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Tag: E-Commerce

Are Software Companies Safe from Present Economic Conditions & COVID-19?

What’s happening right now due to coronavirus is a supply-chain crisis. Businesses have buyers but are running out of goods to sell. Once the business profitability is affected due to decline in sales, they will let go some of their employees. This could affect purchasing power of some of the people creating a demand-side crisis.

The pandemic could also affect demand as more and more people stay at home to avoid the disease, they would be spending lesser money on certain products. In addition, their purchasing power could also be affected by additional health related bills. If COVID-19 lasts long enough, which at the moment it is showing signs of, there will be both supply-side and demand-side disruptions.

To improve the situation, Fed has cut down the interest rates. The goal is to sustain the economy by offering cheaper credit to businesses. But I’m wondering how can a supply-side disruption be fixed with cheaper credit. Moreover, cheaper credit could help larger businesses but small and medium sized businesses are likely to suffer the most.

While it is obvious that trade and e-commerce are largely affected, are software companies safe? Some of them might be but I do not believe that they will not have a cascading affect on them. After all, many software businesses are intended to solve real-world problems.

In my industry for example, many software businesses are Shopify apps or WordPress plugins. Shopify store owners use those apps to improve their selling experience. But if there are no sales, or no revenue, the store owners will obviously stop using those apps until situation changes.

Softwares that have nothing to do with commerce, may be relying on advertising as a source of revenue, or may be assisting industries that depend on advertising revenue. They aren’t safe either. Once the commerce is disrupted, the advertising is meant to be disturbed too. In my own case, my e-commerce stores are affected due to supply-chain crisis, but I’m also not spending on Facebook and Instagram ads to drive sales which means the advertising industry is taking the hit too.

As a publisher, I also have data to support this argument as CPMs are going down across the board. So any software business which is dependent on advertising or support customers who drive revenue from advertising will see disruption too.

All other kind of softwares may be safe from this cascading affect, but will still be dealing with users with lower purchasing power.

While pure software businesses are much better off than other businesses, I wouldn’t say that they will not be affected. However, it is still a better time to be running a software business than any kind of traditional business.

Receiving Ad Delivery Penalty Due to Coronavirus

It should be no surprise to anyone that coronavirus has affected some of the global trade and specifically slowed down the e-commerce industry.

Since we were facing increasing difficulty to source and fulfil our orders, we had stopped advertising some of our stores by end of January where product sourcing had become difficult.

But even though we had stopped the ads, there were still shipping delays for the orders that we had already received. By last week, after a three week break, we had made alternate arrangements for our product sourcing and resumed partial advertising operations for the affected stores. However, today we received an advertising delivery penalization. This has caused us to stop ad-ops one more time.

Although our delivery rates received poor reviews and for obvious reasons, I’m still relieved that nearly 100% of the customers were happy with the product quality.

In the end, I’m not just an e-commerce seller, but many times also an e-commerce buyer. Since I expect to receive a certain quality of service as a buyer, I need to ensure the same as a seller too and when I fall short, with or without coronavirus, I’m not proud of it.

What I Absolutely Hate About Dropshipping

Although dropshiping is just a fulfilment method and there’s nothing wrong with this fulfilment method given that there is a good process in place. But the dropshipping that I commonly refer to on this blog has some shortcomings. I’m going to list a few below.

When you’re fulfilling orders only and only from China, and shipping across the globe, there will be delays despite using e-packet only shipping method. Delays result in angry customers and angry customers aren’t repeat buyers. It’s more challenging to have repeat customers, subscriptions, or higher lifetime value if you’ve 1 fullfilment center in China responsible for your global shipping.

I dislike this about dropshipping and my team does everything in their power to resolve this as much as possible. This can be resolved to some extent using 3PLs once you have a proven product. Like I said, I dislike this but I wouldn’t go so far to say that I hate this about dropshipping.

What I absolutely hate about dropshipping is that there are many many stores that use the same or similar creatives, copywriting, landing pages and scam customers in the end. The customers, who are often very naive, can not even differentiate between two or more stores running ads for 1 identical product.

Moreover, most customers can not understand that they were scammed by someone else. Our support inbox is often full of queries about orders that the customers never placed with us. These are the nicer emails. The other types of emails are accusations and abuses also intended for someone else, but sent to us. Our ads on Facebook get flooded by unhappy customers, who also aren’t our customers.

I wouldn’t say Facebook doesn’t do enough. They run surveys targeting the people who bought from Facebook ads and penalize sellers based on the feedback. But such sellers move from one LLC to another, one domain to another, one theme to another, closing everything behind.

In the end honest sellers suffer. Facebook will obviously crack down even harder. The honest sellers will lose their accounts even more. This is what I absolutely hate about dropshipping.

