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What to Think About Before Running an E-Shop

I am not an e-commerce consultant, nor do I operate an e-commerce site; I am just a user who buys surfing and golf-related goods and household goods on Amazon or Rakuten whenever I feel like it, or who regularly buys amino acids for my muscles. However, as I talk with many companies that operate e-commerce sites on a daily basis, there is a point that really interests me about their management methods or organization.

The scale of the BtoC e-commerce market in 2021 will be 20.695 trillion yen (according to the Ministry of Economy, Trade and Industry’s “FY2021 Market Research Report on Electronic Commerce,” August 2022), and looking at trends in other countries, it is a field that will continue to grow.

As an aside, looking at the growth rate compared to last year, the growth rate is about 7%*, so even though nest egg consumption has increased, my impression is that it is not as explosive as it could be. (19,277.9 billion yen in 2020 → 20,695.0 billion yen in 2021)
Nevertheless, since the market is growing year by year, some companies may be thinking of launching an e-commerce site, adding more products to their e-commerce sites, or increasing advertising expenses for their e-commerce sites. We hope that the following points will be of help to you.

Recently, we had a customer who said, “We have products, so we started selling them on Amazon and our own site. We don’t know if it will sell, but we are going to start and if it scales, We’ll put people on it.” There is no good or bad reason to start, so it depends on each company’s situation. However, when we spoke with a senior manager a few months later, he said, “The response was more than we expected. The person in charge suddenly became busy with inventory and sales management. We just want to leverage him, but only he knows what to do, so we are asking him what he wants us to improve.”

When we asked about the situation some time later, we found that almost nothing had been resolved, and that the person in charge’s tasks were increasing rapidly. We did not ask him in detail about the background of how he started, so I am sure he had his own circumstances, but I think there were multiple points that should have been kept in mind beforehand. The person in charge of the project might think, “No, I’ll tell you what, I want more people, more time, more budget, and better business processes.”

I think that no matter what you test, you need to set a goal for what you want to get out of it. I don’t think the previous senior manager had a clear goal; you can get a certain amount of information on the web and social media, and if you follow your acquaintances and contacts, you can easily find someone who has started an e-commerce site and can give you some advice. You can gather opinions first, and then you can guess what the situation will be like. So, you could ask someone who could frankly say, “I’m thinking of selling this, and I’m thinking of the goal.” I recommend that you ask someone who you can frankly ask, “What do you think?” You never know, there may be someone who has some unexpected points to press, know-how, or advice!

However, the main point I would like to emphasize this time is, “Can you think of measures to improve the satisfaction level of customers who have purchased from the beginning, to create a mechanism to encourage them to actively purchase, to conduct retention activities that lead to repeat purchases and upselling, and in general to achieve customer success?” This is the part that we call “Customer Success. ” More specifically, while there are various measures such as sales, average unit price, and cost-effectiveness in the goal setting of an e-commerce site, can you be aware of LTV (Life Time Value = customer lifetime value), quantify certain items within LTV, and create a system to track effectiveness/KPI? I think it is important to be able to quantify certain items of LTV and have a system in place to track effectiveness/KPI. I was in charge of customer success organization management at a SaaS product company for a period of time. This naturally helped us to visualize the number of man-hours required, identify strategic customers, and clarify KPIs and evaluation indicators for each staff member.

Generally speaking, it costs five times as much to acquire a new customer as it does to acquire an existing customer, but after five years in the surf tour business (by the way, SOPHOLA allows side hustles!), I have learned that it is possible to control seasonal factors and targets. ), controlling for seasonal factors and targeting, it has cost me not only 5 times but more than 5 times what it would cost me to get a new customer. Even if you decide to do e0commerce for a test or short term, you will eventually have to pay for customer acquisition and retention. Therefore, I would like to tell them, “You will eventually need to think about LTV, so it is better to create a system to think about it from the beginning! I would like to tell you that you should create a system to think about LTV from the beginning. (I have a lot to say about the organization of customer success, so I will tell you about that in another entry.)

There are already many CRM solutions in the world that can automate approaches such as sending messages to customers at the right season or at the right time, and I believe that in the future there will be solutions that predict/visualize LTV using AI. At SOPHOLA, we are currently working on an advertising optimization solution for e-commerce sites (m19, AdScale E-commerce), and we are currently researching what kind of solution or mechanism would be best for us to help in this area in the future as well. We look forward to working with you in the future.

Takehiro Yamaguchi