CNP fraud is growing in part due to an influx of organized criminals using sophisticated, evolving technology to defraud online sellers, which means that old-school, rules-based fraud screening is no longer enough to protect your bottom line.
If you sell online, here’s what you’re up against now and how to fight back.
What is payment fraud, and what types of payment fraud are there?
CNP fraud comes in many guises. You’ve probably heard about chargeback fraud, friendly fraud, and true fraud and you may have wondered what the differences are.
- Chargeback fraud is any fraudulent purchase that results in a chargeback. Friendly fraud and true fraud are types of chargeback fraud.
- Friendly fraud happens when a customer, or someone with access to the customer’s payment information, makes a purchase and then claims it didn’t happen. Sometimes the customers don’t remember a purchase or don’t recognize a merchant on their card statement. Sometimes they don’t realize a family member or friend used their card. Sometimes they are pulling a scam to get a refund on items they know they received.
- True fraud occurs when criminals use stolen payment data to buy merchandise for personal use or for resale. When the real cardholder discovers the fraud, he or she requests a chargeback. Most true fraud is committed by organized gangs, often using bots to commit more fraud faster than before.
What are the costs of e-commerce fraud to merchants?
However, the costs of e-commerce fraud go beyond lost revenue.
Experian and Juniper Research note that merchants also absorb the cost of shipping and insurance for fraudulent purchases, chargeback fees from payment processors, in-house manual reviews for orders, and third-party fraud detection and fraud prevention services.
What’s more, when merchants respond to fraud by deploying too-stringent, one-size-fits all fraud protection solutions, they can face hard-to-calculate short- and long-term losses.
Systems that auto-reject valid orders can lead to lost sales, higher customer churn, poor word-of-mouth marketing, and lower lifetime value per customer.
Which major economies experience the most payment fraud?
Most of the 300 million fraud bot attacks stopped by the ThreatMetrix digital authentication network during Q2 2017 “originated in the US, Germany, China, India, Vietnam, Brazil and Russia.”
Countries that are top destinations for cross-border fraud attacks are the US, the UK, Austria, Ireland, Australia, and Germany.
Japan ranked among the top target destinations for the first time in 2017, especially for attacks originating in the US, France, and Italy.
Countries with the highest rates of fraud-related chargebacks, based on recent data reported by Juniper Research, are Mexico, the Netherlands, France, Russia, and Spain, with the US ranking sixth in this category.
What products do fraudsters want most?
In recent years, fraudsters have especially targeted:
- Airline tickets and other travel products
- Digital content, such as online gaming subscriptions
- Luxury items, such as high-end designer handbags, fine jewelry, and watches
In general, fraudsters seek items they can re-sell quickly or return in-store for cash, although some focus on travel or digital items for their own use.
How many purchases result in chargebacks?
The number of chargebacks a merchant receives compared to their total orders is the merchant’s chargeback ratio.
The overall chargeback ratio for online sellers is about 0.60%.
Part of the reason that ratio is low is that card companies penalize merchants whose chargeback ratios rise above 1%.
A seller with a higher chargeback ratio can be forced to pay higher payment-processing fees or even face account closure.
What are typical chargeback ratios for different product categories?
Different verticals have different average chargeback ratios depending on how appealing they are to fraudsters. Here are a few from high to low:
- Software 0.66%
- Financial services 0.65%
- Media and digital content 0.56%
- Retail 0.50%
- Travel 0.50%
- Gaming 0.43%
Sellers in verticals at higher risk have to adopt a more comprehensive, multi-layered fraud-detection program in order to keep their chargebacks below 1%.
What are the most common reasons cardholders ask for chargebacks?
The number one reason cardholders request chargebacks is true fraud – purchases made with their stolen card data. Other common reasons, from most to least frequent, are:
- The product never arrived.
- The seller shipped the wrong product.
- The product didn’t match the seller’s online description.
- The product was unsatisfactory.
- The customer was billed twice for the same order.
Again, some of these claims are due to true fraud committed by criminals using stolen card data. The rest is deliberate or accidental friendly fraud.
What are the most effective chargeback prevention methods?
Preventing chargebacks starts with preventing fraudsters from placing orders, and experts say that’s a much bigger challenge now than ever before.
Experian and Juniper Research said in their 2016 Online Payment Fraud white paper:
Fraudsters now operate globally and need to be dealt with by means of sophisticated, real-time fraud screening solutions, supported by an understanding of the latest fraud patterns and behaviours around the world." Experian & Juniper Research
Layers and analytics are the keys to successful fraud protection.
The report recommends 2 to 3 layers of security to analyze users’ devices, browsing behaviors, credit card processing, and transactions, plus data analysis to spot fraud patterns quickly across channels.
As CNP fraud and fraud-related chargebacks continue to rise, every online seller needs to stay informed of the latest fraud trends, monitor their chargeback ratio closely, and use the most effective tools to prevent chargebacks and related fraud losses.
This is especially true for sellers in the most targeted verticals of retail, travel, luxury, digital, and electronic goods.
However, every e-commerce merchant can benefit from fewer chargebacks, fewer false declines, and comprehensive, always-evolving payment security.
E-commerce fraud protection by ClearSale
For over 15 years, ClearSale has helped retailers increase sales and eliminate chargebacks before they happen.
Our solution protects a merchant’s business by sorting orders and giving an accurate determination of fraud risk.
Our manual review process ensures that suspect transactions are never denied outright, providing the highest approval rates industry-wide and virtually eliminating false positives.
Founded in 2001 by two-time Olympic athlete Pedro Chiamulera, ClearSale has offices in Sao Paulo, Brazil and Miami, Florida.
Although Magento 2 has been around for a while (it was first announced in 2010, but the beta version only became available in 2015), many ecommerce business owners are still probably contemplating whether upgrading to Magento 2 is worth it. By discussing the Magento 1 vs. Magento 2 issue, looking at different important aspects, we aim at helping them with making the right decision.
So the question is:
Is it necessary to upgrade to Magento 2 for current Magento 1 owners or is it OK to use a stable Magento 1.x version during the upcoming months, or even years?
We’re going to cover the following topics:
• Magento 2
• Magento 1 vs. Magento 2 – When should I upgrade?
• How problematic is migrating your ecommerce store to Magento 2?
• Magento development
• How to plan the development budget
• The Magento community factor
• What is new in Magento 2
1) Scalability and enhanced performance
2) Responsive and search engine friendly
3) Streamlined checkout
4) Elasticsearch (EE only)
5) Cheaper and easier updating
6) Ajax add-to-cart
7) Simpler navigation
8) Split database solution (EE only)
10) Simpler product upload
11) More efficient customization
12) More efficient testing
13) Simpler integration
14) Platform compatibility
15) Hardware requirements
• When will Magento 1.x become outdated?
• Is it worth it to upgrade now?
Magento 2 brings fundamental changes in the well-known ecommerce platform.
Beyond overall functionality enhancements, it has major improvements:
- on a technological level,
- in modularity (both backend and frontend),
- in terms of performance.
Clearly, Magento aims to consolidate Magento 2 and expand its functionality, making it more attractive especially for bigger enterprises.
The official development team adds new features to Magento 2 every three months – this applies to both Magento Community and Enterprise Editions.
Magento 1 vs. Magento 2 – When should I upgrade?
If your Magento 1.x version ecommerce store
- is running smoothly,
- has no problematic features,
- generates orders and revenue,
- operates under a version that is not outdated,
then, as of Q2 2017, at least for a few months more, there’s no rush to upgrade to Magento 2.
You should already start planning, however if you’re thinking long term.
We recommend updating urgently if:
- your current ecommerce store has performance issues,
- you’re planning to start a new ecommerce business,
- you’re planning to implement bigger modifications,
- your current system is running smoothly, but on an outdated version.
It might still be worth updating to Magento 2 if you have absolutely no problems with the current system, aren’t planning modifications, and your version is not yet outdated.
Because Magento 2 offers a number of new features, opportunities, and innovations that can make growth and serving your customers possible in ways not available until now.
We will further elaborate on the differences between Magento 1 and Magento 2 soon.
How problematic is migrating your ecommerce store to Magento 2?
Let’s face it: Migrating is never painless, even when you’re migrating between two versions of the same system.
On upgrading from Magento 1 to Magento 2, you can transfer products, attributes, databases – people wouldn’t even consider migrating otherwise.
However, you have to leave all customized features and design behind – so, if you want these features in your new Magento 2 store, you have to build them again.
But you can look at this as an opportunity.
Yes, it means extra work and costs for your business, but, at the same time, it encourages you to make improvements wherever possible.
It’s a great opportunity to reconsider:
- whether you have done everything the best possible way,
- whether there are redundant features in your store,
- if there are any missing features you’ve wanted to add for a long time,
- how you can improve your online store in general.
Magento 2 has brought many improvements.
But since having to tackle some difficulties and develop new features are inevitable when migrating an online store, smaller businesses might want to wait a little.
In fact, technological advancement itself makes migrating a little more difficult, since Magento 2 has new solutions surpassing Magento 1.x in many ways.
Still, a new major release was inevitable, and it’s not a good idea to hold on to older versions for too long.
Migrating databases between the two systems won’t be a problem, especially with the Data Migration tool.
Migrating product, customer, order, etc. data will likely go smoothly. However it’s a good idea to entrust experts with carrying out the process and handling your online business’ most valuable assets, your database.
Magento 2 can still be considered a relatively new platform.
Though it’s been around since 2015, still, the number of developers with considerable experience in Magento 2 development, developing and installing extensions is not yet very high.
Magento 2 development will probably cost more. (If you want to learn more about how much Magento developers cost, read our article covering global agency and freelancer pricing.)
How to plan the development budget
If you want customized solutions when switching to Magento 2, you will need professional developers.
Since the number of developers with experience in Magento 2 development is limited, their expertise comes at a higher price.
The exact costs of developing an entire Magento online store are hard to determine, since it’s an extremely customizable system, meaning basically endless development possibilities – which also makes giving generic estimates in advance difficult.
In our article on Magento Pricing we provide some information to help estimate on your budget if you know what you need. These prices typically refer to Magento 1.x developers. Budgets for Magento 2 development should be 1.5-2 times larger in comparison.
Modules already available are also pricy due to the limited choice. They might cost more than the modules available for Magento 1.x versions.
The Magento community factor
One of the advantages of Magento is the huge professional community behind it.
This community has been using Magento 1.x versions for the last 9 years, so those using the latest Magento 1.x versions have access to assistance with their related problems.
In Magento 2 even the core is developed on github, so many developers work on new features and patches every day.
What is new in Magento 2 – 15 reasons why you should upgrade
Magento 2 comes with a lot of improvements in areas of coding, functionality, and user experience. Let us see the most prominent ones.
1) Scalability and enhanced performance
Magento 2 loading time is way faster than the standard 2-3 seconds.
The homepage, category pages, and product pages load in less than 1.5 seconds, even without using frontend caching.
2) Responsive and search engine friendly
Magento 2’s responsive frontend design makes it easy to browse on all devices. This is a big advantage, because Google’s algorithms have been officially favoring mobile friendly websites in ranking.
This responsive design also enhances user experience.
3) Streamlined checkout
With the new, streamlined checkout, the checkout process has become easier and faster for customers.
Checkout is available for guests without registration and Magento 2 automatically identifies registered customers based on their email addresses.
Registering after the checkout process is also an option, and the process has also been simplified.
In Magento Enterprise Edition, thanks to Elasticsearch, the quality of searches and user experience have been improved.
Last but not least, it already handles 33 languages, and Magento core developers are clearly going to rely on Elasticserach in the future.
Third party Elasticsearch extensions for M2 are also available with similar functionality.
5) Cheaper and easier extension updating
Compared to Magento 1.x versions, installing new extensions and modules has become simpler and thus cheaper too.
Installing even a few of basic Magento 1.x extensions can take a lot of time, even for professional developers, not to mention the possibility of conflicting extensions.
The process has become simpler, as well as the frontend development, the functionality can be modified more easily too, thanks to HTML5, Less, require.js, and CSS3.
6) Ajax add-to-cart
Every time a product is added to the cart in Magento 1, the system reloads the page, which has a negative impact on its performance.
This can mount to seconds, and as our regular readers might already know, having to wait even only a few seconds can cause customers to abandon their carts.