Why Lifetime Value (LTV) Is a Survival Game

As the ad costs to drive sales keep going higher, at some point you’ve to understand and work on the lifetime value of your customer. Otherwise, you’ll not stay competitive and will be crushed away.

You pay Facebook or other platforms a certain amount to display your ads to people who are interested in a certain “interest or a keyword”. At some point you realize that the cost per acquisition has gotten so high that after paying for acquisition cost, cost of goods sold, and other infrastructure costs such as fee for shopify/server and other plugins etc, you’re losing money.

Sometimes after optimizations of all kinds on the ad level as well as on the landing page, you’ll realize that you’re still losing money. How can that happen? How could your competitors by bidding so high? How can their business model work if they are spending higher than you to acquire customer. The simple answer lies in LTV: Lifetime value. And LTV should always be higher than CPA (cost per acquisition).

If your business model is designed such that you acquire a customer who would pay you once only, your revenue model is limiting you to compete. The reason why that happens is because your competitors are now betting on the lifetime value of a customer. They are interested in recurring purchases, subscriptions, and in summary to acquire user once, and monetize him again and again.

Other buyers of ads are bidding higher in order to purchase data that they can use later to either bring the bids lower, or use it elsewhere to generate revenue.

To conclude, in this day and age, if your business doesn’t account for the lifetime value of the customer, you’re simply not competitive.

The 1/2 Rule For E-Commerce Metrics

Although there’s no standard for e-commerce metrics, you should still aim to hit certain floors for your metrics in order for you to have a working funnel. I call this a 1/2 rule.

When a user lands on your product page, you need to track the progress between the different steps he needs to go through. A large or unexpected drop at any step should make you want to investigate that particular step of the funnel.

After landing on the product page or landing page, the user may have to add the product to cart. After adding the product to cart, user would land on the cart page. At this point, user would need to initiate check-out to land on the check out page. The user then needs to input his shipping and billing info in order to place the order.

While what percentage of users reach on each of these pages will largely vary depending on the type of products, price of products and the source of traffic, for typical dropshipping stores selling products between $20-$100 I recommend to at least watch out for the 1/2 rule.

The 1/2 rule suggests that if 20 people added the product to cart, at least 1/2 of them should initiate check-out which should lead 10 users to the check out page. And if 10 made it to the check-out page, at least 1/2 of them should purchase giving you 5 purchases in the end.

Landing page optimization is very important and I recommend that you use heatmaps to optimize your funnels. If you get your advertising, creatives and product selection right, but there’s a problem with your landing page, cart page or check out page, you’ll end up wasting all your efforts.

After all a chain is only as strong as it’s weakest link.

The Fast Moving World of Digital Marketing

As I mentioned earlier on this blog, our first e-commerce store was launched in 2016. Our primary customer acquisition strategy since then has been through Facebook ads.

While I had run Facebook ads a long time before, it wasn’t until 2016 that I spent a major budget. Since then, almost everything about the ads has changed. Many new strategies have been introduced and a lot of strategies that I learnt in 2016 are irrelevant.

Case in point, tech moves really really fast. Digital marketing moves even faster. And I’m curious what value could business schools add in your marketing career in this day and age.

It’s likely that my perspective is limited too, since I’ve never been to a business school. But help me understand, do business schools, including international, teach anything about this kind of marketing? If they do, how do the teachings stay relevant since the minimum length of a masters business degree is 1 year. Let’s not even talk about the bachelors degree here. In my opinion 1 year is a long enough time in digital marketing to unlearn everything and learn new things.

In my 15 years of career as digital marketer, I’ve changed my job roles 15 times. If I hadn’t, I would have found myself with no work. My primary source of revenue came from selling ads and our publishing company Socialoholic mastered that area. Only a few years later, we found ourselves buying ads instead. Now all of our revenue comes from buying ads.

In digital marketing, if you’re not pivoting every few months or even weeks, you’re being left behind.

So if you’re looking for a marketing school, let me tell you one. It’s where I went to. It’s called YouTube. The course length varies from 4 days to 4 weeks. And after that, you can get shit done.

Protecting Your Ad Campaigns From Yourself

Lately, I’m writing only about Facebook ads & e-commerce. That’s because since 1st January, we’re busy with the launch of our new store. We took a big part of 2019 off and planned to do some work from 1st January 2020. It has consumed us so far. But today is a good day because today we made it profitable.

In 12 hours, we have done $415 in sales. We’re projecting to close the day at $700.

Our ad spend for today is $154.81 which is about 37% of our gross sales. The net-margins are low right now but since we’re just getting started and the pixel is developing, we’ll see improvements with conversion rates over time. We also haven’t introduced any kind of lookalikes at this point in time.

