Proof of Concept: What It is and How to Do It Right
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It’s now more imperative than ever for brands to have an owned digital presence — companies without an e-commerce presence need to build one out to remain viable. This guide will help brands understand the challenges and opportunities for moving their business from physical to digital, from relying on third-party platforms to managing their own thriving e-commerce presence.
In this article:
Types of E-Commerce Platforms
Overview of Major E-Commerce Platforms
Product Considerations for Moving Online
Understanding Which Products Will Sell
Alternative Product Ideas
Digital storefronts come in a variety of flavors and configurations, from complete DIY experiences to turn-key solutions. For the purposes of this guide, we’re going to break them down into three distinguishable categories. These can be roughly classified as “owned,” “partially-owned,” and “unowned.” The distinction between the three is important for determining your e-commerce strategy:
Like the name implies, these platforms are ones on which a business can sell goods and services online, but which the business doesn’t own. The most well-recognized platform is Amazon Marketplace, though others include marketplaces from Target, Walmart, eBay, Etsy, Alibaba, and similar.
Pros: Easy to set up and quickly get started selling; outsources a lot of the technical and back-office work; often has built-in logistics.
Cons: Expensive licensing fees, sometimes a percentage of sales based; sellers are at the whim of the platform and can lose rankings, be penalized, or get completely delisted often with little communication or redress; opaque rules and conditions; and limited marketing opportunities.
For additional reading around third-party platforms:
Partially-owned platforms are typically social platforms linked to an owned “back office” and often tied in with social sales. The most common example is a Facebook store — it’s on a platform that’s somewhat (partially) controlled by the company doing the selling, but not entirely. While the back end that processes orders might be entirely self-owned, the front end that customers see is still at the whim of the platform.
Pro: Built-in user base; a familiar interface for many consumers; trust from being associated with a large platform; minimal design work required.
Cons: Opaque rules and conditions; limits on what can be sold and how; risk of losing ranking or visibility, or being delisted.
Owned platforms are completely owned and controlled by the business doing the selling. This means that everything, from the design to the order processing to the customer experience to the product selection, is entirely in the hands of the business and is hosted on the businesses’ own servers.
Pro: Complete control, top to bottom; can sell anything in any way; most marketing options.
Cons: Requires the most time and thought upfront to implement; requires the most effort to maintain.
Looking at these different types of platforms isn’t just an academic exercise — the decisions that brands make about their e-commerce approach has real, lasting consequences on how they reach and sell to customers online.
Companies on third-party platforms may benefit from an initial boost in visibility from the installed user-base of that platform (Amazon shoppers, for example), but may end up losing almost all of their traffic when those platforms respond to a crisis like COVID-19. Amazon sellers, for example, saw business drop when the platform decided to deprioritize “non-essential” products sold through its Fulfilled by Amazon service.
In a time of social distancing and mandatory quarantines, any digital sales presence is better than no digital sales presence. Brands looking to move online, however, should take the time to weigh their options and consider how they want to build out their digital storefronts — with a strong bias towards investing in a fully-owned platform.
There are hundreds of e-commerce platforms available, ranging from super-specialized providers that serve a particular niche to newcomers just trying to breakthrough. For brands just getting online, however, it’s highly recommended to go with an established major player: not only will it be easier to find guides, manuals, and solutions to common problems, but it will also be much easier to find developers and experts with an expertise in a larger platform than a small one, and that expertise will often be much more affordable. Below is an overview of the most popular options.
|Shopify||Established platform; lots of add-ons and customizations; feature rich; includes hosting||Limited free design options|
|WooCommerce||Lots of plugins and add-ons; highly customizable and extendable; easy setup||Built on WordPress, so some limits and requires knowing how to work with WordPress|
|BigCommerce||One of the market leaders for large brands; very fully-featured||More difficult to use than many competitors; can get pricey; no app|
|Wix||Most popular website builder online, so easy to integrate for sites built in their ecosystem; simple drag-and-drop interface||E-commerce functionality is an afterthought, so lacks a lot of features standard in other options; not easy to integrate with social|
|Squarespace||Easy to use and excellently designed website builder; large support infrastructure||Like Wix, e-commerce is an afterthought; no integrations, apps, or add-ons — you get only what’s built-in|
|Magento||Incredibly powerful and fully-featured; owned by Adobe, so integrates with marketing/sales cloud; extremely customizable||Most expensive option; can be very difficult for beginners; expensive support, design, and developer options|
The product calculus for selling through digital storefronts is different than for physical storefronts. The characteristics of the products sold go beyond “Will this sell or not?” They have the potential to dramatically impact profit margins, sales strategy, pricing, and marketing considerations. Some of the most important are:
Digital vs. physical products: Not every product being sold has to be a physical “thing.” Many brands moving online find that selling intangible products is an important part of their strategy. This includes gift cards, services like design or stylist consultations, digital art and music, and other virtual items that are easier to sell online than physical products.