If you’re selling products of smaller value or your customers usually add more products to their carts, this is an issue you can’t disregard.
Thanks to Ajax add-to-cart, the new system doesn’t have to reload the entire page when a new item is added to cart, which also enhances user experience.
7) Simpler navigation
Admin navigation has been simplified and modernized in Magento 2, even users with less experience can manage their online stores efficiently.
Many Magento 1 store owners have found M1’s admin interface a little complicated – only those with previous experience with complex interfaces could navigate it easily.
The new, simpler admin interface is a welcome feature for those without their own Magento developers.
8) Split database solution
In Magento 1, customers, admins, and developers use the same database, which might lead to database overload.
Straining the system from the admin side might cause problems on the customer side.
Magento 2 Enterprise Edition offers you the opportunity to use three separate master databases for:
- product data,
- and orders.
This scalability prevents the load on different databases having a negative impact on the performance of the others.
In the new system you can find the most important information in one place.
The Dashboard gives you an overview of:
- lifetime sales,
- average order amount,
- last orders,
- top search terms,
- most viewed products,
- new customers, etc.
It also displays financial data, so you can see the overall state of your business in a blink of an eye.
10) Simpler product upload
Creating new products has also become simpler.
The new system guides you through the simplified process step-by-step.
Another innovation makes it possible to upload product videos besides product photos.
11) More efficient customization
A personalized customer experience is a basic requirement for ecommerce stores that take business seriously.
Up-sell and cross-sell offers, personalized payment methods, or even giving coupons based on earlier behavior are all available to merchants using Magento 2.
By monitoring on-site behavior, we can determine what content we want our customers to see, what discounts and offers we want to give them.
12) Platform compatibility
Magento 2 supports advanced technologies such as CSS3, HTML5 and of course, MySQL.
Magento 2 uses jQuery instead of prototype.js.
13) Hardware requirements
Right now it’s hard to say exactly how much better Magento 2 is compared to earlier versions, since different performance tests yielded different results.
One thing is for sure though: it has lower hardware requirements to ensure the same level of performance.
This has a positive impact on costs and also potentially less problems.
First, new hardware is not cheap, acquiring even only a few pieces per year can be a huge burden on a growing business’ budget. Besides, more servers mean more potential complications.
The new system is more cost-effective even if you don’t have your own servers but use a hosting service.
14) More efficient testing
Regression testing Magento 1 to screen it for bugs is not an easy task.
When working with a more complex system with a lot of customized features, extensions, and modules, especially when the online store has a lot of traffic, minimizing risks is important too.
That’s why testing is essential. Fortunately, it has become easier in Magento 2.
Checking if new features and modules would conflict with the existing system has become a lot simpler.
The built-in testing framework makes running automated tests on any Magento site, regardless of size, easy.
15) Simpler integration
A useful feature of the Magento ecommerce store platform is the ability to integrate a lot of different systems – inventory management software, ERP, CRM.
However, when the integration doesn’t go smoothly, it’s not easy to find out exactly what messages got lost during the communication between Magento and the other system.
Magento 2 Enterprise Edition addresses this particular problem with the built-in RabbitMQ (Message Queue) framework that monitors the communication between Magento and other systems.
The second half of its name refers to its main function – storing unsent messages and forwarding them to the relevant systems as soon as possible (for instance, whenever a certain system, say, the inventory management software, is set to refresh).
User name: admin
When will Magento 1.x become outdated?
The fact that Magento will cease official support for its 1.x versions makes a Magento 2 platform the right choice for those planning to launch new ecommerce stores.
The functionality of earlier versions can practically only be expanded by customized solutions.
Migration is basically inevitable, since only Magento 2 will have official support.
It’s not that the technology itself becomes obsolete in such a short time – Magento 1.x versions might actually prove to be a good choice in terms of efficiency.
You can always have developers create security patches for your system, but this means extra development costs and a lot of extra work, while you can still never be sure that there won’t be any new security vulnerabilities discovered a day later.
If you’re thinking long term, stability should be an important aspect, one that definitely makes Magento 2 the right choice for those who are currently using Magento 1.x or are planning to launch a new ecommerce store.
“We have no intention of denying access to our world-class software and know your business relies on Magento to drive growth and differentiation for your brand.”
Woosley assured users on Twitter that the Magento 1.9 support, originally planned to end in November, 2018, is now extended by at least 18 months.
With this being said, the SVP encourages every merchant to upgrade to Magento 2 to be able to benefit from the innovations it has to offer, when “the time is right” for them.
Is it worth it to upgrade now?
The answer to the question depends on the state of your project and your budget.
What’s the bottom line?
Thinking long term, you can ensure stability by upgrading to Magento 2, because one way or another, Magento 1.x versions will start to become dangerously outdated in a few years, typically due to the lack of official support, security patches, and updates.
If you have a smaller budget, but you also need customized features, you might want to make plans about when you will upgrade to Magento 2, which will be a bigger project.
If you have a well-functioning ecommerce store running on one of the latest versions of Magento 1 generating a regular income, you should make plans for upgrading to Magento 2 in one or two years.
If your online store runs on an already outdated 1.x version, then you should definitely continue development on Magento 2.
Either way, you’re going to require a lot of development, so, if your budget allows it, upgrading to Magento 2 is a must in the long run – Magento 2 versions are going to be the prominent ones for the upcoming 7-8 years.
For what reason does one choose Magento? For its extensive functionality, of course! We’re confident that no other framework comes close to Magento in this respect.
However, as we’ve already mentioned before, it’s not for everybody.
The main reason for this is the required budget: Magento development is not cheap, since it requires highly skilled professionals who guarantee the delivery of a high-quality product.
Questions about development costs are the most frequently asked ones that Magento development companies encounter.
Giving an estimate on the development costs is not easy: prices change from year to year, vary region by region, there might be huge differences in available resources, affecting either time or project based Magento pricing alike.
The purpose of this article is not simply to provide you with pricing information.
We will explain why Magento costs what it costs, why you still shouldn’t cut corners, and how to avoid being ripped off.
This way you can better estimate your ecommerce budget and avoid any surprises along the way.
We will discuss the following topics:
- Magento Community vs. Magento Enterprise Edition
- What Everybody Should Know About Extensions
- Magento 1 vs. Magento 2
- In-house vs. Third-Party Development
- How Much Does In-house Development Cost?
- Web Development Agencies vs. Freelancers
- Experience and Professional Approach
- Magento Pricing by Agencies
- Magento Developers in 2017 – Interview with Kalen Jordan
- What You Should Always Keep in Mind (About Quotes and Other Factors)
- Magento Hosting Prices
- Price Categories
- Low-End Magento Store
- Basic Magento Store
- Custom Magento Store
- Magento Enterprise store
- The Real Question Is: What Do You Actually Need?
Magento Community vs. Magento Enterprise Edition
First, you have to decide which Magento edition you want. This already has a great impact on your budget.
The Magento Community Edition is free, however, it comes without support.
Any customization has to be taken care of by you, an agency, or freelancers.
Enterprise Edition is not free.
Magento enterprise pricing: The Gold Support package costs more than $22,000 a year. The Platinum Support package costs even more, and you have to pay commission based on traffic.
In return, you get support, improvements and features that speed up the webpage, database management, and so on.
To achieve the same level of functionality with Community Edition, approx. 65 extensions are required. (Depending on what modules we actually need.)
After the launch of Magento 2, licenses for new Magento 1 Enterprise Edition stores are no longer available.
Renato Medina has published a collection of information on the new pricing system on the MDN blog.
The license cost is based on a revenue model. The higher the revenue band you fall into, the lower the percentage that has to be paid to cover the fixed license costs.
A Magento 2 EE ecommerce store costs $22,000 whether it generates revenue or not. Above a $100 million revenue the support might cost $250,000 per year.
Prices are 20% higher in the Platinum package.
If the license is not renewed after the first year, the ecommerce store remains functioning, however, without further support. This means all updates have to be made by the owner or a third-party developer.
Extensions, of course, can be purchased. Most available extensions are more expensive for the EE than the CE.
What Everybody Should Know About Extensions
It is not easy to decide which extensions we actually need. Making an educated decision requires a deeper understanding of the available choices, their functions and performance. Even experts need some time to make the right decision.
The chosen modules then also have to be installed.
Installing extensions can take a lot of time, even under ideal circumstances.
Let’s say, a professional developer needs two hours to install an extension. Even if you only need 10 out of 60, installing them adds up to 20+ hours of work, probably involving even more people, since they have to consult the management, the hosting service provider, and maybe even marketing professionals.
Depending on the hourly rate of the developer, installing as few as 10 extensions might cost you $3000-4000 even under ideal circumstances (which is not very likely).
Then, it’s time for performance optimization with the new extensions. Learning how to use the modules also takes some time.
You can read more on developer and agency pricing soon.
Magento 1 vs. Magento 2
Picking the right Magento version is also important.
The tens of thousands of ecommerce stores currently running Magento 1.x versions generate tens of millions of revenue annually.
For completely new projects, it is advisable to think long term, and choose a Magento 2 platform.
In case of Enterprise Edition, Magento 2 is the only available option.
In-house vs. Third-party Development
If you don’t want to outsource the development to freelancers or agencies to stay in control of all processes, you will still need to involve other professionals besides developers.
Even in the simplest case you’ll need a designer and a UX expert to ensure meeting basic visual and user experience requirements.
As we’ve already mentioned in an earlier article, even picking the right colors may play a major role in achieving your goals – that’s why you need a dedicated design professional.
Somebody has to specify realistic business requirements and – taking the target audience, the product, the competition, etc. into account – the essential functionalities to achieve them, and prepare specifications for the project.
A frontend professional’s help might be necessary for the development of frontend functionalities.
And, of course, you will need a project manager to coordinate the development process.
More complex solutions require the involvement of additional professionals, such as ERP integration specialists or 3D model designers.
Building an in-house team is a pricy and complex task.
Building your own in-house team focusing solely on this project might still be worth it, if you’re expecting to make a multimillion-dollar annual revenue.
How much does in-house Magento development cost?
Experience has shown that the in-house development costs of Magento CE and EE are similar.
Hiring a junior developer (with less than a year of experience) costs $60-80,000 a year and a senior developer costs at least twice as much. A developer with some experience will cost you around, let’s say, $120,000 a year.
You can add server, software, and other equipment-related costs to this.
Even for bigger enterprises, this has its risks, since building a team from scratch is not easy. For a team to work most efficiently, its members have to be accustomed to one another and it makes it easier to trust them if they already have good references as a team.
This is why working with an already existing – and experienced – development team or agency might be a good idea for even the biggest enterprises.
Web Development Agencies vs. Freelancers
There are numerous aspects that have to be considered when deciding between these two options.
Working with freelancers is usually cheaper, there’s a reason, however, why agencies cost more.
The following list of important aspects helps you make this decision:
Availability is one of the weaknesses of freelancers compared to agencies.
This is not about expertise or personal qualities: just imagine a scenario where your freelancer falls ill and can’t work on your project.
At an agency, life doesn’t stop if one person can’t work – a developer can be substituted by colleagues. There are probably more developers working on the project anyway, who know enough about it to be able to carry on with the development.
Our experience has shown that clients who contact us for our project rescue services, named uncoordinated communication and the lack of project management as the main reasons for not hiring freelancers.
It’s not easy to determine the pricing for freelancers.
The cheapest developers (typical of South-East Asia, India, Pakistan) may work for as little as $10-20 an hour.
The typical hourly rates range from $20 to $60 in Eastern Europe, while in Western Europe, the UK and the US it’s around $150-200.
Everybody has to decide for themselves whether they believe that the lowest price range can guarantee actual quality – in our experience, it’s not a good idea to entrust freelancers from this pool with a complex project, and expect a customized, high-quality product.
However, hiring them to install Magento templates or modules is less risky.
Experience and professional approach
Entrusting a freelancer with a complex project might mean that they will approach it from only one point of view, with less emphasis on the bigger picture.
A Magento agency offers several professionals who can develop a system functioning well in every aspect, by approaching challenges from different viewpoints.
A professional agency might charge $20,000-60,000 for a Magento website with a basic functionality and visual appearance.
Obviously, as little as a couple of thousand dollars might get you a Magento online store – if you hire someone who uses auto installation to install Magento templates worth only a couple of dollars, without doing any actual development work.
