The Internet has brought significant business advantages for merchants and smaller retailers. A web storefront requires less financial investment compared to a traditional physical store when considering costs necessary for buildout, maintenance and rent. Unfortunately, today there are millions of web storefronts online, and consumers have plenty of choices for just about any product on the market.
This increased competition means retailers and merchants need to continually grow revenue to add stability to their businesses and to cover rising operating costs. No matter how big or how small your business is, this is likely your top concern. New customer acquisition would serve as a logical first plan of action. But finding new customers can take time, particularly with today’s customers interested in shopping at locations that have offered positive experiences for friends and family members. Referrals are powerful, and a recent article in The New York Times stated that 65% of customers typically come from referrals. The downside here is that social media often helps drive referrals, and many small business owners either do not understand how to grow their social footprint, nor do they have the time.
Increasing prices can also boost the bottom line, however, a commoditized Internet won’t support prices above the market and consumers are very price-conscious when shopping online. So, if you sell low-margin products, have limited resources to acquire customers or lack the financial structure to withstand a risk gone bad, your options are limited.
Some smaller businesses and merchants have tried to build relationships with larger businesses in their local area that offer complimentary services. It’s a good theory but can require a lot of networking in order to bring in customers – and many owners are already pressed for time just to manage their existing daily operations.
Often times, smaller businesses will also seek ways to make customers purchase more frequently. The use of loyalty programs has become a mainstay for today’s largest brands such as Starbucks and the airlines. Smaller merchants have had more difficulty instituting these programs, though, because they don’t have the infrastructure to support these campaigns. Furthermore, many loyalty programs are quite complex to install and manage.
Another option exists, but comes with other logistical challenges for a small business – growth by increasing the average order value (AOV). In this concept, customers spend more when they’re already making a purchase. This is often referred to as cross-selling or up-selling, and is a popular option since it taps the existing customer population at the time of check-out and results in higher sales results for the bottom line.
Amazon has mastered the opportunity for cross-sales of different products in front of customers, and this method has been known to result in an increase of business by as much as 15% for businesses of all sizes. Cross-selling and up-selling can serve as a great opportunity for smaller businesses and merchants, but the key is to find the right set of complimentary products. Insurance and protection plans have proven to be a good option since there are so many products that can be covered by a protection plan.
The most popular product extensions serve simply as commission sales for the retailer, where there is no need to provide support services on the product being offered. These services are supported by the partnering company and the products can be white-labeled or co-branded, depending on the agreement between the two companies.
The second key to a successful cross-sell or up-sell is to find a provider that can easily integrate into an existing e-commerce platform. Many smaller retailers and merchants are thin at the IT level and can’t afford an expensive, complex or lengthy expansion of their e-commerce infrastructure. Fortunately, this is an area that has evolved over the years and there are options that exist currently that can help retailers easily integrate new and complimentary product lines into their web storefront.
The bottom line is that increasing the Average Order Value through the integration of a commission-based e-commerce add-on can actually help on all levels. It can help generate more customers, it can elevate the frequency of purchase, and it can also increase average revenue per transaction.
By Matthew Pufall, Director of Product for Assurant Cart Protection.
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