transaction.

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Another example comes from an unlikely source: The Country Hen.

Each carton of their pricey organic eggs comes with a pamphlet that uses content to paint a powerful picture of why their eggs are more valuable than those offered by their conventional—and much cheaper—competitors.

Each carton of their pricey organic eggs comes with a pamphlet that uses content to paint a powerful picture of why their eggs are more valuable than those offered by their conventional—and much cheaper—competitors.

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The sale is already made, so why does The Country Hen bother spending the extra time and money on that short pamphlet? Because it helps establish their place in the market and shows consumers all the work—and therefore value—that goes into producing every carton of organic eggs. It’s a story shoppers can relate to and remember on their next visit to the grocery store.

Plytix Empowers Marketers to Make a More Valuable Impact

You’ll never be able to stay afloat by competing on price forever. Instead, use your resources to add tons of value by hosting awesome experiences, giving away nifty extras, developing a unique selection, keeping your customer experience up to date, and implementing thoughtful touches throughout the customer journey.

And if the day-to-day monotony of keeping track of and optimizing all your products and data is getting in the way—we’ve got just the tool to put you back above water.

With tons of integrations, affordable pricing, and ecommerce features that hold their own against some pretty tough competition; Plytix is standing by to help you automate the boring stuff and get back to building the cool shit that wins leads, sales, and referrals.

Start a chat with our friendly in-house unicorn Belinda or sign up for free and start growing your value today.

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Tina Eaton

Written by Tina Eaton