Magento Pricing by Agencies
Looking at agency prices, you might find different pricing approaches.
It’s common practice to set a project minimum – check out our infographic to see what minimums are set by agencies in the US and on a global scale.
Developers with lower prices in Asia or South America are typically freelancers, so you will find less agencies with low prices there.
Western European agencies typically work on bigger projects with $20,000-50,000 project minimums.
As opposed to this trend, there are numerous smaller teams in America that specialize in smaller projects.
Another approach is when agencies set a monthly price, usually starting from $7,500. This might be the best option for long term projects with complex development requirements.
There are agencies – usually targeting smaller projects – that don’t set project minimums at all.
Always pay attention to what is covered in the quote.
It’s not easy, even for an experienced developer, to determine an exact price, but the elaboration of the quote is a good indicator of a team’s professionalism.
For instance, items like design, SEO, frontend and backend development, and support listed separately is a good sign.
We’ve consulted CommerceHero.io, a Magento professionals hire service site, to get a deeper insight into agency and freelancer pricing. They list hundreds of developers and agencies specializing in Magento.
We’ve examined freelancers by region and by types of certifications.
Basically, the more qualified the developers, the higher their hourly rates.
Compared to a Certified Developer, a Solutions Specialist can ask $10-30 more per hour, regardless of where they are based.
Regional differences are not surprising.
North American developers have the highest prices, followed by Western European, Eastern European, South American developers respectively, and prices in Asia are only half as high as those in the US.
If you’re looking for a developer and want to check out the options in your region, we recommend this site. It’s free and its filters work great.
Now let’s take a look at global Magento development freelancer rates:
As for agencies, the following prices can be considered as project minimum rates, in different countries:
Q: What trends do you see unfolding in the ecommerce professionals job market?
A: I’m not sure which way it’s going, but I want to figure out whether more people are hiring developers in-house as merchants as opposed to hiring agencies. I see everything happening: people bringing developers in-house for merchants; developers, solutions, consultancy with merchants moving to agencies; people moving from agencies to freelance – you see it going in every direction. This is something I’m trying to figure out, but it’s probably going to take a little bit longer to understand better.
Q: Do you think developers are keeping up with Magento 2 development challenges? Is there a shortage of high caliber Magento 2 developers?
A: You’re definitely paying a premium for Magento 2 development talent, as not many teams have experience with it. There is a super high learning curve – a lot of people say learning Magento 2 is almost easier without the Magento 1 background, because it’s so different.
At the same time, obviously the vast majority of people learning M2 are M1 developers. We’re seeing more and more M2 work go through Commerce Hero. It’s definitely come a long way in the last 18 months having bug issues with M2’s earlier versions. I think we’re over that hump and I’m starting to see more and more projects, more and more developers that are comfortable with Magento 2.
You’re definitely still paying a premium for that though because it’s early on. I was and am very wait-and-see on Magento 2, it’s not totally there yet, but I see more and more of it.
Q: How flexible these minimum individual / agency prices for Magento development can be in your opinion?
The rates that you see published on Commerce Hero tend to skew a little bit high. Most people, it depends whether you’re looking at an individual or agency etc., can store a private rate, a minimum rate they will be willing to accept. Those can be anywhere from 10% to even 50% lower than what the published rate is.
The rate skewed a little bit high because of the way the site was seated, with top level developers posting their highest rates. So we do have private data which tend to be 10-50% lower. We’re working on building a matching workflow where you’re getting matched up based on your requirements, and we’re able to match that up based on what we know about their minimum rates as well as their published rates. That way we can keep people’s privacy intact but also match up based on budgets.
Q: Do you have any crucial insights you think every e-merchant should know about in 2017?
A: I’m really not sure that I do… I come from a development background and I think the merchants know what they are doing to be successful – they know their product, they know how to market, they have great content. Obviously, if their technology is super whack, they’re gonna run into big problems.
I feel like I don’t even know enough about the business of retail to necessarily give advice. One thing I see, as far as some of the projects I see come through, just something that came top of mind, is that people are moving to AWS.
Probably because there’s a certain hype to it, but I definitely think AWS is super useful for a lot of types of merchants, particularly if you have very spiky traffic or if you’re out a certain scale. I see merchants that maybe are paying 20-30 bucks a month move to AWS, now they are paying $200 a month and they are paying more than that to the development retainer.
To be fair, full disclosure, Commerce Hero’s in partnership with MajeMojo, which is a hosting company, so I have some incentives here, but I really do feel like some people are moving to AWS just for the sake of moving to AWS – particularly the smaller end of the scale for merchants, in the $500,000 to $1,000,000 range where they’d probably be better off with managed hosting.
Q: Why did you think it would be important to create a dedicated Magento developer hire website?
A: I’m generally not the type of person that does a lot of looking at competitors, like doing competitive analysis, that’s not my strength. Really the only reason we thought it’d be important to do is hearing the pain point over and over: people say “Man, it’s so hard to find a developer.” “I need to hire a developer” “I work with somebody and they were crappy.” “I work with an agency, they were bad.” On the flipside, I know solid developers getting paid less than I know they could…
So just seeing that over the past 3-5 years, made me and Eric, my partner, feel like there was a need for that.
Q: You don’t include agencies unless they have at least 3 certified developers, already listed as individuals. Why is that so? Don’t you see any conflict here? Don’t clients go for the cheaper rates of individuals instead of hiring agencies?
A: I don’t fully remember, but I think there is something in the algorithm at some point where if you have less than 3 team members, that reduces your ranking so you may not show up on certain landing pages.
I think the main thing there was just incentivize getting a certain number of team members linked up to the agency. Otherwise they could just create an agency without any team members linked up to it. I saw that if they had at least 3 people linked up to it, they tended to have a more of a robust profile on the agency and the team members.
And for the last question, “Don’t clients go for the cheaper rates of individuals instead of hiring agencies?” – this is similar to the first question about the trends, whether people are hiring in-house or they’re hiring freelancers instead of hiring agencies…
We’ve started doing more and more agency referrals, we’ve seen agencies sub out to other agencies even, we’ve seen merchants hire agencies. I think people’s preferences are usually pretty clear when they want to work with a team if they worked with an individual in the past and it didn’t work very well, they know they wanna work with a team.
We usually try to find out what range they’re looking for as far as what kind of rate they’re looking to pay and if they’re in that agency range, we’ll give those options.
So I think you’re seeing both. Part of the goal here is to open people up to be able to work with individuals with less friction – when you hire a freelancer directly, there’s a lot of risk, friction, and uncertainty about their schedule.
That’s definitely something we’re trying to sell for and hopefully improve that experience. But at the same time we’re also referring business to agencies. So on balance it’s hard to know exactly which way that trend will go.
What You Should Always Keep in Mind (About Quotes and Other Factors Related to Magento Pricing):
There are many things to keep in mind when requesting quotes.
The most fundamental: development agencies and freelancers can hardly give you an accurate estimate for the project costs in advance.
In most cases, we get estimates in quotes, while the invoice will be based on work actually done.
There’s a certain duality about this situation.
Obviously, the client would like to know the exact costs of the development project. The developer, however, cannot commit to an estimated price and risk getting into a hopeless financial situation.
The best thing clients can do is to ask for a minimum and maximum estimate, and plan the budget according to the latter.
Watch out when a developer promises a suspiciously short development time. Developing Magento websites takes time and requires advanced PHP development skills.
Don’t fall for promises of getting a complete and functional ecommerce store in a week. (Just think of the time simply installing extensions can take, as mentioned in our example earlier.)
Additional costs may arise whether you have an in-house development team or outsource the project.
A customized design also adds to the budget (the designer has to actively cooperate with the developers).
Never cut corners when it comes to expertise!
A junior developer or a single PHP developer won’t be able to build a Magento store single-handedly.
Such projects require the involvement of both frontend and backend developers, SEO and analytics experts, web designers and graphic designers.
A single freelance developer can successfully handle installing extensions, but not the entire development of a complex project.
Before accepting quotes from developers or agencies, always make sure to check their references. Especially those of foreign developers: be absolutely sure that the work will get done and you will get a quality product.
It’s never a one-time expense.
You have to stay on your toes in the volatile ecommerce environment, you need constant development to keep you ahead of the competition, changing technologies, and channels.
You will constantly have to spend on keeping your ecommerce store up-to-date, user friendly, and fast.
You might get a functioning one for a couple of thousands of dollars, or find a developer who covers the most necessary tasks for $30 an hour, but this won’t be enough to make you stand out from the competition, ensure a better user experience, or guarantee growth.
Use your profit to facilitate growth. If you have a $2 million annual profit and your business is growing fast, do not hesitate to spend $100,000 on development.
Even a 10% increase in sales as a result would mean you have doubled your initial investment.
Magento hosting prices
Magento’s strengths, such as it comes with an amazing number of features, it’s customizable, and can be made as complex as needed, also mean that running it at optimum performance is resource intensive when it comes to hosting.
Magento’s own hosting service – an option for EE users before 2014 – is no longer available. This means that you’ll have to find your own hosting solution.
Running an EE ecommerce store requires at least a dedicated server.
Many times, hosting costs are not considered when setting up the budget for a project, however, finding the right hosting company is essential for starting a successful business.
For CE users, shared hosting might be a viable option, with prices starting from $150 a month, while dedicated server cluster hosting – needed for more resource-intensive projects – may cost as much as $4,500.
Questions you need to ask yourself when choosing a hosting company – some might even be familiar from our article on Magento AWS hosting:
- How many visits / day do you expect?
- What’s the number of sessions / month?
- What was the highest session value at peaks during the period?
- What is the incidence rate of these peaks per business year?
- How many concurrent sessions do you expect on average and during peaks?
- Where is your target market located geographically?
- Which version of Magento store do we want to develop or migrate?
- How large is the SKU (Stock Keeping Unit) in your current ecommerce store?
- Will you be using SOLR, Elasticsearch or Sphinx search?
- Will you be using Magento Payment Bridge?
- What are the specifications of the current server(s)?
- Will shared hosting be sufficient, or will you need a dedicated server or even a server cluster as a hosting environment?
- What external systems does the ecommerce store communicate with and are there any plans for expanding this list (database type/size, billing software, ERP, CRM, etc.)?
- Will you be using application performance tools (such as Pingdom, New Relic, etc.) to monitor your website’s performance?
- Will you need a content delivery network (CDN)?
Shared hosting might mean lower costs, but it also has its limits: it’s not the right choice for ecommerce stores with bigger traffic.
Thinking long term, more expensive, dedicated servers, rented from professional service providers are the right choice.
Shared hosting services cost $20-120 monthly, depending on your needs.
Dedicated servers cost $500-750 per server monthly.
Magento Pricing Categories
Low-end Magento Store
Price range: $1,500 – $5,000
If you ask some experts about the cost of creating a Magento web store, they’ll probably tell you “At least 10-20 thousand dollars”.
We’d say this is only partly true. You can have a functioning Magento store for as little as $1,500.
But we wouldn’t recommend creating such a store.
For such a low price you can only find very cheap freelancers who offer only the most basic installation and then there won’t be any budget left for more features and further developments.
There is, of course, a good number of small and medium sized enterprises that use Magento, but the very essence of this platform lies in its complexity, sophisticated features and a huge array of possibilities for development and customization.
Such a low budget does not allow for harnessing all these possibilities. Therefore, other ecommerce systems such as BigCommerce or WooCommerce would probably be more suitable for serving the simpler needs of a smaller business.
Basic Magento Store
Price range: $10,000 – $40,000
If you want to switch to a new ecommerce system or you’re about to start your online business and are thinking about using Magento, then this is the minimum budget you should calculate with – and it’s just enough for having a range of basic features.
As we’ve seen earlier, thousands of dollars may be spent on installing the necessary extensions alone.
That said, you can get the latest version of Magento CE, a default or very cheap theme and the most important features added for this price.
This includes Magento system, extension and theme installation tasks performed by a pro freelancer or a smaller agency, minor web design customizations and setting SSL parameters.
However, any developments, complex extension installations, custom modules, unique appearance, or back-office system integrations are beyond this cost range.
Custom Magento Store
Price range: $40,000 – $100,000
For this price you’ll get a custom Magento ecommerce store developed by a pro agency, meeting basically all your expectations.
