The Only 4 Ways to Successfully Build an Online Store

SignsTen years ago you could get a basic store online, add a few products, buy some cheap traffic and – voilà! – you’d be able to build a successful online store.

Oh, how times have changed!  While it’s still very feasible to build a thriving eCommerce business today, the competition has become stiffer, and merchants need to be much more strategic if they want to have a chance against giants like Amazon.

Here are the four ways I believe you can build a successful eCommerce business today:
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Compete on Price

Let’s start with the hardest and most common approach to eCommerce: competing on price.   The low price proposition can seem alluring if you’re starting a new store, but it’s more often than not a siren’s cry that leads to disaster.

If you’re reselling common products based solely on low prices, how will you ever compete with Amazon or Wal-Mart?  Both companies are well trusted and offer extremely low pricing.  And even if you did match their pricing, why would buy purchase from you over a well-known and trusted retailer?

It’s not impossible, but competing on price is the hardest way to build a successful eCommerce business as an independent merchant.  Even if you’re successful in driving revenues, your margins will likely be so small that you’ll need to scale enormously to receive a decent payoff.

There are a few exceptions when low pricing can be part of a viable strategy, like with my store TrollingMotors.net.  Most of the motors we sell have a Minimum Advertised Price (MAP) enforced by the manufacturer that puts a floor on pricing.  The sticker price is largely the same regardless of where you buy.

While you can still advertise low prices, it’s paramount that your online store offer something else of value.  To set ourselves apart from Amazon, we spent months redesigning the website to include in-depth product information, technical articles and purchasing guides to help customers make an informed decision.  They can’t get the level of detail and expertise we offer for trolling motors on Amazon.

Bottom line?  It’s difficult to compete with the big boys solely on price as an independent merchant.  If you do, make sure it’s only part of – and not the entire foundation – of your competitive strategy.

 

Manufacture Your Own Product

WeldingIf you can create a unique product that people are willing to buy, manufacturing your own product has a lot of advantages.

Less Competition:   When you’re selling an existing product, people can easily comparison shop.  But when you’re the only one making it, people have no choice but to buy through you.

Premium Pricing:  It’s easier to charge a premium price when you don’t have 200 other stores driving the price of the item down.  And with few or no other pricing data points to compare, customers will be less likely to balk at a higher price.

Higher Savings:  Perhaps best of all, building your own product and/or buying directly from the manufacturer is the cheapest way to source products.  It requires more capital up front, but is the best way to increase your profit margins.

Manufacturing your own products isn’t for the faint of heart and probably isn’t the best way to get your feet wet with eCommerce.  A lot goes into creating a product, and the logistical issues will not be insignificant.  But done correctly, it’s one of the best ways to build a long-term business in today’s environment.

 

Add Informational Value to Your Products

This is the approach I’ve traditionally taken and is one of the best ways to succeed if you’re building a drop shipping business.  If you’re selling existing products in the marketplace and don’t want to compete on price, you need to offer something else of value.  Some of the best things to offer are reassurance and guidance to customers.

Anxiety about purchasing an item that doesn’t work is a large reason people don’t buy, and this is especially true in confusing niches.  Would you feel comfortable buying the components for a Do-It-Yourself home security system install on Amazon?  Probably not, because they don’t specialize in the space and you’d have a hard time understanding what you needed.  Instead, you’d likely seek out a business specializing in security equipment systems.

Will some people visit niche websites, use their focused resources to decide what to buy and then shop around for the lowest price?  Absolutely.  That’s why this approach works especially well in niches where lots of different accessories or components are required.  The more items someone needs to purchase, the harder it is to comparison shop in a timely manner.

But despite the bargain shoppers, you’ll still earn the trust – and business – of many shoppers as a specialist.  And the more you educate them up front, the more goodwill and sales you’ll generate.

 

Build a Brand

When you build a brand, you move beyond selling just a product and focus on also selling an experience, idea or philosophy.  This is probably the hardest approach to take,  but has the power to create a business that’s very defensible with high long-term value.

