Lessons from Bed Bath & Beyond

The demise of retailer Bed Bath & Beyond reminds us of the necessity to adapt to evolving consumer needs. Overstock.com is reportedly buying the brand from bankruptcy and adopting the name. Still, the giant home décor and furnishings seller was set to close its doors.

The failure to embrace online shopping early is surely a leading cause. Covid-19 accelerated the slide as Bed Bath & Beyond fell behind ecommerce rivals.

Change is inevitable, and flexibility is key — for any business, online or off. As I write this, shoppers’ needs are evolving. But how do merchants know what those changes are? How do we adapt?

Start with these three tools.

Website Data

Analyze how shoppers enter the site and what they do once there. This includes navigation, product search, taps and clicks, saving products to carts and lists, and checkout. Product ratings and reviews reveal useful information, such as consumer expectations and brand loyalty.

What to do: Track everything you can without violating shoppers’ trust. Study heat maps and detailed analytics. Annotate your changes in the analytics tool to track what works. Try to implement updates over time to more easily tell the impact of each.

Studies and Trends

Reputable surveys and studies can identify product gaps and growth potential.

For example, a recent analysis by Boston Consulting Group and Shopify of more than 1 billion data points across 220,000 online stores identified these top sales drivers:

  • Organic traffic sources — primarily word-of-mouth and direct marketing — outperformed ads, especially for smaller businesses.
  • Shopping carts filled with multiple products tend to convert better. The sweet spot is five to 10 items, depending on the type of store.
  • A quick and easy checkout process is essential. Customers must trust you, but fraud-prevention checks should never slow things down.
  • Express payment methods such as Amazon Pay, Apple Pay, Google Pay, and PayPal can increase conversions by 50%.
  • Simple converts better. A clutter-free environment keeps shoppers focused. Minimize distractions.
  • Enticements work. Loyalty programs and value incentives such as volume discounts and free shipping nudge shoppers to add more to their carts.
  • Page speed is paramount. Fast-loading pages are a priority. Checkouts longer than 90 seconds decrease conversions by upwards of 47%.

What to do: Pay attention to third-party surveys with large sample sizes for changes in consumers’ shopping habits affecting navigation, products, checkouts, and traffic sources. Analyzing competitors is always helpful, as is the need to understand advances in technology.

Minimalist product page featuring cocktail napkins, add to cart button and quick purchase with Apple Pay button.Minimalist product page featuring cocktail napkins, add to cart button and quick purchase with Apple Pay button.

Minimalist designs reduce distraction and confusion. Source: My Mind’s Eye.

Shopper Feedback

My article in 2020 titled “Feedback from Shoppers Is Gold” is equally relevant in 2023.

Off-site reviews, customer service queries, and post-purchase surveys are invaluable. However, actions mean more than words. Shoppers will often tell us what we want to hear.

check your data to confirm the feedback. For example, requests from shoppers for more blue shirts are meaningless if similar shirts never sell in that color. A solution could be a visual survey showing a shirt in the most popular color, the requested color, and one or two other colors. Then allow respondents to pick their favorite.

What to do: Listen to customers and build realistic visuals when asking for preferences. But rely on data to understand the difference between consumers’ words and actions.

Inevitable Change

How will tomorrow’s customers shop? What will they buy? How will they pay? Keep an eye on website data, third-party studies, and consumer feedback. They are not foolproof but likely include telltale signs of what’s to come.

ChatGPT Prompts for Customer Support
Male and female on headsets.Male and female on headsets.

With the right prompts, ChatGPT can offer ideas for better customer service.

Artificial intelligence-powered chatbots have served customer support roles for several years. ChatGPT has created more opportunities.

Here are common customer support needs and ChatGPT prompts to help address them.

ChatGPT Prompts for Customer Support

Compose customer-service emails. Writing a customer-service email can be a challenge. It should be generic enough to work for all customers yet specific to answer each need.

ChatGPT can write and tweak emails repeatedly. Start with a generic prompt, such as:

You are an ecommerce retail shop selling car parts. Create an email template thanking your customers for their purchases. Target the email to probable buyer personas.

And then follow up with more prompts as needed:

  • Make it shorter.
  • Change the tone to be more informal or friendly.
  • Add a “Subscribe to our newsletter” call-to-action that blends with content.