The point is, you need to maintain a budget in the long run for ongoing developments, hosting services, and expansion plans.
In this price range you can have customized extensions and features that suit your product range and business policy.
User experience can be improved thanks to thorough testing and you will also be provided with a custom website appearance, created by pro designers working together with frontend developers.
Here you can also take advantage of tailored features like making coupon offers, sending out newsletters, publishing content and using sophisticated search solutions.
Additionally, you can enjoy the benefits of advanced support and testing services as well as detailed service documentation, guaranteed store performance and data migration from other ecommerce store systems.
Magento Enterprise Store Pricing
Price range: $100,000+
Magento Enterprise Edition, “The World’s Most Flexible, Customizable Commerce Platform”, is an online store platform developed for large companies (costs related to it have been mentioned earlier in the post).
- mobile friendly appearance,
- multi store environment,
- default extensions,
- search engine optimization (SEO),
- targeted special deals,
- customized coupon offers,
- retargeting and remarketing tools, etc.
The real question is: What do you actually need?
Magento is not the best choice for small and micro enterprises.
As we’ve mentioned in earlier articles, for launching smaller ecommerce stores not expected to generate revenue exceeding $1-2 million, other, free and easily customizable platforms might be a better choice.
The reason for this is that Magento development is not cheap.
The smallest ecommerce stores don’t require such diverse functionalities Magento can offer, but it is essential for medium and large enterprises that have to be able to afford developers, even agencies, to stay ahead of the competition.
It is also a question of long-term thinking.
As we’ve mentioned earlier, Magento is not a one-time expense when taken seriously: it requires constant development and refinement to respond to market volatility.
This is why Magento is not the best fit for those who don’t have $100,000-200,000 allocated for customized development.
Such small ecommerce stores can be launched by working with freelance developers. Even though these can be profitable, there’s small chance for considerable growth in the long run.
Of course, many ecommerce stores use Magento – we’ve already written about their market share – many of these don’t generate profit or are not capable of growth.
90% of new businesses have to file for bankruptcy – due to their bad business policies, and not because of their Magento based ecommerce stores.
Investing in ecommerce stores works the same way as investing in physical stores. If it’s in a bad shape and the cash registers aren’t functioning well, it’ll scare potential customers away, right into the hands of your competition.
On the internet, they don’t even have to make a real effort to find a better store.
If you can afford to invest $100-200,000 into a Magento web store while paying your employees and investors, while also investing in expansion in other areas (marketing, for instance), and have a budget buffer (expecting the unexpected), then you should definitely invest in your future.
If improved functionalities, payment methods, and user experience result in a 10% growth, your investments will probably pay off – and a customized system can do so much more for you.
As we’ve discussed it in our earlier articles: with the support of the right online marketing tools, and working with professional developers, achieving a 10% growth in revenue using a Magento ecommerce store is a realistic goal.
From the very first steps we’re going to walk you through the stages of how to use Twitter for business: how to create your user profile, how to find your audience, what kind of topics you should look for and how to make posts, how to find influencers and build a group of followers, and what kind of extra tools you can boost your performance with.
Even though the significance of Twitter among social platforms has somewhat decreased by now, it still has 317 million users a month according to the data for January 2017.
Some statistics about how people use Twitter:
- Content on Twitter is public, registration is necessary only for tweeting, for doing some activity – for this very reason the site is visited by 500 million people a month without logging in.
- However, altogether they reach over a billion of internet users taking into account the embedded content as well.
- Most people use the platform through their mobile, 82% of the users to be exact. (This is relevant because of speed: instant communication is what’s the most important on Twitter.)
- In the case of video displays the share of mobile devices is even more significant, 90%.
- An average user is followed by 208 people, however, 391 million of the users don’t have any followers. (Of course there’s a difference between the user accounts and the accounts of actual people that are operated by them.)
All right, you know some data – still, you cannot be sure whether your audience is in fact on Twitter, whether they actively use the service, in other words, whether there’s any point in investing more energy in the platform.
Once you know that, you have to determine how you’re going to communicate with them, what kind of strategy, what sort of approach you should choose.
According to the 2014 research of PewResearchCenter, six archetypes of the discussions taking place on Twitter can be identified:
- Polarized crowds: larger groups, the members of which talk about larger topics, and who have arguments with the members of groups with contrasting opinions. Such divisive discourses typically develop around political subjects, when so-called echo chamber structures may develop and clash against each other on social networking platforms.
- Tight crowds: active discussions of professional communities, of crowds clustered around hobbies, of current events, for example conferences belong here. There are no outsiders here, the participants are all the members of the given crowd.
- Brand clusters: discourses organized around products, brands, celebrities or events, which have diverse and numerous participants, the discussion follows a lot of strands, clusters that are independent of each other.
- Community clusters: events of global significance typically develop such patterns, with several smaller and larger participants, with a great deal of isolated groups, which all tweet about the same topic.
- Broadcast networks: similarly to traditional media, they are usually clustered around news portals or influencers dealing with news. News are published and then the users tweet, discuss and comment them.
- Support networks: these are groups of customer relations, like when you create a given account specifically for communication with the crowds. Brands, companies are present here just like media, governmental organizations or even religious groups.
Monitor what kind of discussions your audience takes part in and in what sort of crowds it is active in (later you can read about some analytical tools that will help you with that), and shape your communication according to that.
Before you start using Twitter, it’s worth contemplating about what your goal is with that.
There are countless social networking platforms for you to help you to build your brand, to sell or to publish content – we’ve already dealt with all of the biggest ones on this blog.
Twitter also has its own characteristics, so you should start with monitoring how your audience behaves here.
If for example, they like asking questions from each other and from shops they buy goods from, you can position yourself as a resource of information. You can share useful pieces of content, you can deal with customer support issues and so on.
Twitter, like most of the social networking platforms, has its own language, its own customs, which you have to use instinctively.
Of course, the most important thing is that you can write tweets of maximum 140 characters, which is mainly what makes the whole thing special.
This may seem few, but you can express surprisingly many things even in a couple of tweets – all you need to think about how important a role this platform has gained in politics in the last few years.
In case you want your published messages to be found easily, you’ll have to use hashtags, before which character # has to be put.
You should invent your own hashtag to build your brand and your audience with.
If you want to address someone publicly, if you want to draw their attention, you can mention them, in which case you have to use the person’s name and the character @ before it in the message. According to the default settings, the other party receives a notification that they have been mentioned in a tweet.
You can retweet others’ tweets – when, let’s say, one of your clients shares a positive rating on your business, and this way it will appear in your own channel as well.
You can also mark messages you like as favorites, however, this makes much less sense, it‘s more or less the same as the like feature on Facebook.
Finally, you have the possibility of sending direct messages as well, but only to those who follow you.
You can also upload images and videos to Twitter, thus you can make your channel more colourful, you’re not restricted to 140 characters in case of these – and you can also advertise your content and your products more efficiently this way.
What you should keep in mind when setting your profile
The first step is building your profile.
Make sure it’s in line with the image of your brand.
- Header photo: upload something that can be associated with you right away, something that’s connected to your activity and that transmits the mood of your image.
- Profile photo: it’s recommended using your logo here – it is immediately recognizable and easily identifiable.
- „Handle”: in other words the name under which you are available on Twitter. This doesn’t necessarily have to be the same as your user name.
- Bio: describe what you do, even what the given account is used for (this is where you publish the news or where people can ask you questions for example).
- Your website: direct people according to the function of the account, you can refer to your blog here, the main page of your online store or a landing page.
Twitter is not the platform where you should accumulate content in the hope that it will bring organic traffic later on.
Your goal is to make people react to what you publish, which is what we call engagement.
The platform offers you few opportunities to “format” your messages, however, it’s good to know a few things.
Tweets including links are 86% more likely to get retweeted.
Use a link shortening application, for example Bit.ly, so that the URL itself takes up as few characters of your message as possible.
(At the same time, it’s worth using parameters for the hyperlink behind the shortened URL, so that you’ll see the traffic source in your analytics dashboard properly.)
Yes, you’ll have to be engaged in discussions
You have to understand that if your online store has its own channel on Twitter, its use for customer support purposes is inevitable.
Most users can find you most quickly here, this is where they can most easily ask you questions and send you messages publicly.
According to a study of Conversocial, the number of customer support type messages has increased by 250% in two years – users are more and more willing to use this immediate opportunity for inquiries or complaints.
This has a positive and a negative side as well.
Obviously, the positive side is that you can react to almost everything immediately – provided you have enough time for that. (That’s only one reason why it wouldn’t hurt having a social media manager in the team who can deal with such matters.)
Its negative side is that when you’re dealing with an indignant and disappointed customer, it may be difficult to handle the complaints here.
When you’re targeted by trolls, you can’t really hide the whole thing from the public, even though you may as well benefit from such issues with the help of communicating in a creative way.
This doesn’t only bring a 21% increase in engagement on average, but it also helps you in joining the appropriate discussions.
There’s for example Hashtagify.me that helps you find those who are currently the best, or the Keyhole, with the help of which you can follow hashtags (moreover, not only on Twitter but on Instagram and Facebook as well).
However, you should also bear in mind that while the effect of a single hashtag is this positive, if there are three or more in your tweet, engagement decreases by 17%.
Using images in the tweet can also increase engagement by even 50% according to the experiences – but you should keep in mind that you’re not on Instagram.
A little about topics
There isn’t really anything you can’t talk about on Twitter, but it’s worthwhile for you to determine what you will deal with exactly.
For example, it may be confusing if you’re sometimes having customer support type discussions when you mostly use your Twitter account for content distribution. You can create two dedicated accounts for these separately.
- Every now and then you can publish promotions, new product offers, but you should be careful with those. It may be worthwhile for you to make special offers to tweeters (just like to other audiences as well), for example to grant them individual promotional codes.
- Ask questions. You can enhance activity this way, but you might as well use it for research purposes if, for example, you ask your followers to describe in two words their experiences concerning you or your product.
- Ask for their opinions – about slogans, product names, logos, about anything they can give feedback on.
- Publish your recent pieces of content, show what you publish in other channels as well – for example blog posts, YouTube videos etc.
- Publish interesting infographics.
- The short, straightforward quotations also belong here – these may be testimonials, but you should avoid excessive self promotion. It should rather be useful or interesting, like the statements of industry experts or those taken from interviews.
If you have a brick & mortar business and an ecommerce store as well, you should check out the strategy of Home Depot.
They don’t use Twitter alone, but as part of a cross-platform strategy. They share recent content (for example in the field of “do it yourself”). They don’t only show the product but they also provide hints on how to use it. They share influencer and partner materials and the visuals are in the focus of almost all of their content.
Then there’s Arena Flowers. They sell flowers. Do you know what you won’t find in their Tweet-feed?
The company decided not to care about the relevant hashtags, keywords or product promotion. They simply want to gather a large and enthusiastic group of followers, and they achieve that with humour.
They simply forgot about their earlier strategy and they started uploading funny images and texts to their timeline.
And with this, they obtained 18,000 new followers within 1.5 years, they doubled the number of those who mentioned them compared to the same period of the previous year, and overall they reach as many people as a simple flower delivery service can’t even dream of.
When to tweet?
If it’s about topicalities, immediately.
On the other hand, if you use it in a long campaign, you should adjust the time of posting to user behaviour.
According to Wiselytics, the “lifetime” of a tweet is only 24 minutes, after that there’s very little chance that it will have significant impact.
Consequently, it has to be published when possibly most of the members of your audience see it because they are hanging out on Twitter in that very moment.
We could show you a great deal of statistics presenting different figures depending on various audience types.
The one thing that’s the same in all of them is that it’s better to post on weekdays than weekends.
One of the most preferred periods within the day is between 12 and 3 pm and between 5 and 6 pm – roughly that’s what can be learned from the data of Kissmetrics, HubSpot, QuickSprout and others. (You can find a great collection and infographics about that at HubSpot.)
If you want to be seen in social media, one of the most effective tools is finding the influencers.
But that’s not an easy task: there’s no list on Twitter about exactly what kind of people your specific audience usually follows.
Due to the high level of disorganization of Twitter and the great variety of users and content, it’s difficult to find the accounts you should follow or tweet, the ones who you should actively communicate with or where it’s worthwhile for you to appear.