As a marketer, I like to think I’m above being influenced by mass media campaigns.  Sadly, I’m as susceptible as anyone else to great advertising.  The first time I saw the “Most Interesting Man in the World” ads by Dos Equis – the campaign using a sophisticated, George Clooney-type character to sell beer through funny commercials – I spent at least 10 minutes watching them on YouTube.

It wasn’t until a trip to the store that I realized how truly powerful their branding was.  As my eyes scanned the beer cooler, they came to rest on a six-pack of Dos Equis, which I promptly pulled from the shelf.  For a guy who usually bases my selection on what’s on sale, I surprisingly can’t remember how much it cost.  I was too busy daydreaming about smoking cuban cigars, jumping out of airplanes and generally being studly to notice the price.

dosxx

And consider Dollar Shave Club and their hilarious promotional video you’ve almost certainly seen.  Instead of stopping with the funny ads, they also involved their brand with the entire experience of getting a razor.

As Jonathan Colman writes on his blog, the experience of getting your first razor is fun, cheeky and just as enjoyable as watching their video.  Shaving with plastic razors is pretty boring stuff.  But with some creativity, humor and consistent branding, Dollar Shave Club has built a viral business.

Which Approach Will You Choose?

If you’re on the verge of launching your first store – or if you own one now – make sure you know which one of these approaches you’ll take.  Are you offering a unique product?  Adding informational value?  Or creating an experience for your customers?  If you’re not sure, you may want to reconsider your strategy and think through how you can approach your business differently.

What do you think?  Disagree and think there are other viable strategies that I’m missing?  I’d love to hear your thoughts in the comments below.

Photo by danielygo

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Comments

  1. Scott Weigle says:

    I think you are 100% correct. My wife and I are in the 100% electronic download space for elementary education (lesson plans, worksheets, etc.). But there are literally thousands of other teachers trying to do the same thing, enabled by http://www.teacherspayteachers.com (where we also sell). But teachers do love their gurus. I stumbled into building a brand, but we are pushing hard in that direction. I was very glad to see it on your list!

    Scott Weigle

    • Andrew says:

      Especially with a crowded market, I think brand building is one of the best ways to break-in if you can do it well. Best of luck with your business!

  2. Elle says:

    For me, I started with compete on prices. It was very frustrating and stressful because my competitor was the distributor of the brand I sold in my country. Then, I decided to create added value, tons of information about the products on my online store, a resource website especially for my niche, and outstanding customer support.

    Today, my competitor decided to work with me and we found a win win solutions that we both are happy.

    • Andrew says:

      Nice, Elle! Did you notice a significant increase in conversion after you dramatically improved your website with the increased information?

  3. Shabbir says:

    I’d like to add something to point #1 – while this won’t really be your fault in a large market, in a smaller market, competing on price can destroy a product. If you’ve read the Four Hour Workweek by Tim Ferriss, he theorizes a situation where that happens – when so many dealers try to outprice eachother, ultimately, no reseller can buy the product anymore because they no longer have enough margin for it to stay profitable.

    With point 3, adding informational value, that is pure gold for search engines. With my site, most of my organic traffic comes through 2 or 3 of my resource pages – though I am having a little trouble turning those people into customers:D.

    Great post, as always – Cheers

    • Andrew says:

      Agreed, Shabbir! Pricing wars in any market makes it nearly impossible to build a strong business – especially as an independent small merchant.

      Good luck with your traffic / conversions! :-)

  4. Leighton says:

    I think the last 2 (add informational value and build a brand) can be combined with each other, and also combined with either of the first two to be even more competitive. In other words, I think you’re exactly right that you have to have at least one of these 4 be true, but if you can combine them, even better!

    One other strategy I think that could be added to the mix is to have the most user-friendly, well-designed website. I’m researching a number of small niches right now, and I’ve noticed that some smaller niches still have websites that appear to be from the 90s, so if someone can jump into that niche with a usable, mobile-friendly website, they could compete on that factor as well. Thanks for the great post Andrew!

