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The Trend Disrupting eCommerce and Killing Businesses

Mike Rossi

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eCommerce has gone pretty well so far, right?

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But what about the next 5-10 years?

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vs.

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About Mike

• Co-Founder, CEO of Sweet Tooth

• Worked with Magento during its beta stages

• Helped hundreds of merchants with their eCommerce marketing efforts

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What did eCommerce marketing look like 5-10 years ago?

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Where did online store sales come from in 2004-2009?

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1. SEM, Pay-Per-Click Ads

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1. SEM, Pay-Per-Click Ads

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2. SEO

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3. Affiliates & Link Building

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4. Content Marketing

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What do all of these have in common?

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1. Get a visitor 2. Convert 3. Profit 4. Repeat!

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1. Find 2. Kill 3. Eat 4. Repeat!

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Important Metrics in ~20071. Cost Per Click (for SEM)

2. Marketing Costs per SEO Visitor

3. Conversion Rate

4. Cost to Acquire a Customer

5. Average Margin

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Example Merchant in 2007

• Sells apparel

• Cost to acquire a customer = $5

• Average order = $50

• Average margin = 30%

• Average profit per order =

$10

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So, what’s been happening in the past ~5 years?

@sweettoothSource: searchengineland.com

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These marketing methods have become less effective over time

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– Andrew Chen

“Over time, all marketing strategies result in shitty clickthrough rates.”

The Law of Shitty Clickthroughs

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…but why?

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2007 Merchant

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2014 Merchant

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More competition in every vertical!

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Side-Effects of More Competition

1. Higher pay-per-click ad prices due to more bidding

2. SEO is more difficult (i.e. less efficient)

3. Prices are driven down, which lowers margins

4. Commoditization

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Example Merchant in 2014

• Sells apparel

• Cost to acquire a customer = $7.50

• Average order = $50

• Average margin = 20%

• Average profit per order =

$2.50

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2014 Merchant

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So what have merchants been doing about it?

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Source: Monetate

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Marketing Budgets

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Important Metrics in 2014

1. Customer Lifetime Value (CLV)

2. Average number of purchases per year

3. % of sales from repeat customers

4. Churn, or the number of customers who never return

5. Some of the 2007 metrics too!

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“Hunter” Merchant in 2014

• Sells apparel

• Cost to acquire a customer = $7.50

• Average order = $50

• Average margin = 20%

• Average profit per order =

$2.50

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“Farmer” Merchant in 2014

• Sells apparel

• Cost to acquire an existing customer = $2

• Average order = $50

• Average margin = 20%

• Average profit per order =

$7.50

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1. Referral programs 2. Lifecycle emails 3. Loyalty programs 4. Great customer service 5. Memoriable experiences

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vs.

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Important Metrics in 2014

1. Customer Lifetime Value (CLV)

2. Average number of purchases per year

3. % of sales from repeat customers

4. Churn, or the number of customers who never return

5. Some of the 2007 metrics too!

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&

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Questions? !

@m3rossi & @sweettooth