We presume that you know who you’re competitors are on the market, that you’ve already done some marketing competitor analysis – you should start with finding their accounts.
Search for lists on which the influencers of your specialty field are present.
After a certain time Twitter will start automatically recommending you users similar to the ones you followed previously. Always pay attention to who you should watch according to the algorithm.
So you’ll need to resort to tricks in order to find the appropriate people. And you should remember that there may even be several dozens or several hundreds of them.
The simplest thing to do of course is to find listicles about the most influential tweeters in a given field, and to cherry-pick the suitable candidates from among those.
But you also have other options: for example with the Klear tool you can analyse the accounts on several platforms (in addition to Twitter, on YouTube, Instagram and even on blog platforms.)
To some extent it’s also suitable for finding the local influencers, since you can also set the country in addition to the category in the first round. And in the second round you can further narrow down the results, for example by influence or skills, or even by filtering out business accounts from the list.
The Little Bird application is also useful, which searches and ranks influencers as Google ranked websites ten years ago: according to the connections and relations between them.
The logic is the following: if you’re a well-known influencer, then it’s logical that a lot of other influencers will follow you. Little Bird is quite suitable for mapping the biggest names in a given field.
Besides, you can also use it for the monitoring of the most popular pieces of content, posted by the influencers. You can filter by country and you can even make reports if you have a subscription.
With the help of Agorapulse you can follow your chosen keywords and see all the tweets that appear for a given topic.
It has other useful functions as well, you can filter for example according to who are retweeted by the most people within a given time interval.
You can use a lot of tools as well, e.g. Audiense, BuzzSumo and Twitonomy can also be used for certain purposes – I recommend you trying these, to use even several of them at the same time, and you’ll see which is the most comfortable and most useful for you.
Unfortunately, the product cards are no longer available on Twitter, even though it was a great tool for the e-merchants to share extra information with their audience on top of the 140 characters.
However, you can use other types of cards.
If you want to run a campaign on Twitter, you should build the code in the relevant product pages and landing pages by which Twitter will know which information it’s supposed to “pull” to a given link – e.g. title, description, image.
The most useful currently available type is most probably the website card, to which you can also set a CTA.
Another tool that also deceased, and which was supposed to serve e-merchants, was the buy button.
The reasons for its termination are somewhat obscure. It’s clear that the focus wasn’t too strong on it, but the point is that you can no longer buy anything by clicking on a button placed in a tweet.
So what’s left?
For the moment, merchants can work with the various Twitter advertisements, which is not too much.
You can sponsor individual tweets, accounts or even trends, thus achieving higher reach. These are natively embedded into the timelines of the users.
If you want to build your brand, if you are publishing posts on the platform about a new product or action, these may be useful, but unfortunately they don’t help you to have a direct sales opportunity on Twitter, thus shortening the purchasing path.
Even though since 2015 there have been some rumours about the company developing product pages, we still don’t know any details about it.
If you promote your posts, they should be simple.
According to Twitter’s own surveys, the messages shorter than 120 characters perform 8% better, the ones shorter than 100 characters perform 18% better for engagement.
The tone should be direct, the users should feel that a human being is sitting “on the other side”, even if they see a company logo next to the tweet.
We’ve seen several campaigns where the employees of the customer support service – outperforming themselves – answered every single message concerning individual topicalities in a direct and funny way, and the reactions were almost unanimously positive.
Don’t want to be an influencer by all means, you should rather just join the discussions.
You shouldn’t want to shove your product off their throats. It’s more than enough if there is some kind of a link leading to any product page or landing page in only 20% of your promoted tweets, since the main goal here is engagement and brand building.
We have already mentioned some useful applications you can use for analysing Twitter, for monitoring your followers and for finding influencers.
In this subsection we are going to describe some really great tools in a bit more detail.
If you want a bigger, more engaged Twitter following, give Social Quant a try.
Think of them as your social media manager whose only job is to grow your Twitter account with targeted, relevant followers with the power of big data: they listen to Twitter for mentions of keywords you provide.
Then when they find accounts using those keywords, they run them through a proprietary algorithm to determine the best accounts to follow.
This way you have more time to engage and make stronger connections with the new followers you’re getting every day.
Here are some useful tips from David Boutin, Content Manager of Social Quant:
- We find the best keywords tend to be hashtags and the handles of big accounts your target market is engaging with on Twitter.
- The most important thing to keep in mind is the words/phrases/hashtags/handles your target market, and only your target market will be using on Twitter.
- Think past the common industry terms your competitors will be using also and really drill down what your ideal customer will be tweeting about and what accounts they are engaging with.
- We also recommend using rightrelevance.com and hashtagify.me to do research on influencers and hashtags that will make good keywords.
It’s also worth joining their Facebook group which happily helps you out should you have any queries: Twitter Marketing That Sells
If you’d like to make your Twitter activity more automated, you should take a look at this service.
The service was launched just recently – after thorough testing with the involvement of several influencers from their 2000+ member Facebook group called Twitter Secrets.
What is it for?
You can send out automated mentions and messages / DMs with the aim of transforming your followers on Twitter into customers – according to the tests, 10 times more efficiently than with some earlier methods.
Twitter tips for ecommerce store owners by Dripper / Luka Labrovic:
- Right after someone follows you, send them a tweet thanking them for their follow with a coupon code. Send out multiple (different) mention tweets over the first month after their follow to guarantee you get their attention.
- Do the same with Direct Messages on Twitter ‒ a lot of people don’t read them, but the ones that do are highly engaged and will check your store out and also start a conversation with you which in my experience resulted in lots of highly engaged customers.
- Put some effort into optimizing your cover image, profile image, bio and pinned tweet. This is the first thing your new & existing followers see. Your cover image should be relevant to what you’re selling and include a link to your business. Your profile image could be a logo, but a lot of people use a personal picture when they’re involved in Twitter chats. Bios shouldn’t include hashtags ‒ when people click them they will leave your profile forever.
- Pinned tweets should include something of value like a guide or something for free. Successful Twitter profiles get more than 5000 clicks on their pinned tweet in a month.
- Use Right Relevance to find out who your influencers are and start following their followers and doing what they do with their content strategy, but better.
- Tweet 60-80 times a day. Use SocialOomph to create ‘Queue Reservoirs’ of content that will circulate your best performing content on your account forever.
When you sign up for Dripper, they also provide a lot of Twitter tips like these in your inbox including a detailed walkthrough how to implement the tips above.
The best pieces of content are those that are tailored to your audience.
However, in order to get some ideas, to know what they really desire, you need to spend a lot of time on research.
That’s what Post Planner helps you with: it provides new pieces of content and thus ideas, by monitoring keywords, hashtags, Facebook and Twitter users.
It carries out big data analyses with the help of algorithms, and it predicts the level of engagement you can expect in the case of different individual audiences, which makes planning a lot quicker.
The algorithm even tells you when it’s most worthwhile for you to post.
You should definitely try Twitter.
You should survey your audience beforehand – read our article on segmentation, and if possible, also ask them whether they are using the platform, and if yes, what they use it for.
If it’s not good for anything else, you can direct part of your customer service communication here, and you can manage that easily.
Use the tools we showed you: automation, analytics will be incredibly useful, your Twitter account will operate almost by itself – you only need to make sure that you elaborate strategies and campaigns for it and produce valuable content.
Finding the right provider Web hosting solutions Managed vs. unmanaged hosting Managed hosting provider qualities Defining your own needs Hosting service providers Managed ecommerce hosting Managed Magento hosting Cloud hosting Off cloud & hybrid providers On cloud providers Choosing your cloud provider 5 key provider competencies 11 questions to ask your provider
In this chapter we go through what you may need as a client focusing on your business processes, policies and special needs.
That’s when you need to consider to hire a partner for this job.
Transformation of the market during the past decade has led to a significant change in the quality standards of the service sector, so those who really want to exploit their potential, besides being committed and productive, need to incorporate the philosophy of delegated management and coordination.
Before we deep dive into describing the various solutions, for a better understanding, let’s a take a quick look at a few terms:
|PHYSICAL SERVER||A bare-metal server is a descriptive term for a computer server to distinguish it from modern forms of cloud hosting. It is defined as a ‘single-tenant’ physical server. Bare-metal servers have a single ‘tenant’. They are not shared between customers. Each server may run any amount of work for the customer, or may have multiple simultaneous users, but they are dedicated entirely to the customer who is renting them. Unlike many servers in a data centre, they are shared between multiple customers. Bare-metal servers are ‘physical’ servers. Each logical server offered for rental is a distinct physical piece of hardware which is a functional server on its own.|
|VIRTUAL SERVER||A server, usually a web server, which shares computer resources with other virtual servers. In this case, the virtual part simply means that it is not a dedicated server – i.e. the entire computer is not dedicated to running the server software. Virtual web servers are a very popular way of providing low-cost web hosting services.|
|SHARED WEB HOSTING||Shared web hosting service refers to a web hosting service where many websites reside on one web server connected to the Internet. This is generally the most economical option for hosting, as the overall cost of server maintenance is allocated among many customers. In shared hosting, the provider is generally responsible for managing servers, installing server software, security updates, technical support, and other aspects of the service. The hosting service must include system administration since it is shared by many users; this is a benefit for users who do not want to deal with it, but a hindrance to power users who want more control. In general, shared hosting will be inappropriate for users who require extensive software development outside of what the hosting provider supports.|
|CLOUD HOSTING||Cloud hosting services provide hosting for websites on virtual servers which pull their computing resource from extensive underlying networks of physical web servers. It follows the utility model of computing in that it is available as a service rather than a product and is therefore comparable with traditional utilities such as electricity and gas. Broadly speaking, the client can tap into their service as much as they need, depending on the demands of their website, and they will only pay for what they use.|
Basically, a hosting service offers the opportunity of displaying diverse content on the Internet to anyone.
There are various levels of this kind of service. The most common one is shared web hosting for websites. As an additional service, it often includes email service or Domain Name Service (DNS).
It usually fulfils the basic needs of a start-up businesses.
All-in-one web hosting plans are offered by shared hosting providers who usually share the resources of a single server or a cluster of servers between many websites and clients.
In a shared hosting environment most technical details are totally transparent for the client, but certain parameters can be managed through a control panel.
Unmanaged dedicated hosting
Owning or hiring a server or servers of your own – virtual or dedicated – is another way of hosting a website.
In its simplest form, which is often called “unmanaged hosting”, the related work of keeping software updated, monitoring, managing backups, for example is mostly done “in-house” by your team.
The servers might be managed by the provider on a hardware or on the operating system’s level, but it is your responsibility to operate and maintain it.
In this way you can have more resources than using a shared hosting model, but you have to take care of managing and tuning server software and procedures that keep your website running.
If there aren’t any sudden increases in traffic or the application is very simple and does not require special environment or fine-tuning, shared hosting of self-hosting can be a good choice.
This, however, may prove to be sufficient over time and you might need to step forward to be able to meet the growing needs.
As a consequence, in the long term, traditional shared hosting or unmanaged dedicated hosting is usually inadequate for the operation of a growing ecommerce store.
The additional load generated by the greatly varying traffic (e.g. Christmas rush) can only be served reliably by servers with significant reserves, which is usually not supplied by shared hosting providers.
There’s nothing more inconvenient than a situation when a server slows down before the holidays due to the increased load, or when the service provider applies traffic limits, causing significant losses to the operators of the online store.
Ecommerce stores usually need specific settings and special configuration, which service providers in the traditional shared-hosting set-up might not fully satisfy or follow.
It’s also very common that the professionals developing the online shop need daily direct contact with the people operating the server, which may also be difficult or even impossible in the case of a traditional shared hosting service.
You can avoid all this by making a strategic decision to cooperate with companies where the competences necessary for the development of ecommerce stores and for their hosting are concentrated in one hand!
Managed hosting is an IT model meaning the host itself or a third party offers support for emergency or routine tasks for the servers that are hired or owned or started by you. Managed hosting usually comes with automated backups and monitoring.
It differs from unmanaged hosting services mainly from the aspect that the hardware, the operation system(s) and other applications are all, or most of them, managed in some way or the other.
The clients usually get an admin access of some kind, but they rarely take advantage of it, they rather access and use the resources of the rented system through a web interface or they turn to a 24/7/365 support team if they have a problem or a future support or development need.