    • Andrew says:

      Hey Leighton! Good to hear from you!

      Absolutely. If you can combine multiple strategies, all the better. Adding value with a great branding experience? That’s going to be powerful. And I agree with you on “most user-friendly” site… …to a point. I think it’s a way to potentially break into an underserved niche, but long-term I think you need to have one of the other strategies mentioned as competition will come in and you’ll eventually be competing with guys like Amazon. So it might be a great indication of a way to get some traction, but I think it’s crucial you have a more in-depth longer term game plan.

      Thanks for sharing your thoughts! How’s the podcast coming along?

      • Leighton says:

        Definitely agree–a usable site isn’t enough on its own, but can be a plus to the other strategies you discussed. The podcast is going great (2 episodes out so far)! I still want to have you on it soon, so I’ll be in touch!

  5. Jeff Raymon says:

    Andrew, I am glad you are reinforcing the adding value. Where I struggle is outsourcing the time consuming well researched articles, product guides, etc. Do you recommend doing these yourself and if not what type of writter should I be looking for?

    • Andrew says:

      I’ve found it’s really hard to outsource good content. If you do, you need to partner with someone for a longer timeframe who can really get to know your industry. Otherwise, the quality of the content will suffer if you’re having contractors who know little about your niche creating content. Personally, I’d do it for to begin with and then, if finances allow, bring someone on with a long-term perspective who can help out.

  6. Thomas says:

    Many years ago I was a retail salesman in a now defunct major hi-fi store. Incedently, the fact that it is defunct had nothing to do with me. In fact I was one of the few reps that had a consistent sales record with a decent margin. My secret was reflected in the nickname my colleagues pinned on me… “SWEET-CLOSE”. I found that the numbers work out fine when your customer is priority one. Taking the extra steps to assure satisfaction. A positive side effect is a good night’s sleep. Of course I grew up when you drove into the service station and they automatically cleaned your windshield, and checked your fluid levels. In todays world, that kind of service is on the brink of extinction. Of course I want to make a profit, but a phrase mentioned by “Elle” above is the key. WIN/WIN. There aren’t any sure things in this or any business, but ethics go a long way towards achieving success.

  7. Brenda Taylor says:

    While I can see how this concept could work for educational downloads or specialized motors, but I am trying to start an online plus size women store, and I’m wondering if this concept could apply?

    I am opened to any/all feedback.

    • Andrew says:

      For your business, I think the branding and create your own product approaches would probably work best. Either create an experience for your customers / sell a lifestyle OR create your own line of clothing for them.

  8. Dave says:

    This article is timely for me. I am in the process of training in ecommerce. I am currently
    making and selling my furniture locally. I’m probably going to go with drop shipping unrelated products for my first store.
    Thanks for all your info! I look for ward to being educated : )
    Dave

  9. Sam says:

    Hi Andrew,
    Great Post …!
    Building a brand and providing extra value to customers is extremely important if you’re in it for long term. Those funny videos and ad’s might provide some boost initially but after that if you do not have good brand values, those customers aren’t going to stay.
    Loved your website re-design post, very straight forward advice and step by step action plan with examples. Shall surly going to adopt few of your re-design guidelines.
    Thanks for sharing.

    • Andrew says:

      Thanks Sam! Glad it was helpful. And agreed – you’ve got to stand out some way if you hope to build a long-term business.

      Best of luck!

  10. Andrei says:

    Hi Andrew,
    thanks a lot for putting all this opportunities together. It is always good to revise from time to time what you are doing in terms of following a certain strategy or a few. What do you think about the extreme and over delivering customer service and support (pre- and post sales) as an additional opportunity to compete successfully?

    • Andrew says:

      Hi Andrei! I think both are important to any business, and extremely good service is a great way to help build / reinforce a strong brand.

  11. Brandon says:

    Out of respect for someone else’s blog, I will not post my site in the attempt of a shameless plug. We went the way of “Building a Brand” and it has done wonders. In fact, when we released the video of the photo session for our product (Its a fashion accessory), sales doubled. People see videos as marketing but in this case it helped with the brand and added to the “experience”. Great post. Cheers!

