5 eCommerce growth strategies beyond advertising.
When most people think about growth, they often focus on advertising to increase revenue and distribute products through different channels.
I agree with this. When we do that, the revenue will increase. But once you reach a certain peak, then revenue will be stagnant & it never grows faster.
Most of the time, the products won’t sell as expected, only expenses grow with advertising spend, tool costs, team costs & other fixed expenses.
As a founder, it’s essential to understand the key difference between Direct response & growth strategies to increase the contribution margin & profit.
Ideally, paid advertising will help you to reach new prospects & build awareness about the product & brand.
In this article, you will learn 5eCommerce growth strategies to have stable and profitable growth.
Here are the problems that might occur when you just focus on doing Direct response marketing focused on sales.
1. Higher than 10% fixed expense
Your fixed expenses are the same, and they only keep increasing in percentage of total sales after a few years. You will realize when the sale is dropping.
2. Un-expected ROAS Drop
How good your performance marketing team is doesn’t matter. Sometimes, your ROAS may drop due to various external factors. Here are a few things that happen commonly.
Facebook/Google raises the cost benchmark for each category based on the inflation
Competitors are spending more money on ads & they bid higher on you.
Competitors might drop their price less than your price or add some value.
Purchasing behavior might change during certain times like winter or lockdown. So people don’t buy due to various external factors.
3. Less than 10% repeat revenue:
You might acquire customers via paid ads. So your Customer acquisition cost is always high. But those people don’t buy from you again either, only you are getting <10% from existing customers. This makes your brand stable. Your 90% revenue drops when ads are not running.
You may say that I have a great product, so people love to buy it. Why do I struggle with the above problems?
Like the below growth graph, you will see the growth in the first 3 years. When you complete an early stage audience & move to the next stage or due to any external factors, the growth starts falling off.
You can raise the direct response budget as you get stronger at the foundation.
5 Easy Growth Strategies for Profitability:
I don’t suggest founders see the ad copies, creatives & audiences. Instead, I suggest you spend on the growth tasks that you are going to learn soon.
1. eCommerce is a seasonal business. Must understand the natural peaks of the year.
Here is the revenue peak for a brand. December to February is the lowest month. Take a look at the last 3 years' revenue, you will get a complete idea of when the sales happened naturally.
💡 Pro Tip: Ads do not drive sales. Natural moments do. Ads are a tool and place that help you reach your customers based on their interests.
2. Consistent Product Launch with 10X Value:
If you notice you can find all the products that people need in nearby shops & marketplaces. When you just try to sell products that are available in the market, it becomes a commodity.
However, You can sell massively with a large profit if you have a product that is 10X better than existing products in the market. This is the only way to stand out from the crowd. So launch new products every single year. This will be a game changer in the brand for aggressive growth.
3. Keep Fixed cost under 10%
The fixed cost is mostly Team cost and operational expenses. Initially, Hire any freelancers or agency with a flexible service fee. So you will have less problems with the team. You can be flexible anytime…
💡 Pro Tip: You can hire a few people in the operation when you are starting. If you want to expand your team & scale faster within-house team, your Repeat revenue must cover your operational expenses. This is the healthy way to do that.
4. Strong Presence in marketing place:
The hard truth is people don’t trust new brands & also 60% of people expect orders with COD.
When people want to buy something, they search for the product & buy it on Amazon.
They don’t search for brands that are available in the market. So stay at Amazon’s top to capture demand.
When we did massive YouTube advertising, people started searching on Amazon. At the time, we are not on Amazon. You can see the brand searches here.
5. Understanding the market & having a bigger TAM, SAM, SOM.
When you want to play small, you need to consider the total market size. At the same time, if you are expecting growth, then the TAM must be big enough to scale.
Otherwise, your audience exhausts soon & naturally ROI & aMER will be high.
I have worked with 40+ brands and noticed the brands who are having more than 5 Crore Total reachable market are good enough to build a brand that makes 10 ARR.
