Services like Uber and Airbnb are forcing traditional travel and hospitality businesses to work differently and refocus their efforts to make it easier for customers to search and shop for goods. Subscription purchases in the UK increased by 40% over the past year. To be an online success, UK startups will compete with bigger rivals on a smaller budget and even smaller team as government seed funding won’t be enough. So where do they start?
Businesses should start at where the money comes in. Investment into eCommerce is sometimes forgotten in a startup in favour of product research and development. This should not be the case as being online and global from day one has offered small businesses the best opportunity to grow, because it provides access to a whole world of potential customers. In this market it’s critical to always be converting across the entire commerce lifecycle and not just focused on the upfront customer acquisition, with the internet offering as many opportunities to lose customers as to gain them. Winning and especially retaining customers is not easy to do with there being so much choice available to the customer, and requires businesses to truly focus on their core business & client needs at multiple points of customer engagement.
While essential, building an effective commerce process is a difficult task for any business. It is made up of many moving parts such as payment processing and authentication, local tax rules, cart management and marketing campaigns. Being able to offer local payment services is often a good feature for start-ups, because it takes friction away for the customer when paying for goods. Our work with many customers shows localising payment services will increase revenue by 9% on average. This is why payment-only processors like Stripe and Square are held with high regard with billion dollar valuations currently.
Yet this is just one, small part in an effective commerce process. Businesses need to think beyond the automation of payment processes and handling international currencies such as the Euro, the Chinese Yuan or the Croatian Kuna. It is highly recommended for startups to outsource commerce operations, especially when resources are scarce so they can focus on their core intellectual property and continue to build their business. When considering Commerce solutions, it’s also important to choose one that supports rapid experimentation of pricing, packaging and new markets. Equally important, it should also allow non-IT members to respond quickly to customer demands and service clients in real time.
On a technical level, startups should consider commerce operations in the cloud – digital commerce SaaS platforms make the most sense given there are no upfront cost, and most of these services work on a revenue share model. In addition, it can help with managing spikes in traffic without additional resources. Goldman Sachs predicts spending on cloud computing infrastructure and platforms will grow at a 30% Compound Annual Growth Rate (CAGR) over the next three years. Understanding customer behaviour can also be made easier in the cloud thanks to readily available data analytics engines showing what the current strengths and weaknesses of a specific marketing campaign.
If we look at all the elements of the customer lifecycle, the first step is acquisition and businesses are constantly fighting a battle to keep the cost per customer acquisition low. Online businesses are using smart, cost-effective marketing tactics such as setting up affiliate and reseller networks. Often people use affiliate networks to increase traffic and revenue.
When managing affiliate networks, companies need to join a reputable network or tracking platform so they can effectively measure their return on investment (ROI). A company benefits through clear reporting on metrics such as CTR and numbers related to affiliate traffic, plus how this is impacting revenue and average order value (AOV). It’s important that the business communicates well with affiliates via the platform they join.
Now a startup has traffic, it is time to convert and retain it alongside the commerce lifecycle of acquisition, activation, upgrade, cross-sell and renewal? Avangate’s experience working with more than 4,000 businesses has learnt a shocking 10 to 20% of additional revenue can be leaked due to lax commerce processes. Shopping cart abandonment, lack of payment options and customer churn all contribute to businesses losing out on six-figure sums. For a small company, this could mean its profit margin and getting to the next level.
It is important to have an Commerce system which can offer different options to the customer to fit their buying preferences. Engaging customers throughout the commerce lifecycle by utilising tools, such as revenue recovery tools (RRT) from Avangate will provide fail-safes to proactively prevent customer churn and revenue leakage.
Commerce is an essential asset for businesses in the digital economy. Delivering superior commerce is a complex challenge for young businesses, but it would be a mistake to let this hold them back. If addressed early, start-ups can rely on their commerce platform to scale the business faster and reap the rewards of being able to sell anywhere in the world and go to market with new features and products faster than their rivals. All big corporations were start-ups once, and the internet is providing the level playing field which UK young businesses need to catch-up with their Silicon Valley cousins.