    • Andrew says:

      Thanks for the tact, Brandon! But feel free to post the example – I’d be curious to see it now. :-) Glad the branding approach worked out for you!

      • Brandon says:

        Of course! http://www.fuchsinave.com/ (Füchsin: German – “Vixen”)
        We are working on a fashion accessory known as the Garter Purse. Ours are meant to be seen. The video can also be seen here (just released Sunday) : http://www.youtube.com/watch?v=MxVyqpcFCCs
        Thanks for the interest.
        Cheers!

        • Andrew says:

          Great video, Brandon! Very well done. One suggestion – it was hard to find a way to click through from the video to your website. Even when I was looking for a link on the YouTube page, I couldn’t find it.

          • Brandon says:

            Noted. It is currently in the description below the video but it is not the first thing you see – I will change that. Also was thinking of putting one of those buttons in the actual video but did not want to “muck it up”. Thanks for the suggestion.
            Cheers!

  12. Janna says:

    Great timely article as I am in the process of creating my first product for a new e-commerce website I want to create.

    I am striving for #2, Create Your Own Product. My question is, if I am creating an information product (actually a test prep crash course for a specific professional licensing exam), how can I compete with the other big players in my space who offer similar courses and they have more years of experience/more impressive sounding credentials backing their name?

    I think I have a unique system that worked really well for me and could work well for other people, but I am concerned about competing against other similar products and establishing expertise.

    Any advice would be helpful!

    Thank you :)

    • Andrew says:

      I think the only way to do that is to create a better product, and then prove to your customers it’s better. You could do this by showcasing very convincing testimonials or giving parts of the course away for free to build credibility.

      Best of luck!

      • Janna says:

        Thank you. I am working on trying to do so! That is my plan exactly…reaching out to people to be part of a focus group to test and give feedback/testimonials (they get free portion of course in exchange), and making a really good product. Now it’s just time to buckle down and actually do it!

    • Shabbir says:

      There is a ton of great information online about creating your own info product. Ironically, possibly one of the largest(and most fiercely competitve) niches on the internet is teaching people how to make money on the internet!

      For your info product, show your product is better than everyone else’s(like Andrew said), but why not build a brand first? Take eCommercefuel itself for example – by creating awesome content and marketing it well, Andrew built himself a loyal audience – and then he came out with his online store course – which already had a giant customer base that respected him and enjoyed his content – it’s a win-win, and competition is out of the question(for the initial stages, at least).

      For info on building audiences, check out http://www.thinktraffic.net and http://www.smartpassiveincome.com

      Cheers and good luck!

  13. Jerry Lee says:

    Hi Andrew,

    I will choose both ‘Manufacture Your Own Products’ and ‘Build A Brand’ to build on my Online Business!
    To me, for an Online Business, you need both and of course you need tons of traffic.
    So Andrew, I need your help!

  14. Valerie says:

    I wanted to also reply to Brenda’s post from earlier…..I was thinking about your niche (plus sized clothing) in relation to the image rich marketing opportunities useful for adding value for customers on both Pinterest and Facebook….women still flock to Pinterest to get ideas in every area imaginable. Posting boards/images with fashion trends is just one idea of something that could be used to direct prospects back to your store. Posts can be created to advertising sales, etc……LOTS of opportunities here. Honestly, I’m not an affiliate marketer, but I will say there is some high- quality teaching on-line for the use of Pinterest and FB for marketing. This is a goal I have for my shop.

    Also, thanks Andrew for the high-quality teaching in your new ecommerce training program! Very thorough, well-organized, and easily understood! It’s clear you put a ton of time, energy and experience into the program. Don’t hesitate to advertise the sale of the program….it’s well worth the cost. I’m looking forward to moving forward!

