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What sales channels matter most? (Guide to Small Business E-Commerce Strategy)

We’re continuing our look at Small Business E-commerce Strategy today. Last time, we looked at “Why Splash Pages Suck”. Today we’ll take a look at channel management.

Not all e-commerce channels work as well as others. When most folks think of e-commerce, they think only of their own website. Having your own website for your business is critical. But it’s not the only place to sell as part of a well defined e-commerce strategy. Let’s take a look at the three types of e-commerce channels and how you can decide which ones work best for you.

Three key e-commerce channels

Sales of your product can occur in up to three key channels. These are:

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  1. Your website
  2. Partner sites
  3. Voice-assisted web

Your website is the most important of these, by far, followed by customers starting on the web and calling you. But partners matter, too. Partners include sites like Ebay, Amazon and Etsy for retailers and manufacturers; travel agency websites for hotels; directories for service providers; and affiliate sites for most business types.

Depending on your business type, you should measure how effectively these channels work for you and tailor your e-commerce strategies around their benefit. How do you do that? By measuring the cost of each channel, the volume of sales and the amount of revenue received from each. The will tell you your profitability per channel, which you should always look at in terms of dollars, not margin. As Alan Rimm-Kaufman said over at Mike Moran’s Biznology recently, “Too many retailers focus on profit margin (a percentage) instead margin dollars (real money)…At day’s end, you don’t deposit percentages, you deposit dollars.”

Cost of channel

Every channel has a cost. Typically these include things like commissions paid to affiliates or fees paid to retail sites (think Ebay/Amazon). Some of these costs will be fixed (monthly recurring fees, for instance), while some will vary according to the amount you sell. Make sure to include your time and the time of your staff as one of those costs. For a typical business owner, divide your annual salary by 2080 (40 hours/week times 52 weeks. I know you work more than 40 hours a week, but dividing by the actual hours you work would probably just depress you. Stick with 2080. Plus, you can use the same number for you and your team).

Volume of sales

Volume of sales is pretty basic. How many sales do you receive from each channel? Most third-party partners will provide you this information readily. Phone tends to be one of the harder channels to track this for, but you can use these tips to come up with some measures.

What about the volume of traffic? Don’t assume that just because a site gets lots of traffic that your listings automatically will. You might, but you’ll need to check to see if that’s true. By focusing on sales, you’re tracking the actual value of that site to your business.

Revenue per sale

The number of sales may not matter as much as how much revenue you make from each. Here’s one place where voice-assisted web sales often show their stuff as many companies do a better job upselling and cross-selling on the phone.

Profit per sale

Finally, you can use the numbers you’ve gathered above to determine the profit from each channel, which should represent its value to your business. However, even if your own website produces a lower profit than partners, don’t surrender all sales to a partner channel. In the long run, your business depends upon your own, thriving web presence. Your own website builds a stronger brand, represents your company most effectively and isn’t subject to the whims of a third party such as raising prices or limiting selection.

Tim Peter is the founder and president of Tim Peter & Associates. You can learn more about our company's strategy and digital marketing consulting services here or about Tim here.

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  1. […] E-commerce drives a purchase action. Ideally, for most companies, this involves revenue. But, getting people to download a white paper or refer to an FAQ can be an effective method of lead generation and customer service at a lower cost. That’s a Good Thing. And it works like just like an e-commerce transaction. Just evaluate the costs of each activity relative to its benefit and its customer value to prioritize you…. […]

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