Re-engage inactive clients. There’s no perfect way to entice lapsed customers to buy again. But ChatGPT can generate email ideas for re-engagement. Here’s a sample prompt:

You are an ecommerce retail shop selling car parts. Generate ideas to re-engage customers who haven’t purchased for six months. For every idea, craft an email and a social media post. 

Replies to positive reviews. Saying “thank you” on Google Local or Yelp with the same message can appear insincere. ChatGPT can help:

Generate 20 messages to thank customers for positive reviews on Google, Yelp, and Facebook. Make them short but different.

Replies to negative reviews. Responses to negative reviews risk annoying customers even more. ChatGPT can generate empathetic words and thoughts:

Generate 15 phrases to display empathy to customers who had a negative experience with our business.

You could also ask ChatGPT to critique a response:

This is my reply to negative feedback from a customer [TEXT]. Critique my response and offer suggestions for improving it.

Analyze social media sentiment. ChatGPT can review and organize mentions of your brand on social media via these prompts:

  • Categorize the mentions based on sentiment.
  • Identify mentions that need replies and generate a response.

Create customer surveys. Crafting an effective customer survey is difficult. The aim is to elicit respondents’ status and opinions with a minimal number of questions. Here’s a prompt to solicit ChatGPT’s help:

You are an ecommerce retail shop selling car parts. You want to survey customers for their experience with your site. Compose questions for actionable insights that generate a high response. 

Other survey prompts could address specific situations, such as account cancellations or cart abandonments.

Generate telephone scripts for conversations with unhappy customers. Engaging ChatGPT with hypothetical support calls is a handy training method for new personnel. Let them prompt ChatGPT with scenarios for frustrated customers and how it addresses them.

Here’s a prompt:

You are a customer support person at an ecommerce retail shop selling car parts. Generate three scenarios of why customers may be unhappy with your product or service. For each scenario, create a telephone script addressing the unhappy customer.

Other prompts could refer to a particular occurrence, such as recommending an inferior part or charging the wrong price.

Test the team’s customer service skills. ChatGPT can help manage support personnel and improve their skills. Here’s a prompt:

I manage a customer support team at an ecommerce shop selling car parts. I want to test their customer service skills. Generate a 20-question quiz to test those skills. Include answers. 

Don’t forget to refine your prompt or ask follow-up questions as needed.

FTC Rules Would Impact Ecommerce Subscriptions

The U.S. Federal Trade Commission has proposed new rules that will likely impact ecommerce subscriptions.

Called the “click-to-cancel” rules, these FTC changes would require any business selling subscriptions to add a simple cancel mechanism on the same website as the initial transaction and include the same number of steps — i.e., a one-click subscription requires just one click to cancel.

The FTC announced last month the proposed changes to its 1973 Negative Option Rule to address consumer concerns. These rules establish how subscription sellers must communicate offers, ensure consent, manage billing, and simplify cancelation.

The last part has raised much concern.

Cancelation Struggles

A typical American has $273 per month in subscriptions, according to a 2021 survey from West Monroe, a Chicago-based consulting firm. These subscriptions were for services and products — from streaming video to coffee bean shipments and boxes of dog toys.

Given the 250 million U.S. adults in 2023, subscriptions are a massive business. Unfortunately, some subscribers struggle to opt-out.

A 2021 Chase Bank survey reported that 56% of consumers struggled to track or cancel subscriptions. At least some of these are likely to be ecommerce related, given that subscription platform Sticky.io estimated 24% of U.S. consumers have at least one retail subscription.

“Online marketers have that frictionless enrollment thing down pat. But when consumers want to cancel, some of those same companies set up obstacle courses designed for frustration and failure. Two practices challenged in recent FTC cases illustrate this. One company required people to call a phone number to cancel and then left them on hold for ages. Another company ignored cancellation requests unless consumers sent them to one hard-to-find email address authorized to accept cancellations,” wrote Lesley Fair, a senior FTC attorney.

Cancellation “mischief,” as the FTC put it, is more likely with services than physical goods since leading ecommerce platforms generally make canceling straightforward.

So while ecommerce businesses have not been the bad actors, merchants deploying the subscription model could be impacted if the proposed changes are implemented.