It’s usually the providers who are responsible for
- the deployment and configuration of the infrastructure,
- the installation of the software applications,
- the provision of technical support,
- the supervision and the management of the resources,
- detecting and fixing any problems that may occur,
- and for the installation of updates.
How the provider manages “our” (the rented) resources, it varies from company to company.
The basic services are similar, but the “what” and the “how” of management are different. Nevertheless, the providers usually provide their services in three easily separable categories:
Managed infrastructure solutions provide a transformation road map to take your infrastructure from a basic model, requiring regular updates, to a dynamic, utility-based computing and cloud services that help in the formation of a truly adaptive enterprise.
It includes proven infrastructure management services ranging from remote system management, through secure datacentre hosting to utility and cloud services. It can heavily reduce TCO and complexity.
This can be effectively achieved through outsourcing, including managing your data centres, network and desktop support operations. As a client, try to make sure that your partner is ISO quality standard accredited – so you can be sure of consistent service-level delivery worldwide.
A special form of infrastructure management is cloud infrastructure management where the client’s infrastructure is set up or hired in the cloud.
OS management and monitoring
Management of the operating system comprises monitoring and incident management, backup and security management, the provision of patches and anti-virus protection for Microsoft Windows operating systems, and the assignment of root and administration rights.
You manage only your applications. Proactive monitoring can be useful to see the status of resources. Usually, this is done by various APM software solutions and tools, which helps to decide whether the experts should interfere or not.
Of course it’s up to the providers how the services above are offered to customers.
The main goal is to build environments which offer full-scale solutions to clients, regardless of the infrastructure.
Application management (AM) is the process of managing the operation, maintenance, versioning and upgrading of an application throughout its life-cycle.
AM includes best practices, techniques and procedures essential to a deployed application’s optimal operation, performance and efficiency throughout the enterprise and backend IT infrastructure.
AM is an enterprise-wide IT governance approach geared towards providing an optimal application performance benchmark for organizations while incorporating business and IT segments, but even when we have only a small team, or we are all by ourselves, it can pay off.
Regardless of starting services and installing applications on our own, configuring, balancing and managing resources still need expertise, which the provider has at his disposal.
A certain part of the consumers are many times not aware of the fact that their data, even without their knowledge or will, are part of some kind of a cloud.
One of the simplest examples are Apple products: you can’t even put the phone into operation without the creation of the so-called iCloud account, which sends immediately, without asking for your approval, your profile and the related data to the cloud.
They don’t have to deal with the processes necessary for the operation, there’s only one thing important to them: the water should run, whenever they need it.
They have to pay a fee for the used quantity. The same thing happens when using managed resources: the client uses the resources owned by the hosting company.
There are other services which can be part of a basic package depending on the service provider, or they are offered as extra services.
These are typically the following:
We are now thinking of providers of PaaS and IaaS in the first place. Companies which can make your everyday IT operation more reliable and predictable belong in these groups.
We have already defined providers of PaaS and IaaS in our previous article on cloud hosting.
These companies provide access to shared data centres, thus ensuring you redundant and reliable operation, independent of the size of your company.
You can save time and money in this way, because you don’t need to purchase newer and newer hardware or to take care of the appropriate storage and maintenance of this equipment.
Consequently, it’s meant to be taken literally that you have to pay only for your consumption.
These services are cost-effective at serving short-term projects, but because of their scalability, they are cost-effective when serving long-term business needs and on-demand type resources as well.
For example, you can double your memory capacity within a couple of minutes if your website needs extra resources to serve the suddenly increased number of visitors.
One of the things holding you back as a client may be the scepticism concerning data security.
This is on the one hand a matter of technology, and on the other hand, a matter of approach. Some clients still have difficulties with accepting that their business critical data are on the computer of another party.
Even though insisting on the physical proximity of your servers does not at all guarantee greater security, but quite the contrary! An offended employee, seeking to justify himself can often cause greater damages than any external attack.
That’s exactly why hosting companies have to comply with several security standards and requirements in order to earn their clients’ trust, as by improper handling of data they endanger their own reputation and ultimately their operation.
In order to make things clearer, let’s have an overview of the main differences between unmanaged hosting and managed hosting:
Which is better ‒ managed hosting or unmanaged hosting?
The real question to ask is which fits better the tasks to be carried out, which is the one that can fully serve your business needs?
It’s worth choosing managed hosting if:
- you are in a smaller business and you have modest, limited IT resources both in terms of human competence and hardware
- you want to make your IT budget more consistent and transparent
- you don’t have time and expertise to deal with the configuration of the server
- you wish to focus rather on business development instead of solving everyday IT problems
- you are ready to outsource your infrastructure and give its supervision in someone else’s hands
You should stick to unmanaged hosting if:
- you or your colleagues have experience in the operation of web servers
- your IT budget is not significant and you are in cooperation with not more than 1 or 2 IT professionals, or you wouldn’t like to or can’t work together with a bigger team
- you have time and competence for the configuration and maintenance of the remote resources
- if you are not feeling comfortable with letting an authorized person have access to your data and keep them confidential
What aspects should you consider if you want to increase your efficiency through managed hosting with the help of a professional service provider?
To really take advantage of this approach, it is very important to have a clear picture of your own competence and your expectations towards a partner.
Let’s see what a client should check out when looking for a service provider!
Of course, the most important virtue of a professional hosting provider is a high level of technical expertise and experience.
Besides that, a hosting provider typically
- employs specialists in their fields
- offers 7/24 support
- is aware of innovations and puts them into practice
- knows the typical problems of systems they are managing
- understands how these can be solved the quickest way and with the least possible inconvenience and disruption
These are the main values that make managed IT services appealing for clients.
Communication, customer focus
A really good service provider actively communicates with the clients.
Proactive communication is very helpful for the client when it comes to planning the resources, optimal configuration of the system or its maintenance and when questions emerge and problems occur.
The best service providers treat their partners with special care and attention so the client feels his system is in caring hands. Reliable, quick assistance, of course, is essential to support this.
This attitude of a service provider is appreciated by experts and by non-professionals alike.
Many times it’s not a trained IT specialist at the other end of the line, so it’s crucial that the employees of the service provider can communicate technical information in a way that even non-professionals understand.
The quality of service depends greatly on the emphasis the provider puts on communication – this is one of the strongest points that you should consider as a client.
Specialized knowledge, responsible team
Especially when it comes to larger systems, it is essential that not a single employee deals with tasks including supervision, maintenance and troubleshooting.
A good provider focuses on understanding the workflow processes, the potential problems so it can properly and effectively coordinate the work of the team and achieve the best results quickly.
A service provider has a team competence in managing itself and controlling workflow processes by continuously improving procedures, involving new ideas and finally controlling the quality of the finished job.
As a client you have to decide whether to entrust your system to a constantly active team with dedicated knowledge
or to professional individual experts with strongly limited resources, time and potential, usually at similar costs
A hosting service provider ideally actively seeks ways to improve the systems supervised by them.
Technical changes and improvements are initiated by them if deemed necessary.
If it finds that there is something else that would serve the needs of the client better or that another type of service would be more suitable, it informs the client about that.
To determine your requirements towards a service provider, it’s important to be aware of your own needs.
Try to formulate in 6-8 sentences about your plans for your current store and what you want to achieve in the upcoming year.
Once that’s done, you should answer the following questions:
- What solution is it you’re seeking hosting for (e.g. WordPress blog or ecommerce store)?
- Is there any specific version requirement for any web technology (e.g. PHP version number)?
- Is some special software or other application necessary?
- What traffic size do you expect at the beginning?
- Which are the external services or technologies that you want to connect?
- How important a predictable IT budget is?
It is also good to have a clear picture about which goals can realized using your present resources.
What pieces do you have an in-house solution for and what is that you have to get from “outside”?
If you can properly answer these questions, you have to think over how you can achieve your goals.
Some other useful points to consider:
- Access to up-to-date statistics (which can help service providers make estimates, e.g. Google Analytics).
- Precise, preferably documented, plan on the site to be built (what would you like to use it for and how?).
- If you have already used some kind of infrastructure, the basic network topology and specification of it (if you have not yet done so).
- You don’t have to be an expert in this field but it’s good if you’re up-to-date about web technologies (what are the market trends and directions of development?).
- The basics of managed hosting and cloud services.
- Understanding the natural amortization of outsourced services, meaning over time both the devices and the technologies become obsolete, and they need continuous development (in practice that means developments of 1 or 2 years, with the financial implications of that).
All this is also important to make sure you order only services which you really need.
If you’re looking for a professional partner, you should also act like a professional client.
Now let’s see what hosting solutions are available and which is best for your business to move to the next level!
In order to have a clearer picture of the various forms of hosting, let’s review some well-known providers.
As far as pricing is concerned, we have already discussed in our previous article what pricing you should expect.
By now it is common that a single provider offers various packages that may range from shared hosting to managed virtual private clouds. The main factors of pricing are, of course, the level of infrastructure and support provided.
Some providers offer hybrid solutions for quite low prices, even for a monthly fee of 4-5 dollars, e.g. SiteGround.
Of course, setting bottom prices should not be your weapon when defining your strategy in the battle for clients!
Many times you can find hosting providers operating with money back guarantee, just like HostGator does.
It increases the added value if clients can feel as much secure as possible.
It’s quite common that support is available every hour of the day, every day of the year, and many times the hosting company needs to establish a large call centre in order to be able to perform that.
That’s what Integrated Computer Services or A2 Hosting puts emphasis on, among others.
And if you need larger infrastructure and you have no difficulties financing that, you can think of more expensive solutions as well: e.g. Liquid Web or Peer 1.
Nowadays it’s standard practice that you can also ask your questions to the appropriate person in the form of live chat most of the time when you browse the website of a Managed Service Provider (MSP).
You get relevant answers in almost every case, so if you don’t want to spend a lot of time going through the service descriptions and the SLA documents, it’s worth obtaining the information that way.
As a client you should inquire about data safety and on-call time in the first place!
You should have a complete picture of
- the commitment period that can be undertaken,
- the scalability of the infrastructure,
- the applications presently in use and about the ones to be introduced,
- the process of the support and the consultancy
No matter which provider you choose, the pricing model is one of the most important factors.
PaaS and IaaS providers are generally able to determine your expenses on the basis of consumption and often provide discounts for yearly commitments.
If you have a successful online shop, sooner or later you will feel the need to put your ecommerce store in a runtime environment optimized to a chosen framework.
Hosting providers tend to highlight their ecommerce hosting capacities, and they guarantee continuous operational safety for your online shop ensuring proper operation with the appropriate HW / SW support.
In this way your online store is placed in a run-time environment tailored by the service provider to the needs of the framework. Be it a cloud or private environment, it’s optimized for the needs of the online store.
Since all ecommerce frameworks have specific characteristics, the recipes are not the same either.
That’s the reason why there’s a fundamental need for the service provider to know the selected store engine, so that they can take the burden of the in-depth technical management of the system off the client’s shoulder.
This has to include
- maintenance of the system,
- setting hardware configurations,
- installation and supervision of software applications (monitoring),
- technical support, assistance answering the client’s questions and requests and satisfying his needs.
Besides, the following additional solutions can optionally be selected
- additional services increasing security and performance,
- load balancing,
- automated scaling,
- disaster recovery,
- vulnerability assessment,
- performance tests,
- consultations on the offers for future improvements.
All ecommerce frameworks have their own infrastructural needs by which they can be operated in the most efficient way.
A hosting service provider needs to have the expertise in all that, so this burden is off your shoulder as client ‒ to make sure your online store is always ready to serve your customers and it performs the best possible way.
Let’s see this in practice.
One of the greatest advantages of professional resource management is that it helps prevent problems by intervening in time.
Software compatibility checks, security scans and performance monitoring helps service providers identify and manage smaller anomalies before they become serious and significantly damage the conversion rate and the reputation of an ecommerce store.
Slow page load influences search engine rankings and it scares off potential customers.
While in some cases excessive load can be caused by the inappropriate configuration of the website, many times the capacity qualities of the server also block smooth operation.
However, specialized ecommerce hosting makes it possible for the team in charge to monitor and track performance problems, and to apply, for example special caching techniques ensuring the website loads quickly even under heavy traffic.
Simply, if an online shop is unavailable, you won’t make any money.
