5 Reasons Brands Fail in E-commerce.

Succeeding in e-commerce is not rocket science(really!). It is simply a combination of the right growth strategy, operational efficiency/process excellence, the right people to execute, and the mindset of long-termism (aka perseverance).

>Strategy, processes, people, and long-termism.

While this is true for almost any business today, it is even truer for e-commerce. Drop the ball on one of these and it immediately becomes a struggle.

Having worked with scores of brands to grow their e-commerce businesses, I share the top 5 reasons brands fail online.

5. Doing e-commerce without a clear strategy. Brands should not dive headfirst into e-commerce just because it is the cool thing to do or simply because other brands are doing so. The presence of competition is never a good enough reason. There must be a well-defined strategy for e-commerce that should clearly answer:

a. Why do we really want to be present via e-commerce & what share of our business do we intend to have on e-commerce?

b. By what metrics would we routinely measure our success after 6 months, 1 year, etc.?

c. What management structures do we need to have in place to achieve this?

d. What conditions need to be true to achieve?

e. What is the budgetary requirement for building an e-commerce business?

f. What value do we intend to offer our customers?

4. Treating e-commerce solely as a channel and not as an entire business. E-commerce has many moving parts which require attention and understanding the scope is key for setting the right expectations. I highlight below some key areas of focus for e-commerce. This could also constitute a great job description for an e-commerce manager.

3. Taking e-commerce as a “side” or “small” project. It is no coincidence that every successful brand online either has a dedicated team or senior management/leadership buy-in. This is directly antithetical to the approach some brands take today where the responsibility to grow e-commerce is given as a mere additional task to the modern trade manager alone. In most cases, the modern trade manager is unable to manage the multiple moving parts (highlighted in 2 above), hence the brand suffers losses, and the manager suffers a dent in their reputation. Growing via e-commerce means management buy-in is critical to ensure the right level of support.

Additionally, the very nature of e-commerce requires that you quickly figure out what works, and then, go all-in to achieve the essence of the model. As Jeff Bezos says, “scale is central to achieving the potential of our business model.”

2. Having unrealistic expectations in year 1. In Jeff Bezos’ first letter to shareholders, he says “We are still in the early stages of learning how to bring new value to our customers through Internet commerce and merchandising. Our goal remains to continue to solidify and extend our brand and customer base.” The goal in year 1 should ideally be to understand the ecosystem, build the right foundation, and achieve operational excellence. This is the phase I like to call grow and groom. Any other addition to that should be treated as a bonus and not an expectation. In my experience, I have hardly ever seen a big brand hit 1% of its total (offline)business online in year 1 of e-commerce.

E-commerce by its very nature rarely starts as a profitable venture, it is simply a business model that requires scale to prove its veracity. Neither Amazon, Mercado Libre nor Jumia started as being profitable but with the four components in my introductory paragraph, we are seeing this to be gradually so. In my discussions with senior management from several brands, I have often realized 2 inconvenient truths:

· Senior management understands the long termism of e-commerce and in fact, intuitively knows this is the right approach. However, they are not incentivized to make a business decision for which there might not be an immediate return on their investment. How would they explain in the next MBR or YBR? What will happen to their clean streak of achievements against targets over the years? You would think it ought to come naturally to business leaders, but it takes conviction to take a bet on e-commerce.

· A lot of senior management personnel are amazing business managers but not necessarily entrepreneurial with a huge appetite for risk. This is one reason I now think e-commerce should be designated a “special project” in organizations — this gives the freedom to take risks as opposed to treating e-commerce as modern trade and expecting 100% ROI in 1 year.

1. Approaching online retail solely from a sales perspective. As Tosin Oyekanmi notes, brands that do not invest a commiserate amount of time and marketing in growing their online retail business hardly experience sustainable growth.

Generally, if you execute correctly, e-commerce allows you the opportunity to convert your marketing spend into sales revenue on the same platform!

Let us take Jumia as an example, in 2020 alone, the e-commerce company recorded more than 100Billion pageviews. There is sheer value in recognizing this as an awareness tool, keeping in mind that these are likely qualified customers i.e., customers who are already visiting the marketplace to make a purchase. This is different from targeting a social media platform where the primary aim is to share a picture or catch up with online friends. Who would you rather advertise to: the customer who has already moved from awareness to interest or the user who just wants to post their pictures? The question then becomes what share of these pageviews should you aim to target as a brand looking to grow?

Of course, it is difficult to generally predict success, but the possibility of success increases drastically when the strategy is right, processes are efficient, people are talented and importantly, the mindset is that of long-term. By avoiding these 5 pitfalls, brands can significantly increase their reach and build a solid e-commerce business in Nigeria and beyond.