Screenshot of a Chewy dog food product page showing the auto-ship option. Screenshot of a Chewy dog food product page showing the auto-ship option.

Product sales via subscriptions help merchants and consumers. This example is Chewy’s “Autoship” program for dog food.

Potential Impact for Ecommerce

If adopted, click-to-cancel rules could impact ecommerce navigation, operations, and marketing.

Easy cancellation. The most apparent impact on online stores will be adding a simple cancel button. This should be relatively easy since platform and app developers will likely make the necessary compliance changes. Merchants should ensure those updates occur, however.

Operations. The proposed rule requires annual notices for non-physical products and would restrict offers attempting to change a shopper’s mind about canceling.

For example, an online merchant could not offer a discount such as postponing or rescheduling a cancellation without first obtaining the subscriber’s permission. It could also impact how sellers follow up or remarket to customers who canceled.

Marketing. The presence of a prominent click-to-cancel button could escalate unsubscribes and thus affect customer lifetime value and, by extension, the investment by ecommerce marketers to acquire new subscribers. A business offering a 20% discount to shoppers who subscribe to product replenishment would presumably require recalculating that model’s profit potential.

Subscriber churn is a key performance indicator for merchants employing the subscription model.

How to Prepare

The FTC announced the proposed change in April 2023 but started the process almost five years ago. Hence it will likely adopt some (or all) of the changes.

Merchants offering subscriptions could jumpstart implementation by making the relatively simple changes to their websites and cancellation procedures. Marketers can assess the potential impact on churn rates and customer acquisition costs and plan accordingly.

Despite the changes, ecommerce subscriptions should remain viable and effective revenue generators.

Pet Chinchillas Save Family Business

Josh Paulson acquired his grandfather’s pet accessories company in 2015 when it was losing $25,000 per month. Three months later it broke even. The company, Quality Cage, manufactures products for pet owners and veterinarians.

When Paulson arrived, the company had 2,000 SKUs across multiple pet verticals. Focusing on chinchillas provided the long-term turnaround. “We niched down into only chinchilla products,” he told me.

Paulson and I recently discussed his journey, addressing custom manufacturing, organic marketing, and more.

The entire audio of our conversation is embedded below. The transcript is edited for clarity and length.

Eric Bandholz: What do you do?

Josh Paulson: My company is Quality Cage. We manufacture small animal cages and accessories for the pet and veterinary markets. Our primary market is pet chinchilla owners. We build a lot of cages and products that cover all the needs of a chinchilla through its 20-year life. We manufacture on-demand. You place an order on our website, and we make it and ship it. We carry about 60 days’ worth of raw materials.

The company is 55 years old. My grandfather was the previous owner. I purchased the business in September 2015. We manufacture everything. We do powder coating, woodworking, welding, and machining. We even cut our own cardboard boxes when we can’t get the right sizes.

I had no idea what a chinchilla was when I started. I had to learn about the different animal markets. Chinchilla was the one that kept popping up because there were no big competitors. All the existing companies had crappy products just built to make a profit. Nobody was solving the problem that chinchilla owners had. After about nine months in, we niched down into only chinchilla products.

Previously I was in food and beverage manufacturing. I made beer, wine, and cheese for about two years, and was trying to start my own business. I had a culinary mushroom-growing business on the side selling to restaurants.

I was attempting to raise money from investors for my mushroom farm. One of them told me to get six months of managing a business, and he would invest. Three days after that meeting, I moved to Portland, Oregon, and took over my grandfather’s company. I had no experience managing employees or businesses. I went from zero to a 55-year-old company.

The business wasn’t doing well. It had collected 55 years of process waste and mess and was poorly run. I decided to try it. Quality Cage was losing about $25,000 a month when I got there. Within about three months, I got it to break even.

Bandholz: You broke even from chinchillas?

Paulson: It took me a while to discover chinchillas. The website was Zen Cart. I scrapped it and started building on Shopify. I listed about 40 products, but we had 2,000. I knew we needed to niche and specialize. Manufacturing 2,000 low-volume products is insane. It’s impossible. We would’ve had to quadruple our prices to make that work with that many SKUs. I niched down by necessity.

At first, I chose rabbits, and then some PETA folks — People for the Ethical Treatment of Animals — hit us online and left a boatload of bad Google reviews, one star. I didn’t know what to do. Many comments were from people who hadn’t even experienced our products. I considered renaming the company.