Service providers usually guarantee an annual availability rate, for example of 99.5%. Even a higher level of reliability can be achieved if you choose a professional service provider, where the resources are redundant by default.
IT security is of key importance for both parties.
A managed service usually includes updating and patching of server(s), software and applications.
Protection against viruses and cyberattacks are taken care of if you choose the appropriate service provider.
If you are looking for a solution specifically designed for your ecommerce store, you usually have to pay a higher amount for the knowledge and competence.
If, for example, you’d like to move your Magento store to the best possible environment, you’ll come across a lot of hosting service providers who support their competence with professional case studies.
You can find hosting companies who are specialists of several ecommerce frameworks.
MGT-Commerce, for example, serves its clients with extremely fast load speeds and if up-to-date innovations are also important for you, you should definitely check out Nexcess.
It’s typical that these companies own their server farms, just like the larger cloud giants (Amazon, Windows, Google).
On top of the fact that the infrastructure is privately owned, optimized solutions like store specific VMIs (Virtual Machine Image) – which are offered among others by Bitnami – also try to convince potential clients.
Accredited or certified competences are also important.
Obtaining the trust of a partner is not only matter of competitive price, a provider can reinforce its position by a corporate culture of regular trainings in the applied technologies and by qualifications gained at these trainings.
We at AionHill carry out our everyday tasks working in teams, of Magento Certified Developers. Our hosting solutions, based on Amazon Web Services (AWS), are supervised by our accredited system administrators with several years of experience.
Cloud computing has grown significantly over the past years.
Up until a couple of years ago, this kind of IT infrastructure was available only to mid or large size companies, but thanks to technological innovation, cloud infrastructure now can be afforded by anyone.
Cloud computing is not just an IT fad, but a very strong trend.
Today, the needs of large enterprises could not be met if it weren’t for cloud technologies.Research by Cloudswave tells us that cloud services are expanding globally.
On Cloud vs. Off Cloud
If we study the market, we can find solutions fitting our business needs both among on cloud and off cloud constructions.
A client might use parts of both service types ‒ this is called “hybrid solution”.
Let’s take a look at what the main advantages and disadvantages of these two service types are.
We encounter cloud technology every day. Often, as individuals, we don’t realize that we are using cloud services, e.g. Dropbox, Spotify etc.Soon, probably most software will have a cloud version and it seems to be inevitable in information technology that sooner or later every single company will end up using the cloud in some form.
To be able to make a decision about going to the cloud or choosing a hybrid adaptation, it is essential to analyse what goals and what kind of operations you have.
Hosting is called off cloud when the hosting infrastructure is typically static.
Off cloud can be hosted in a data-centre or on premise, where the servers are physically located in-house.
Both can be managed or unmanaged, virtual or physical, the main point of off cloud setups is that the resources are mainly static and fixed and you typically need hardware modifications to scale resources.
Off cloud hosting ‒ hosted or on premise ‒ of course, does not stop you from outsourcing tasks to system integrators. Hosting companies often offer built-in managed packages for that.
Cloud computing provides shared computer processing resources on demand.
It is a model for enabling on-demand access to a shared pool of configurable computing resources, which can be rapidly provisioned and released with minimal management effort.
Cloud computing and storage solutions provide users with various capabilities to store and process data in either privately owned, or third-party data centres located all around the world.
Cloud computing also relies on sharing of resources to achieve coherence and economies of scale, generally offering guaranteed resources form a general pool.
In cloud computing the underlying infrastructural layer of on demand services is typically fully automated and completely transparent for the client, the level of control made possible for the client on one side and the level of management on the other side largely depends on the nature of the service, which can be a simple storage, a virtual machine, a platform or a single piece of software. In some cases these services can be combined freely.
Cloud users many times do not know the whereabouts of the physical resources – and they do not need to care about this either.Cloud providers may serve several areas of client needs.
With managed cloud solutions, not only the cloud infrastructure is offered by a provider but also the configuration and scaling of cloud services as well as the management of the OS and server applications.
Different levels of the system may be managed by different contractors.
It is also common that a provider acts as a middleman and rents cloud infrastructure from a third party and manages and configures it to re-sell it for the client.
Which is better ‒ Off Cloud or On Cloud Hosting?
The following table gives you some help to have an overview.We have studied certain aspects of Off Cloud and On Cloud and summarized which one, in our opinion, has an advantage over the other.
It has to be noted that off cloud hosting companies, or more precisely, hosting providers who started off as off cloud companies, by now also tend to offer hybrid solutions.
They are not as cost-effective as their large-sized, fully on cloud competitors, but they aim to offer more tailored solutions.
They often have their own data centres capable of handling a wide range of computing and storage needs: 3-5 locations globally in most cases.
Zadara Storage, for instance, lays special emphasis on “privileges” offered by private cloud solutions, such as VPSA storage array and ZIOS object storage services.
They give you the flexibility of the cloud without having to migrate your store. Their services can be tested in a demo environment as well.
If you need more advanced and customized services and are willing to pay for an exclusive, private infrastructure, Verizon may be a good choice.
Besides private cloud services, Verizon highlights their expertise in database management and Oracle’s cloud integration. They aim to offer exceptional client service with a 30-minute response time guarantee, appointing a dedicated Service Delivery Manager.
Typically such a high-calibre service is used by larger companies and therefore it widely supports different kinds of operating systems and databases.
If you want to migrate your online business to the cloud, you have a wide range of providers and plans to choose from.
We now pick 3 major players and compare a few of their basic services.
Describing the full portfolios of these giants alone would easily take a long blog post or even a series of articles. Let’s take a short look at the cloud solutions of Microsoft, Rackspace and Amazon.
As the PaaS of Windows, Azure offers the company’s own operating system, which is quite effective if your application does not need anything else.
You can focus on developments since you don’t have to worry about updating the operating system, handling patches and performing fixes.
Windows Azure offers three main solutions in this field:
- „Web role”:This operating system comprises the per-installed IIS 7 (Internet Information Services) and supports web technologies such as NET, PHP and Node.js.
- Worker role:This OS is capable of running custom codes and basically any kind of application, including Apache Tomcat webserver or Java Virtual Machines, and it also runs smoothly with the previously mentioned Web role, of course.
- Virtual Machine role:Here, you (the client) provide the resource with the OS by using a Windows Server 2008 R2 (Enterprise or Standard) VHD image. In contrast to Web role and Worker role, you are responsible for maintaining and updating the operating system. You can use almost any kind of programming language, framework or device in Azure to build your application. The functions and services can be operated via the REST protocol. Windows Azure client directories are available supporting several programming languages with open source licences. These are on GitHub as well.
Microsoft provides a free trial for 3 months in Azure, which includes a small-capacity server (Small Compute Instance) and other resources that are enough to test and get familiar with Windows Azure.
Like other cloud providers, Microsoft offers a pay-as-you-go pricing plan, based on an hourly fee.
According to the SLA (Service Level Agreement), Microsoft guarantees a 99.95% availability if you use at least two servers under one role.
SQL Azure is a well-scalable, cloud-based relational database service that can be used both by Azure cloud and your own office applications.
You can export data from it and it also supports regular synchronization with your local databases.
You can make payments on a pay-as-you-go basis or even get a discount if you sign a 6-month loyalty agreement.
In both cases you can purchase this service separately or together with other Windows Azure products.
It is possible to store structured as well as unstructured data in Microsoft’s cloud, which can be accessed by Azure applications and other applications via the REST protocol and APIs.
With the help of Azure Drive you can mount storage, managed by the system as a virtual HDD, which can be switched between your private and public clouds. The storage and virtual drive services have a pay-as-you-go payment scheme too.
Rackspace Cloud Hosting
The Rackspace Cloud Hosting infrastructure has control over the operating system.
Their service includes OS updates if you subscribe to Managed Service Level.Rackspace does not allow you to install your own virtual machine, you need to choose from specific Windows or Linux versions.
Rackspace charges you server usage on an hourly basis. In contrast to some other cloud hosting companies, with Rackspace you cannot cease or suspend hourly billings by stopping your servers.
If you want to keep an idle server without having to pay for the out-of-use period, you should make a backup of the server image (which may induce additional Cloud File services costs) and delete the server in question from your account. You can upload this image later if you need it again.
Rackspace doesn’t offer a free trial environment. However, you may create an account with which you can access the admin panel if you want to check out how this service works in more detail.
You are obliged to pay only after starting your server or some other resources.Although Rackspace can provide a range of solutions, mainly if you are OK with having less flexibility, you need to note that they have officially discontinued their beta program for managed application services for Magento, but still support customers who need help hosting their Magento solutions.
Managed Service Level includes server monitoring, layered support of the operating system and the application infrastructure (including automated updates and fixes) and also provides a technical guide to how to use cloud servers.
According to the Rackspace SLA, data centre availability is 100% except for scheduled maintenance which is announced at least 10 business days before scheduled downtime and are not exceeding 60 minutes per one calendar month.
As a result, guaranteed availability is in fact almost 100%, to be more precise it is 99.999%.
Amazon Web Services (AWS)
Amazon Elastic Compute Cloud (EC2) is an IaaS platform, which is the most important component in the AWS range.
This is the basis for building their massive infrastructure. It supports almost any operating system that your applications may need.With EC2, the OS can be monitored and managed very effectively, but patching is the client’s task.
You can import virtual machine images in already created environments (Windows Server 2003 R2 and Windows Server 2008 R1 / R2, VMware ESX VMDK, Citrix Xen VHD or Microsoft Hyper-V VHD).Naturally, Linux solutions can also be used, such as CentOS.
Amazon EC2 offers
- pre-configured servers on which popular database solutions are run (IBM DB2, MySQL etc.),
- resource optimizing solutions,
- web servers (Apache, IIS / ASP.NET),
- application development environment,
- servers which are optimized for different applications
- other, e.g. media servers.
The Free Tier makes it possible to create a “micro” Linux or Windows based server and also to start other useful resources and applications which lets you have a deeper look into the solutions of AWS.
Amazon offers three payment options:
- On-Demand: you pay hourly or monthly rates after using the given resource, with no commitment period.
- Preserved: a one-time fee is paid on the basis of a 1–3 year commitment period with a considerable amount of discount; it is useful when you can precisely estimate your future computing capacity needs.
- Spot: a special case when the client makes a payment offer for a cloud resource. For this you need to know exactly your own IT requirements and compare it to your present IT costs. Spot Bid Advisor helps you with this.
According to Amazon’s SLA, an availability of 99.95% is guaranteed, but you need to use an EC2 instance on two machines in two different Availability Zones. (We’ve mentioned AWS Availability Zones in our previous article.)
AWS provides database services:
Amazon DynamoDB is a fully customizable NoSQL cloud based service (some features are not available in the free tier), while Amazon RDS provides a cloud based relational database solution with similar features to that of MySQL or OracleDB.
Amazon Elastic Block Storage (EBS), as its name suggests, creates storage blocks to be connected to an active EC2 in every case.Every EC2 server comprises a certain storage capacity, but redundancy needed for safe operation is provided by EBS.
You can format the block just like a hard drive and can also set the desired file system.You can create Snapshots of the blocks for backups.
Although you need to pay for their storage separately, these backups use up considerably less space than the original blocks, for a number of reasons: compressed and empty blocks are not stored and, following the creation of the first version of the Snapshot, only new and modified data are stored.
Before choosing a cloud service provider to best serve your business needs, we suggest considering a few aspects right at the beginning.
- What kind of services do you need?
- How do you wish to access the resources?
- To what extent do you want to use solutions in the cloud compared to the on-site (office) environment?
- What kind of control do you want to have over the OS (in terms of applications and developments)?
- Does the provider have up-to date security certificates and know-how?
- Do the laws and regulations, which apply to your operations, identify geographical locations for company data storage?
- What is the difference between the current IT costs and the estimated cloud IT costs?
It may be a good choice for application developers who don’t need to run a Linux environment (although Linux servers have been supported by Azure since 2015).It supports basically every programming language at a reasonable price. If your applications make it possible to work in a Windows operating system, you don’t have to worry about OS fixes and updates.
Rackspace may be fine for those clients that consider it important to have the operating system under the provider’s control together with the managed hosting services.The IaaS and PaaS models combined provide convenience and high availability to the client. On the other hand, Rackspace lacks some services that the other two companies have and, additionally, convenience has its price.Out of the three providers, Rackspace is the most expensive.
