Startup freedom of thought
Startups in any industry focus on testing and learning and quickly applying the resulting insights to pivot ongoing investments, optimize customer journeys, and maximize ROI. E-commerce players with a startup mindset have the freedom to experiment, fail, and learn from those failures. The more hypotheses you test in response to market signals and customer needs, the better your idea throughput, the quality of your experiments, the reliability and relevance of your insights, and the impact your experiments will have. According to a recent study by e-commerce experimentation company Optimizely, the median number of experiments companies run per year is 34. To be in the top 10% of experiments, companies need to achieve 200 experiments per year.
This means that the e-commerce arm of traditional retailers emulates the major players in direct-to-consumer or digital natives who have seen first-hand the huge benefits of experimentation and believe it is important to master experimentation. It's a place where you can. Airbnb has the capacity to conduct more than 700 tests per week using its own tools and platform. Microsoft, Amazon, and Google conduct thousands of experiments each year and discover that even small adjustments to digital experiences can have big effects. For example, Microsoft once raised up to 80 million yen in revenue by changing the color of hyperlinks on Bing from one blue to another after a series of experiments demonstrated how different colors affected user behavior. We estimate that there is a possibility of an increase in the dollar amount. Research by BCG and Shopify confirms that seemingly small changes to the shopping experience can have a big impact on an e-commerce seller's business and customers.
Enhance your digital experience and marketing
Optimizing the digital experience for your e-commerce business means prioritizing and implementing changes based on customer needs and estimated value. A large specialty retailer pursued this goal by identifying 100 opportunities to improve its e-commerce operations and continuously testing them over a nine-month period. Much of the incremental EBITDA improvement (estimated at approximately 30%) will occur within a year as we scaled up successful tests quickly. Their most successful ideas included enhancing guest checkout options and highlighting the top sellers of certain products to encourage users to convert by adding products to their carts.
Retailer startup-oriented e-commerce businesses test more ideas than traditional businesses to understand not just how well their strategies are working, but how effective they are. generate the objective, evidence-based insights you need. The assumptions are: This allows companies to direct more resources to the most effective measures and tactics on the platform, quickly reduce or eliminate those that aren't meeting their goals, and discover new tactics worth expanding. can.
Experimentation also plays a key role in messaging and media optimization, as it gives e-commerce departments a more accurate picture of return on marketing investment (ROMI). However, units must conduct experiments carefully to understand exactly what effects are being measured. For example, testing 10 different brand creative options with a “let's see which ones are popular” approach is counterproductive and risks confusing your customers. Instead, the department can test different levels of marketing investment across geographic regions to find the optimal ROMI.
Building a brand is difficult and expensive, making it important for e-commerce retailers to better understand their ROMI. Increasing brand awareness can be a challenge for any e-commerce company. This is one aspect where brick-and-mortar retailers have an advantage over online retailers. Brick-and-mortar physical locations, in-person events, and prominent signage keep brands top of mind for consumers. Online retailers need to actively increase brand awareness, so they should always identify the best-performing channels to maximize the return on their marketing spend.
How a startup mindset changes the operating model
Fostering a startup mindset and a culture of experimentation requires a different set of enablers than an e-commerce business, which operates as an offshoot of a traditional retail business. Their operating model depends on having the right people and technology in place, agile ways of working, and incentives that encourage the generation of new insights.
Invest in the right people and technology.
Many traditional e-commerce retailers focus on day-to-day operations and often lack the resources needed to keep pace with rapid digital change. This includes not only talent but also technology. Best-in-class e-commerce retailers use cutting-edge technology to power their platforms and tools to enable expanded functionality, rapid updates, and sustainable expansion. We've also had success by “rebooting” existing teams while bringing in external talent with experience in startups, agile working, and experimentation.
Experiment, learn and improve quickly.
E-commerce retailers with a startup mindset consider an agile experimentation framework to be an essential success factor. In our experience, large cross-functional teams can easily adopt a startup mindset and agile way of working. While training plays a key role, the rapid test-and-learn nature of the process also accelerates the pace of adoption. This process may seem scary at first, but through experimentation, teams can usually find ways to add significant value to the business in a matter of weeks. The positive effects of multiple experiments are quick and cumulative, improving team buy-in.
Reward risk-taking and lessons learned.
Incentives play a key role in building a high-performing e-commerce business. Unlike traditional brick-and-mortar businesses that incentivize “winning,” consistent performance, and achieving plans, best-in-class e-commerce businesses must incentivize individuals and teams for the speed and quality of testing they initiate. . The learning they produce. Additionally, failure should be celebrated, as even failed experiments can yield valuable insights that can help modify a company's approach. The next version of an experiment that incorporates the lessons learned from the failure often yields better results.
To reach e-commerce's “north star” goals, retailers must think like a startup and be prepared to take all the risks, experiments, learnings, and successes that come with it. By adopting a startup mindset, retailers can achieve their goals faster and more efficiently by encouraging a relentless consumer-driven approach to experimentation. It also lays the foundation for the e-commerce sector to respond quickly and confidently to future changes in consumer behavior, competitive pressures, technological advances and other external factors. Without a startup mindset, retailers' e-commerce businesses will fall further behind best-in-class businesses, leaving money on the table and talent on the sidelines.
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