  15. I’ve been thinking about this since reading it yesterday, and I think there’s something to be said about designing a quality experience for the visitor. All of the features of a site that can be easily overlooked:
    – High quality images
    – Intuitive navigation
    – Helpful search
    – Engaging titles

    All of these and more add up to an experience that can convert a visitor where another site with the same information would fail.

  16. Akilah says:

    Great post lots of great information. For #2 I also recommend doing a combo approach of selling some manufactured items and self made. This helps with the inventory question in ensuring your online store has enough product it also helps with establishing value if your items are handmade customer can get either the manufactured piece or the unique handmade.

  17. Neel says:

    Hey Andrew,

    Great post! I wanted to ask you one thing which I don’t think is mentioned in your eBook. When researching a niche on the Google Keyword Tool, I understand using the 3-5K Local Search rule of thumb to see if its a viable niche. Does the “Competition” column on the Keyword Tool mean anything? For many of the niches I’ve researched that have been in the 3-5K Local Monthly Search range, the Competition is always “High”. Is that a red-flag? Thanks!

    • Andrew says:

      Hi Neel! That refers to the competition in AdWords for a keyword. And it’s almost always “High”, even for moderately competitive niches. I wouldn’t let that distract you from pursuing the right niche.

  18. James says:

    Hi Andrew,

    I have a question about dropshipping.

    Can a dropshipper, despite having lower margins generally expect to compete with established online retailers that have been in the market for a while and have built their businesses to the level of importing (and have all the price benefits that come along with it)? Is this a redflag for entering a market? If so, what is the best/quickest way that you recommend to be sure?

    • Andrew says:

      James – If you’re drop shipping against an established retailer who is importing in bulk, you’ll have a very hard time beating them on price, so you’re good to be cautious. Instead, you’ll need to beat them be offering more value – often informational value – along with your products.

      Bundling items, create technical guides and installation manuals or simply offer superior, expertise service are all ways you can do this. But if you try to compete on price, you’re doomed.

      • James says:

        So to give some context to people reading this (MY UNDERSTANDING), there are benefits to purchasing light bulk (could cost $500 or less and be stored in your house), heavier bulk (may eventually need a warehouse or fulfilment center) and importing (can be quite complicated). All generally have progressively higher price breaks and while drop shipping saves the effort of handling the product and is perhaps less risky, my understanding is that it is not as cheap as incorporating warehousing into the business. This thus necessitates someone entering an established market (where others are already getting price breaks) to offer something special to make up for the premium they will need to charge. This is my understanding anyway.

        Something I’d like to look into is what the differences in price tend to be (between importer and dropshipper). So if the established importer gets ‘it’ for $15 and sells it for $25, should I hope for $20 dropshipping? This kind of thing. I’ll let you know any information I can gather on this.

    • An established retailer with dropship and/or Import relationships would be difficult to compete with for a startup dropship retailer. Often times, a retailer who has been online for many years is able to get price breaks, shipping price breaks, and even un-conventional drop ship agreements. By that, I mean there are some companies out there that drop ship for select companies. A new dropship online store has a whole host of competition right out of the gate, especially if their distributor advertises that they drop ship. This opens the door for every 18-50 year old who has a computer and wants to start a business. You can definitely compete and get higher rankings than many of these. But the problem is, many of them don’t mind making a few pennies over their drop ship cost just to get the sales. If the distributor doesn’t have MAP (minimum advertised pricing) then prices will be all over the place, and you can’t compete with that.

      What I have found is that there are wholesale distributors who will drop ship but do not advertise as such. So if you are looking to sell a certain product, you can often just e-mail Wholesalers and ask if they will drop ship. You might be surprised how many are out there. These are a gem, in that, if it is a unique product, you won’t have near as much competition online.

      Lastly, I would say, no matter what you do…you will always be more successful (even if good competition is out there) if you sell a product in a niche that you know alot about, or have a passion for. This tends to make you a natural salesperson, and a great customer service rep..all that. It also fuels the content on your website, and makes you desire to put the time in to make your business successful. I can attest to this.