Dimensions and weight: The biggest impact dimensions and weight have in a physical store is “How many of these products will physically fit on a shelf?” When selling online, the dimensions and weight of products being sold are critical components of profitability. Brands selling large or heavy products may see the net margins on those products fall to zero because of high shipping costs — including higher packing costs for items that don’t fit into regularly-sized/shaped boxes and envelopes.
Perishability, breakage, and other shipping concerns: Not only do digital store owners need to worry about the size, weight, and shape of the products being sold, they also need to think about how those products will hold up to shipping. Fragile or perishable items can still be sold online, but they’ll need additional care in packaging, which can drive down margins.
Differentiation, uniqueness, and commodities: Selling a generic product, say a thermometer, can work on Amazon where people aren’t really looking for branding and differentiation. Selling a generic product in an owned digital shop probably won’t, since it’ll be much harder for customers to find it. Moving to a completely owned digital storefront requires thinking about how products are branded and differentiated, whether that be with features, pricing, experience, or some other factor.
Finding success online requires carefully picking the right products to sell. That requires two things: knowing what products customers want to buy, and knowing which products will be the most profitable to sell online. The latter can be discovered using ABC inventory management, but how do brands solve the problem of figuring out what customers want?
One of the easiest ways to identify products that will sell well is to look at what the competition is doing. Thanks to prevailing trends in web design, almost every e-commerce website will have the functionality to sort products by most popular. Enterprising brands can browse the competitors’ best-selling products and align their inventory to match.
For more on how to conduct a competitor analysis:
Competitors’ e-commerce sites aren’t the only source of data brands can use to evaluate product popularity. Some additional data sources include:
Google Search Console: For brands that have a website in place, what are the keywords and queries people use to find it? Google webmaster tools provide a historical record of the search terms that a website has shown up for, and how many visitors each one leads to.
Advertising: What products are competitors advertising, and how much are they paying to advertise them? This is another place where a free Google tool, the Keyword Planner inside the Google AdWords tool, can help brands figure out what people are searching for and how much competitors think those searches are worth. In general, the more a keyword costs to bid on, the more interest consumers have in that product.
Customer surveys: Who knows a brand better than the people that are already customers? Reaching out to past retail customers via email, SMS, or web survey and asking what they would like to purchase online can give a wealth of data on what kinds of products are likely to do well through e-commerce.
Sales data: Similar to customer surveys, historical sales data can provide some insight into what customers are likely to buy online. It won’t be perfect, because the medium changes shopping habits, but it can be a good place for brands to start.
Figuring out the logistics of shipping existing inventory can be difficult. Brands looking to dive into e-commerce should consider selling some alternative or digital products while they work to figure out how to move the bulk of their business online. Some ideas are:
Gift cards: Gift cards can be simple to roll out, and are one of the easiest ways to generate cash flow online, even for companies whose products might not fit the e-commerce model. Most digital storefront platforms have integrations to allow selling gift cards, making the rollout fast and easy.
Remember, though, that selling a gift card creates an obligation for the future — sales of gift cards are essentially an advance a business gives itself against future sales.
Presales: Very similar to gift cards, presales allow brands to sell a product today without having to deliver it until later. Like gift cards, presales can be set up relatively quickly and easily, but they also set up liability for businesses. The product will eventually have to be delivered and typically by a certain date, which can be difficult to plan for during a pandemic.
Downloadable content: Some businesses will be in a position to offer digital products, whether it be software, art, music, video, or something else entirely. Just remember that digital products come with their own concerns. These include piracy and unauthorized copying and distribution. Various apps and plugins can help brands offset some of these dangers.
Digital services: Brands, even ones that don’t focus on retail, can offer digital services through their e-commerce shops. This can be something like a design consultation offered by a furniture retailer, or hair and makeup consultations sold by salons. Professional service providers like CPAs and attorneys can sell their time over video conferencing software. As with other digital products, plugins and apps exist for most e-commerce platforms to make selling these services easy.
Now that you know the different types of e-commerce platforms and the products that will sell, it’s time to learn more about online customer acquisition and fulfillment.
And don't forget to get your copy of our eBook, Diving Into Digital: Bringing Offline Brands Online!
Last updated on November 17th, 2022.