These aren’t our desired results. We have to make up for the losses incurred with ads in the first 15 days. We need to optimize the ads after removing whatever segments aren’t converting to bring the costs down. We also then need to scale this campaign. If everything goes right, we should be able to do that in the next 7 days.

The reason why I’m not touching the ads right now despite that there’s room for improvement is because campaigns take time to optimize. Many people suggest not to touch your campaigns for 24 hours after you make them. While this could work if your campaign is completely off, I generally suggest 48 hours if there’s some sign of success. And so I’m going to let these go on for at least 48 hours and will not modify them.

After 48 hours, I’ll decide how to modify them by looking at breakdown data.

So if you want your campaigns to work, you need to protect them from yourself. Stay away for 48 hours, be patient. The cash might burn and it is going to hurt you, but the profit lies after that.

What to Realistically Expect From Your Drop Shipping Business

If you’ve read this blog before, you may have read some of the content that I’ve already written on dropshipping thus far. While e-commerce and dropshipping are very profitable in general, they are not as simple as most people market them to be.

I wanted to share my experiences with dropshipping so far to give you a more realistic overview of the journey, instead of the flashy end-result that you often see.

We launched our first store in Sept 2016. Our first sale happened in the first week. But it wasn’t until Feb 2017 that we were profitable. So it took us 5 months, 68 unique products in testing, and $10,000 in ad-spend before we figured out how this was going to work.

We targeted primarily english-native markets hence the competition was higher. It was also our first attempt with sales of any kind so we were inexperienced. But collectively we had over 10+ years of experience of running various internet businesses mostly related to content. So we weren’t completely inexperienced either.

From Feb 2017 till May 2017, we had achieved the flashy status that you often hear about. The margins were 40% initially but after scaling, came down to be about 23%.

Since then we’ve launched many stores targeting many different industries but drop shipping as a whole has gotten way more tougher. This is due to the obvious: more competition, higher ad costs, and lesser margins.

But it’s also because that in addition to ads getting more expensive, Facebook ads machine learning has gotten more advanced too. What it means is many marketers are now able to achieve results with little to no targeting options. Many times strategies have gotten as simple as running a broad ad with no targeting.

Since there’s lesser room available to outperform your competition with ad strategies, the competition now lies in creatives and product hunting. If you’re able to create better video ads than your competition, you stand a much higher chance of winning.

Over all, in the next few years, it’s going to be best product/creative takes all kind of game. Facebook ads are going to dumb down to just budgets and optimization goals.

What I’ve written above is related to my e-commerce experience in international and primarily english-speaking markets. Others may have had better or worse performances. In addition, e-commerce in developing and under-developed countries including Pakistan, has much lower competition and related ad-costs.

In summary, Pakistan is a much more potent market for early-stage entrepreneurs for e-commerce. We choose to work in global markets for a bigger scale although it comes with much larger set of challenges.

Chinese Are Eating The World

Everyone knows it. You may have already read other variants of this article. A different angle through a different lens. May be in terms of One Belt One Road initiative. But I’m only interested in how they are doing that in tech, and most specifically in the e-commerce industry.

When we first got into dropshipping, there were nearly no Chinese in the industry. They were mostly just suppliers of the goods. Dropshipping in essence began with AliExpress. Chinese would just host products there and fulfil on behalf of other dropshippers.

In the following year, Chinese learnt that they are being duped. For every $5 they get in gross sales, the dropshipper gets $20 in gross sales. The first change we saw happen was the prices went up at least 100% on AliExpress. They needed an equal share in the dropshipping business.

By following year, many new dropshipping stores popped up that have now become some of the largest in the world. Chinese didn’t just want to fulfil orders, they mastered the business end to end. From advertising and sales to fulfilment. They replaced most dropshippers.

A similar trend can be seen on Amazon FBA as well where most new and top sellers are based out of China.

Facebook’s Super Lookalike Audiences Using Top Percentile

Super lookalikes isn’t officially a type of audience by Facebook. It’s just a term used by performance marketers to describe lookalikes made using top percentiles of the audience.

This kind of custom and lookalike audience is generally not publicly made available by Facebook but it’s kind of a hidden gem. If you don’t know about lookalike audiences, please check this out. And if you do, read ahead.

This is where you generally create or find your custom and lookalike audiences

But super lookalike audiences are created here.

Using the percentile option under activity in analytics section

You can create a filter to reflect the top percentile of your readers or buyers and save as custom audience

You can then use this custom audience to create lookalikes using the standard way. I call these super lookalikes.

Because results for super lookalikes speak for themselves.