I went to the rabbit people for help, and they said, “Tough luck.” The bird folks responded the same. But when I went to the chinchilla community, they responded positively. There are Facebook groups of 20,000 chinchilla lovers. We made some chinchilla products, but it wasn’t a big market for us then. However, they were good products.

Chinchilla folks liked our stuff and liked that I was having conversations and trying to learn from them. They posted in all their Facebook groups, “Hey, go report all these false, bad reviews.” All of them got removed. I knew right then, “Okay, we’re going chinchilla only.” These people are awesome and passionate, and they were not being taken care of.

Bandholz: Manufacturing seems like a tough business.

Paulson: For sure. You have to be crazy to get into manufacturing. If you have money, you can hire the right help. But the beauty of manufacturing is there’s no limit to how efficient you can be. That’s what the competitive advantage is, but it is so hard. You’ve got employees. You’ve got safety. We probably have 20,000 processes that all go into building our products.

But there’s still marketing. There’s still accounting. Manufacturing is not for the faint of heart. I grew up loving to make things. I live to produce products that make people happy. It’s a core value for me.

A lot goes into making each product, so efficiency is everything. There are probably 10 components per product at 150 products right now. The chinchilla exercise wheel is one of our most popular items. It is made in the sheet metal, welding, fabrication, and woodworking departments. Then it goes through a powder coating process and is assembled. There are upwards of 200 processes in that one product alone. We can make it in about 20 minutes.

There were so many inefficiencies initially. I just started ripping things apart and putting them back together.

Bandholz: Talk about your marketing.

Paulson: Most of our marketing is organic, not paid. Despite our growth, we still have a 40% returning customer rate. Forty percent of our orders every week are from return customers.

Word of mouth has been the best. I interact in Facebook groups and talk to folks. If I see somebody post about getting a Quality Cage, I look at what they ordered and what product they didn’t buy, and then I send it to them as a gift. That worked well over the years. That would turn into them posting two or three more times, and I’d send them a gift each time. The retail value of the gift ranged from $50 to $70. That snowballed hard.

Bandholz: How do you research new products?

Paulson: I usually figure out what people have built on Etsy or what they posted in a forum 20 years ago. I analyze and use my empathy skills, looking at what the animal needs. How do we plan for that in the cage designing process? I go very deep into that. And that’s what I did with chinchillas.

The first step for most new owners is Googling, “What is a chinchilla?” And then it takes nine months on average for those folks to get one. And then you have 20 years of caring for it. How do we plan for all of those steps? I want to care for the animals and provide the products they need.

Bandholz: Where can people buy your products and reach out?

Paulson: QualityCage.com. I’m on Twitter, @amagijosh.

Post-Covid Shoppers Are Omnichannel

Many consumers are returning to pre-pandemic shopping habits, including in-store purchasing. Facing stalled revenue, some online sellers are looking to open physical stores or partner with brick-and-mortar brands. But those brands, having experienced the revenue boost and cost savings of ecommerce, are looking to bolster their online presence. Many are closing stores and reducing staff.

In 2023 and beyond, the key to merchant success is a robust omnichannel strategy.

Brick-and-mortar Struggles

Some physical retailers have lost sales to ecommerce. One example is Bed Bath & Beyond, which just filed for Chapter 11 bankruptcy. In the past 18 months, the company suffered from empty store shelves and poor financial and merchandising decisions.

According to several analysts, Bed Bath & Beyond’s demise is mostly attributable to its slow adoption of ecommerce, even during the pandemic. Customers migrated to merchants with a better online shopping experience —  more products, lower prices, faster shipping — such as Amazon, HomeGoods, Target, Walmart, and Wayfair.

Bed Bath & Beyond will soon close all its stores and 120 Buy Buy Baby shops.

Conversely, Best Buy has prioritized ecommerce. It has started eliminating hundreds of store jobs across the U.S. as it embarks on a cost-cutting effort that includes shifting its business online, according to a Wall Street Journal article earlier this month. Store workers specializing in selling complex products such as computers and smartphones are the focus of the current layoffs.

A Best Buy spokesperson stated, “… we’re evolving our stores and the experiences we offer to better reflect the changes in customer shopping behavior, as well as how we organize our teams.”