  19. I think most ecommerce miss the fact that people really want to see real reviews from other owners of the product. We are going to be launching a new ecom site and one of our biggest strategies will be incentivizing reviews. Maybe you can’t compete on price or make your own stuff but you can think of clever ways to drive free content like reviews to help boost your product offerings and give your site more credibility with users.

  20. Richard says:

    Build a brand, Google has been saying it for long enough, just look at the SERPS if you need proof.

  21. Harry says:

    Andrew, this is my first time to your site. I stumbled upon it by accident when doing a keyword search on google about the new rules of their search engine and the effects on ecommerce. I really enjoyed this article and like all the feedback you receive. I hope to be back and look forward to learning how to recreate our site and get back on track. I like your private label product suggestion and doing that wit your own brand is a great way to grow when competition becomes too thin margin wise. Thanks so much and to a great weekend.

  22. Becky says:

    …don’t forget how powerful Facebook is to your marketing campaigns…you need to be talking WITH your customers, building that relationship – NOT with product pushing, but with valuable free content…! I believe this is critical and also building a list. Then, YouTube is the next very powerful marketing platform…a video a day to get your message out. I have only chosen products based on whether I can provide the additional content. A great site I’ve learned hugely from in my research is Luxy Hair http://www.luxyhair.com they profit (yes profit not turnover) 1 million a year…it is such a wonderful example of how a successful ecommerce store is built. Things to note and template on: the ‘story’ of ‘why’- people connect with the stories, – and check how targeted it is, and NO product pushing in videos, just awesome inspiring help, selling a ‘lifestyle’ than just hair extensions! They also do media buying and I do believe this is actually the icing on the cake that is already been made to work with SEO. It is brilliantly done..so, for me, although I’m new to ecommerce, my products (I believe) MUST follow this template.

    • Becky says:

      AND…this site is awesome too…only just found it and have devoured your ebook and just into finalising my products to go with. Yes, will invest in the course too – will need step by step help for my first ever store! Podcasts also have been remarkable in giving gem tips to think about too…such fun!!!

  23. DM says:

    This blog is very informative, had me thinking a lot more for my strategy. Can one works with the others from the same website? Like the #3 and #4 can works well on the website to build a brand name around it. But seems like #1 should not interference with the other two? or you can use them together in the same time?

    • Good day! Do you know if they make any plugins
      to help with SEO? I’m trying to get my blog to rank for some targeted keywords
      but I’m not seeing very good success. If you know of any please share.
      Thank you!

    • You actually make it appear so easy together with your presentation but I to find this topic to be actually one thing that I feel I’d never understand.
      It sort of feels too complicated and extremely wide for
      me. I am taking a look ahead on your subsequent publish, I’ll attempt to
      get the grasp of it!

  24. Chris says:

    Just another couple of categories to add that seems to be on the up in more recent times – that of adding either 1- ‘social’ value, or 2- ‘local’ value. By ‘social’ value – I mean that I work for an organisation that provides charitable services to our beneficiaries, which are funded in the main part from commercial products/services sold. Its not a ‘not-for-profit’ charity business model, just a ‘profit-for-good’ model, but I understand that this could also be seen as a different kettle of fish altogether (that being, that the commercial activity is NOT the actual aim of the business in the first place)

    The 2nd pont I do think is a bit more valid to add to your 4 other categories though. I do believe that many customers will consider the location of the business with which they place their business – particularly if that business can use the location to further its commercial success. For example – say you wanted to sell paint. There are massive paint manufacturing companies and lots of large ‘sheds’ that retail paint – but if you could arrange your business to sell it online (with lots of relative accessories or ‘packaged’ products) at a relatively competitive price – delivered locally in a reasonable time frame, then you could base a business on that?

  25. Chris Davies says:

    I am totally new to e commerce but feel if done right is a good model to follow. I have been reading the profitable e commerce book and am impressed by the guidance it provides. I must add that the initial task of finding the right niche which meet all the criteria to be difficult. I wanted to ask if you would recommend outsourcing this or is it a task which I should attempt myself for the experience and educational benefit.

    Thank you.

    Chris

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