In 2012, the company had 1,056 U.S. stores. In January 2023, it had 925. Closures include 70 large-format facilities. Best Buy had more than 90,000 workers in the U.S. and Canada in January, down from nearly 125,000 in early 2020. The company expects overall sales to decline this year compared to 2022.

Consumer Preferences

“The State of OmniChannel Retail” is a September 2022 report from Bazaarvoice, the shopper engagement platform, addressing the results of a global survey of 6,000 consumers and 400 retail executives. Most retailer respondents in Australia, Canada, and the U.S. said they offer a successful omnichannel experience. Retailers in France and the U.K. said they had not mastered the right balance.

Successful merchants stated that customer feedback is critical in designing a good omnichannel experience. They also acknowledge that implementing omnichannel is expensive but a necessity.

Sixty-six percent of consumer respondents prefer a hybrid online and in-store shopping experience. Twenty-five percent prefer in-store only, while 8% shop online only. Germans are the most enthusiastic about hybrid shopping at 75% of responses. Americans had the lowest preference for it at 61%.

Globally, by product category, electronics had the highest percentage of online-only preference at 42%. In contrast, the food and beverage category has the lowest preference for both online-only and hybrid, with 73% wanting to shop in-store.

Incentives for shopping online are access to home delivery (60%) and the ability to conduct direct product searches (58%).

Research is important to omnichannel consumers. The report states that “brands need to understand the ROBO (research online, buy offline) economy” to thrive.

  • 41% of shoppers research products online but purchase in-store.
  • 63% use their phones in-store to research and check for competitive pricing.
  • 48% of in-store shoppers research online before going to stores.
  • 74% of online buyers research a product before buying.
  • 76% of online buyers purchase from retailers, not directly from brands.

In short, consumers want to shop both in-store and online. Merchants who ignore that face headwinds or worse.

How to Map a Customer Journey

An ecommerce customer journey map shows the path of buyers leading to an online purchase. Analyzing those journeys helps merchants understand how shoppers find the site, what they do on it, and what they want to achieve at each step.

Imagine a visitor to an online store looking for a new pair of shoes. The journey map would show everything he does — searching for shoes, reading reviews, adding a pair of Nikes to the cart, and checking out. The map might also show the shopper’s emotional state at each step or phase, such as excitement when he finds the perfect running shoes or frustration if the website is confusing.

Creating this sort of map — often on a spreadsheet — helps ecommerce marketers discover what makes customers happy and what problems they face while shopping. It’s an opportunity to improve the buying experience and thus generate more conversions.

Regions

To build an ecommerce customer journey map, start with four regions:

  • Before the purchase,
  • During the purchase,
  • After the purchase,
  • Reengagement.

Create these regions on a spreadsheet or a specialized tool such as Figma. Under each region, add the stages a shopper might go through.

Screenshot of an spreadsheet showing the four regions: Before Purchase, During Purchase, After Purchase, and Reegagement.Screenshot of an spreadsheet showing the four regions: Before Purchase, During Purchase, After Purchase, and Reegagement.

Four regions of a customer journey map are common for ecommerce businesses.

Stages

Next, consider the stages a shopper might go through for each region. These stages could differ for every business, but there are some commonalities.

In the “Before Purchase” region, a shopper likely:

  • Discovers or recognizes a need,
  • Becomes aware of the product,
  • Researches and evaluates a product,
  • Considers potential merchants.

Think through these steps and add them to your customer journey map.

In an ecommerce customer journey map, stages are under regions and represent the shopper’s mindset.

Touchpoints

Next, identify touchpoints in each stage of customers’ journeys. Example touchpoints include ads and content marketing. Some touchpoints are beyond a merchant’s control, such as medical devices from a physician’s diagnosis.

Touchpoints occur in various combinations and may be repeated. A prospect could see an ad before she realizes the need for the product.

Touchpoints are shoppers’ interactions with a company, its products, or its industry.

The Questions

In the context of each touchpoint, ask a series of questions about the shopper. Answering these questions should provide insights into improving the customer journey.

  • What is the shopper doing?
  • What is the shopper trying to accomplish?
  • Where is the action taking place?
  • What is the shopper thinking or feeling?
  • How will we move the buyer along the journey with our store or product in mind?
Screenshot of a spreadsheet showing the questions for each touchpoint.Screenshot of a spreadsheet showing the questions for each touchpoint.

For each touchpoint, develop a series of questions.

Let’s consider each of these questions in turn.

What is the shopper doing? At each touchpoint, consider shoppers’ actions. Is the shopper browsing products, reading reviews, interacting with ads, or watching a product demo video? From this behavior, identify the best ways to engage and improve the buying experience.

What is the shopper trying to accomplish? Think about the shopper’s motivations for each touchpoint. Is she trying to learn about a product, compare options, find the best deal, or obtain support? Understanding those objectives will help meet prospects’ needs and expectations.

Where is the action taking place? Identify where the touchpoint occurs, such as the online store, social media, email, or search engines. Knowing where the interaction takes place can help optimize the experience and ensure a consistent and seamless journey across channels.

What is the shopper thinking? At each touchpoint, consider the shopper’s thoughts. Is he excited about a new product, frustrated by a complicated checkout, or confused about a promotion? Understanding shoppers’ thoughts can identify pain points or negative emotions.

How will we move the buyer along the journey with our store or product in mind? For each touchpoint, think about how to guide the shopper to the next stage of the journey. This may involve providing helpful information, personalized recommendations, or exceptional customer support. Proactively addressing shoppers’ needs increases the likelihood of conversion and long-term loyalty.

Repurpose Core Products for Repeat Sales

Retaining customers is cheaper than acquiring new ones. Retention arguably favors direct-to-consumer brands who, owing to manufacturing control, can breathe new life into core, top-selling items. Otherwise, retailers can adjust an item’s presentation and promotion.

Regardless, here are eight ways to enliven a product mix to keep customers coming back.

8 Retention Tactics

Launch limited edition items. Consumers hate missing out. So limiting the quantity of certain products can create buzz and prompt quicker buying decisions. Give shoppers a purchase deadline, which works well with special services, digital goods, and preorders.

Offer exclusive versions. Making some options available only on your website versus, say, Amazon can attract more people to purchase directly. It can also entice shoppers to buy more limited items and, in some cases, increase average order values. Hydro Flask sells its products across many channels, including Amazon. But it sometimes reserves products or colors for its own site.

HydroFlask pink grapefruit flask.HydroFlask pink grapefruit flask.

Hydro Flask offers exclusive products on its own site, such as the grapefruit-colored water bottle.

Label popular discontinued items as “final edition.” The word discontinued can evoke negative emotions. Since many products are discontinued because they don’t sell, the shopper may shy away and search for something else. Consider labeling any decent product — even if it’s being phased out for an updated version — as a final edition. This simple switch could prompt a sellout.

Build waitlists for soon-to-be-released products. One of the best ways to generate sales is to create hype around a launch. Teaser text and images can go a long way in collecting email addresses to notify shoppers when a new item arrives. Just don’t make them wait too long. After about 30 days, interest will seriously wane. Use engaging messaging onsite and in email. Send a “heads up” notice a week prior if possible.

Take preorders. There are many benefits to letting customers lock in their purchases early. For time-limited items, preorders help you determine production quantities. It helps understand consumers’ perceived value and how to market to them.

Let the community vote on new designs and features. Not sure which exclusive color, design, or feature to create? Ask your customers. Making your community part of the decision-making is a proven step to keep winning them over. Take Squishable, for example. For more than a decade, it has let its community decide which designs go into production.

Squishable's product design voting page, featuring several potential products.Squishable's product design voting page, featuring several potential products.

Squishable makes customers part of the team to build trust and loyalty.

Use synonyms for “hurry” and “don’t miss out.” These terms are overused on ecommerce sites. Consider instead “last chance,” “before it’s gone forever,” and “now.” Also, the word “hurry” pressures and irritates many shoppers. You may want to ditch it altogether.

Give top customers a head start. Make early access part of your loyalty program. Even a 30-minute window can generate excitement around a product launch.

The Critical Question

Finally, update the home page to answer pressing questions front and center. Address the critical question, “What makes us better?” Depending on what you sell, customers have other queries. For example, Burt’s Bees shoppers want to know how its organic skincare products are made or if they are tested on animals. The brand answers those queries with recognizable icons.

Many shoppers enter an ecommerce site via a product page. Use visuals there, too, to illustrate what makes you better.

List of sustainable and cruelty free icons on a website's home page.List of sustainable and cruelty free icons on a website's home page.

Burt’s Bees uses recognizable visuals and statements to tell shoppers why it’s better than others.

How Private-label Goods Spur Online Retail

There are 9.1 million online retailers globally and about 2.5 million in the U.S., according to Etailinsights. The competition is fierce and getting fiercer. Private-label products are an affordable way to set your company apart — to fill gaps, increase average order values, and establish your brand.

Private-label goods are made (and usually packaged) by third parties and branded to your business, typically in one of three ways:

  • A prominent manufacturing brand puts your business name on identical, similar, or downgraded versions of its own products. Examples are store-brand cereal and diapers, typically made and packaged by major firms.
  • A manufacturer builds a custom product for your brand. This is usually the costliest route and could require patents.
  • A manufacturer mass produces something many businesses can privately label, with or without customization. Amazon lists thousands of products that vary only by brand name.
Private labeled solar lights listed on AmazonPrivate labeled solar lights listed on Amazon

Amazon has thousands of identical products offered under different brands.

Add-ons and upsells. Plenty of products call for accessories or components. A company selling dinnerware may recommend cleaning with a Swedish sponge. Offering a private-labeled sponge saves shoppers’ time while generating additional revenue.

Think about items frequently purchased together on other sites. Consider private labeling whenever a prominent brand name doesn’t matter much. For example, consumers are more apt to care more about the brand of smartphone chargers than protective cases.

Freebies that seal the deal. Most unassembled furniture includes an Allen wrench. Coffee makers often have a starter pack of filters. Think about accessories most retailers sell as inexpensive add-ons and offer them free to close the sale. A hardware store could give away a pair of branded safety goggles with the purchase of every power tool. An appliance store could include ceramic stovetop cleaner with each purchase.

Simple freebies reduce frustration. Customers can use them immediately instead of having to order separately. This alone can convert shoppers into loyal customers.

Diamond Art Club, which sells painting kits, packs its boxes with essential branded accessories, such as Washi tape, pen grips, and tweezers. These non-pricey extras provide convenience and help justify the company’s higher prices.

Private label (branded) tweezersPrivate label (branded) tweezers

A simple tool they’d otherwise have to buy can capture the sale. Source: Diamond Art Club.

Finding the best products. There are likely hundreds of potential private-label items for your brand. Finding the best ones takes research. Start with customer feedback and reviews, where you’ll likely find discussions about relevant accessories. Then look at competitors’ gaps and customer feedback. Dive deep on Amazon, where Q&As, reviews, and purchase data inform the add-ons folks buy immediately or soon after.

Customer surveys can also help. But what folks say and do are often different. So test the private-label waters slowly with low volumes.

Success in today’s retail landscape requires satisfying more consumer needs than your competitors. Private labeling the little things can be the short- and long-term solution.

Vehicle Subscriptions Gaining Traction

Automobile sales are changing. Drivers can now subscribe online to vehicles, swapping their rides as frequently as once a month. Could it change how consumers feel about ecommerce and subscriptions in general?

For example, Porsche Drive is a new subscription program in the United States and Europe. A shopper can “subscribe” to a single vehicle, such as a 718 Boxster convertible, a more family-friendly Cayenne, or several other cars.

The program is all-inclusive — the fee includes insurance, roadside assistance, vehicle maintenance, and concierge service — and is one of many similar automobile subscriptions that are consummated online, more flexible and convenient than traditional leases.

Screenshot of a Porshe Drive table containing vehicles and their monthly subscription price.Screenshot of a Porshe Drive table containing vehicles and their monthly subscription price.

The Porsche Drive subscription program is one example of automobile manufacturers using subscriptions to finance vehicles. Click image to enlarge.

Vehicle Ecommerce

Vehicle subscriptions are part of the automotive industry’s migration toward ecommerce.

“The future of automotive retail will be digital and direct to consumer,” according to a March 2023 report from McKinsey & Company. “Today, fewer than 3 percent of customers [in Europe] say they purchase vehicles fully online, but 29 percent indicate that they want to buy their next car entirely online. An additional 23 percent say they would like to order online but require some physical touchpoints (for example, a test drive) along the purchasing journey.”

The McKinsey & Company article focused on European automobile sales, which are more ecommerce centric than in the United States. But the trend could spread globally.

While most wanted to purchase or lease a vehicle in the familiar in-person manner, some 33% of surveyed buyers were interested in vehicle subscriptions, and 15% were “very interested,” according to McKinsey & Company.

Impact

Those findings surprise me. Automobile subscriptions, like leases, are a form of financing. The fact that one in three surveyed buyers was interested in subscribing might indicate wanting a better car sooner.

Or it could foretell a change in how shoppers feel about subscriptions overall.

The subscription model has been successfully deployed across entertainment (Netflix, Spotify), software (Adobe Creative Cloud, Microsoft Office 365), and even everyday items (Amazon’s Subscribe and Save).

Automotive subscriptions could inspire more sectors to do the same.

More subscription options. As consumers become comfortable with subscription-based services for even big-ticket items, more industries could offer similar models, where customers pay online for extended access to goods or services rather than a one-time purchase.

Customer retention. Successful subscription businesses retain subscribers. Thus a shift to ecommerce subscriptions could improve customer service, product quality, and overall customer experience.

Service focus. A migration to subscriptions could lead to a greater emphasis on providing value through personalized recommendations, premium support, and exclusive access to events or content.

Secondary markets. Subscriptions to physical goods could spur sales of second-hand items. For example, a clothing subscription service will eventually sell garments outright.

Data collection. With a subscription model, ecommerce businesses can gather relatively more data on customer preferences, usage patterns, and behavior. This first-party info could lead to increased personalization, with companies using data to tailor product offerings, marketing campaigns, and customer service to individual needs.

New buying habits. If they become accustomed to subscriptions, shoppers’ collective purchasing behavior may change. They might prioritize the value and convenience of a subscription over the benefits of owning a product.

Revenue Boosters in a Rough Economy

Despite a rough economy and a return to in-person shopping, plenty of online stores are thriving. Many sell non-essentials, and some are penetrating new markets.

They remind us of the fundamentals of generating ecommerce revenue:

  • Attract new buyers. Gaining new customers often relies on advertising, which can cost serious money. Consider giving existing customers loyalty points or store credits in exchange for bringing new buyers.
  • Entice existing customers to return. Current customers are the easiest and least expensive to convert. Give them reasons to keep coming back.
  • Increase the amount of each transaction. This can provide much-needed revenue, though it tends to encourage one-and-done shopping sessions.

Here are six pointers for attracting new and existing buyers and increasing transaction values.

6 Revenue Boosters

Solve shoppers’ problems. Consumers need to know why one product is better than another. Solving pain points is the first step in winning them over. Showcase the benefits on landing and product pages. The pain points a product solves is crucial info.

For example, Pillow Cube explains its solutions in three methods: trigger words in the description (“tired,” kinked neck,” “back pain”), bullets to list benefits, and supporting visuals.

Pillow cube product pagePillow cube product page

Use text and media to illustrate how the product solves a problem. Click image to enlarge.

Illustrate the value. A product’s value is defined by the benefits the buyer receives for the price paid. Expensive goods often require educating shoppers about usage, versatility, and durability. A pair of scissors can cost just $1, but Fiskars’ run upwards of $20 and have a lifetime warranty. They’re made of stronger materials and are always sharp, which adds to their value.

Maintain a competitive edge. Spy on competitors to identify gaps you can fill. Customer service, product availability, and on-time shipping are essential to any store’s success and thus a priority.

Beating other stores’ prices on brand products might not be feasible, so consider alternatives, such as product bundling, VIP access, and priority support. Product subscriptions can generate reliable revenue, and volume pricing offers discounts without slashing average order values.

Show off your human side. Remind customers that your business supports real people. Introduce the staff and their accomplishments. Encourage employees to participate in the community, especially on social media.

Curate user-generated content. The best brands build communities. Encourage customers to share relevant photos and videos across social media. Then use a third-party tool to post that content on your ecommerce site.

Offer rewards. Consumers love kickbacks. A loyalty program that adds value to each purchase can help close sales. Consider lower thresholds for redeeming points so shoppers can reap the benefits sooner. Launch reward tiers based on earned points or total spend.