One of the strongest cloud hosting providers if you need total control over the operating system, no matter if it is a Windows or Linux server.Amazon Web Services offers the widest array of solutions and services (as many as 72 of them).That’s why it is well scalable and you can use the resources for a number of purposes, e.g. for computing intensive applications, storage, database or for ecommerce.You can adjust your virtual machines smoothly to your business needs with the pre-configured AMIs (Amazon Machine Image).
AionHill Managed Cloud Hosting
As a Magento developer and managed hosting solution provider, AionHill hosts in the AWS cloud.
Our aim is to provide our clients with the best managed cloud hosting solutions available.
Managed Amazon Web Services allow your organization to take advantage of the flexible solutions of AWS but with the added convenience of expert management.
Managing AWS infrastructure, our team of account managers have a full knowledge of all available solutions, allowing us to tailor the service to exactly meet your needs.
Our technical team is accredited by AWS and receive ongoing training to ensure they can fully support your platform.
By implementing best practices to maintain our customers’ infrastructure, AWS Managed Services helps to reduce the operational overhead and risk.
It automates common activities such as change requests, monitoring, patch management, security and backup services, and provides full-lifecycle services to provision, run and support almost any infrastructure. Amazon provides every customer more than 70 services, from simple file storage through the so-called “serverless solutions”, to elastic cloud computing.
At AionHill we’ve created a stack to fully serve the requirements of any Magento based store.
Our team is managing 3 types of shared environments, we have created hybrid builds as well, but if your ecommerce business is fully customized, we are more than happy to shape the AWS cloud to get synchronized with your plans.
The mainly used AWS Cloud resources are the backbone of our hosting services, such as the EC2 instance types, which are mapped to the specific needs of your application to optimise performance and storage without over-spending.
Simple Storage Service or S3 will be configured for snapshots and other persistent object storage in S3 with lifecycle policies for archiving data to Glacier. Using this method, our customers’ vital and business-critical data is always backed up and stays secured.
If it comes to content delivery, what else could we use than Amazon CloudFront?
It is a global content delivery network (CDN) service that accelerates delivery of your websites, APIs, video content or other web assets. It integrates with other Amazon Web Services products to give developers and businesses an easy way to accelerate content to end users with no minimum usage commitments.
We are also eager to optimize given solutions. Elastic Load Balancing automatically distributes incoming application traffic across multiple Amazon EC2 instances. It enables you to achieve fault tolerance in your applications, seamlessly providing the required amount of load balancing capacity needed to route application traffic.
Balancer is ideal for simple load balancing of traffic across multiple EC2 instances, while the Application Load Balancer is ideal for applications needing advanced routing capabilities, microservices and container-based architectures.
For more professional approach, according to our customers’ needs we install New Relic Licenses. With New Relic, every single instance can be monitored thoroughly.
Using these metrics, we can give advice on optimization or on upscaling / downscaling of infrastructure. This way, we help our clients achieve quicker business growth, implementing data driven decisions.
An optimized, well-structured and cared online shop will improve user experience, which has a key role raising conversion rates, therefore more resources can be allocated to business oriented suggestions.
Managing and maintaining the whole infrastructure, keeping the running services and applications updated, monitoring the servers and all related tasks rest on our shoulders.
We have successfully optimized hosting environments for all kinds of ecommerce stores.
In some cases we helped the clients save as much as $400 per month by optimizing their infrastructure and there is a number of cases in which we could drastically increase page speed via our state-of-the-art hosting solutions.
Today there are over 250,000 ecommerce sites in the world on Magento, making it the most popular ecommerce platform.
Magento’s sophisticated features can fulfil the widest range of e-merchant and customer needs. Because it is quite complex, performance optimization is a continuous task for IT professionals.
As cloud hosting is becoming more widespread it’s worth examining your potential managed hosting service providers on the basis of different criteria.
Do they have all the relevant knowledge and expertise? What kind of references do they have? How deep is the knowledge of their professionals?
Of course, these statements are true when no experts can be found on the client’s side.
More precisely, even when the client has a team of experienced admins and managers, they do not really need hosting itself, rather customized solutions which can be integrated and relatively easily managed.This can be On Cloud or Off-Cloud, hybrid or not, or specialized for running a certain application (i.e. ecommerce framework). We describe 5 competencies that can be expected from any serious managed hosting soliution provider today.
1) Technical knowledge:
On the one hand, thorough service knowledge is needed to manage a complex cloud project, on the other hand, internet based IT capacities are needed to build and install applications in a World Wide Web environment.For example, different capabilities are required for managing storage services and archiving than for configuring a virtual private cloud with dedicated database servers.The knowledge should be strongly based on experience, such as experience with open source solutions and different programming languages, just to mention two fields.
2) Analysing corporate architecture and business needs:
This is indispensable for being able to set up a list with all the services you will need.
Having this done, cooperation and communication with the client and their IT professionals will go more smoothly.
If you have a thorough understanding about the basic principles, the service oriented architecture will successfully support your business operations in the long run.
3) Project management expertise:
Today, project management capabilities and roles are vital for properly carrying out an IT project, to be fulfilled by determined experts with leader qualities.
Such a person must clearly see both sides, manage different resources, help in coming to an agreement in terms of the desired objectives, and take responsibility for reaching the scheduled milestones in the previously set way and time.
There is a great deal of responsibility with migrating an online store to the cloud since it is the project manager who is in the “front zone” connecting the client and the provider.
Usually it takes a lot of work and expertise to finish with the projects on time, avoiding extra costs for both parties.
The project manager also has to take into account that the client may be overspending, since it’s fairly easy to start and stop resources, and thus additional costs related to unnecessary or inappropriate services and resources can easily accumulate.
4) Clear communication with the client:
It can be expected from the provider that it thoroughly understands client needs and is able to give appropriate answers to the questions that may arise.
The provider should also follow all communications between the parties (i.e. every detail is documented in order to avoid any doubtful situations in the future) and reacts immediately when things may not go according to plan.
For example, such cases can be when a cloud service downtime occurs unexpectedly or the service underperforms.
Such situations can be handled with the effective communication of product owners and dedicated managers who take action as soon as possible.
Also, clear communication of prices, costs and service packages can be included here.
5) Security and compliance with regulations:
No matter what kind of service is used, protection and confidential management of user data are of vital importance.
The provider’s security service in this respect must comply with all laws, regulations and practices, such as the Sarbanes-Oxley Act, HIPAA and other data handling regulations, but the client, too, has to keep some rules as well.
As for the AWS cloud, these aspects are taken into account with special care and thus a model of mutual responsibility has been elaborated.
According to this, cooperation can take place on strict conditions, defining responsibilities and protecting the interests of all participants (SRM – Shared Responsibility Model).
In our previous article we explained what you should expect as a client when meeting the associates of the hosting solution provider, what questions they might ask you.
Now let’s see the other side and go through the key topics that the client should ask during the negotiations, and the questions stemming from them.
1) Where will your data be stored?
Nowadays, due to the growing number of cloud service providers, there is such a wide range of prices on the market that you should be suspicious about the too expensive solutions, and the same goes for the too cheap offers, or offers under the average market price.
Nobody wants to see their business critical data on a flash drive worn around the neck of a jovial IT specialist…
Well, in an ideal case your data is stored on some kind of shared or dedicated server, in a data centre that is at a geographically remote, physically protected location.
Whether it should be located within the country or across the borders, it depends on the business policies and also regulated by the legal environment.
2) What problems may occur during the actually running installation or migration?
You should expect clashes of opinions if you have not precisely clarified the characteristics of the software environment during the preliminary discussions.
There are compatibility questions like the OS, the assessment of the capacity requirements, or the version number of the web technologies to be used (PHP, cache).
Migration obviously comes with downtime, and that’s why you should inquire about the expected number of engineering hours, and ask whether migration is done during working hours or at a less frequent time of the day.
3) Is the provider a reseller of the service or do they have the infrastructure at their disposal?
Right at the beginning of the article we mentioned that the resources sold as a service can either be the property of the service provider or a third party.
For example, Rackspace has its own data centres at multiple locations.
However, if it’s Cloudreach or Datapipe – or AionHill – who’s at the other side of the table, then these service providers, as AWS partners, may be resellers of the cloud infrastructure of Amazon, and their IT professionals manage this cloud equipment and optimize them to their clients’ needs.
4) What kind of cloud services do they provide?
You should check out the main service types using the cost calculator of the big cloud companies.
Before going into negotiations, you should know whether the service provider has the appropriate competences and service portfolio.
To be able to do this, you of course have to precisely define your own business vision and your expectations concerning the cloud.
You should have discussions on whether the offered services represent a solution to your problem.
5) What pricing policy do they use?
You should only pay for what you actually use.
That’s why you should pay attention to unrealistically high upfront costs.
In 80% of the cases these upfront costs are not even mentioned since, as we have said earlier, practically all service providers follow the pay-as-you-go scheme, of which the hosting company issues a monthly bill.
This is exactly one of the pricing methods which can push down the costs of the infrastructure usage well below the operation and maintenance costs of the client’s own server farm.
You may come across the upfront costs in the case of a fixed-term commitment. You may be surprised at the greater upfront costs, but usually that’s how you can realize the highest average discount.
The monthly cost of cloud resources can range from $2-3 to even several thousands of dollars. It all depends on what size and what kind of services your company needs.
6) How secure is the solution provided?
It’s not really the level of security what matters, but it’s rather how much the service provider does for security.
Does it have the necessary certificates, licenses, or as a third party does it manage services which meet the necessary requirements?
In addition to data management, enough attention should be paid to the monitoring of the firewall, to the setting of access levels, to access control and to encryption.
7) What happens if my data is corrupted or lost?
A precise SLA description is perfectly suitable for avoiding such situations.
In this undertaking, among others, this and similar cases are usually also covered. You need to know if you can access your data as well, or you completely entrust the associates of the service provider with that.
If your employees also have access to the files, access logging will also have to be monitored.
You should be informed about how the service provider intends to schedule the backups (daily, weekly etc.).
Under which conditions and how frequently archiving takes place? How quick disaster recovery can be performed in the case of an unwanted crash or data loss?
8) What kind of customer support services do they provide?
What sort of methods are there for error reporting? During which hours, how many days of the week can you reach the customer service?
What time frames are there for troubleshooting? Is there VIP support available and if yes, what is considered to be a critical error, the fixing of which has to be started immediately, and which errors belong to the category of “next business day”?
Through what kind of services can you contact the employees of the service provider when you detect an error? Average response time also has to be determined.
9) Is the system easily scalable so that it can follow the business needs?
With the expansion of your business, sooner or later you’ll outgrow the infrastructure currently in use.
The incoming and outgoing data traffic will increase, your storage need will grow, even the number of your products and visitors may drastically increase.
You can also quite often hear the words flexibility and scalability from the service providers. You should ask about the time frame and / or the financial implications of starting or stopping resources (upscaling or downscaling).
10) What downtime rate should you expect?
Downtime, or in other words network outage, occurs when the service is temporarily unavailable.
This can result in substantial financial loss.
For this reason, it’s worth looking for companies that guarantee the highest proportion of availability compared to the days of the year.
Of course, the answer to the question above is that there’s no downtime. What matters, is that the percentage of availability is as close to 100 as possible.
A great part of the companies usually publish the log files of the downtimes. If you don’t find any publicly available information on that, you should inquire about it!
11) How will you access the servers?
It’s important to clarify in what way you will be able to use the resources, how you will access them.
Via what protocols will the upload of the static pieces of content happen?
Generally, the client is granted a certain administrative level access to be used through desktop and very often all kinds of smart devices.
The world of managed hosting is vast and could be bewildering for clients.
An online store owner may lack the competence which is required to start an ecommerce business in the cloud, but that’s why hosting providers are for.
This guide is meant to help taking the first steps as a client and understand cloud terms and essentials.
If you wish to reach customers globally, you might have to look at computing from a different angle, on a different scale. This will bring the transition and cost-effectiveness with itself. Moving your shop to the managed cloud may be the best choice for growth and expansion.
Online marketing is not a one-man task, but a process which needs a significant amount of human resources.
It’s especially true if the company is involved in more marketing activities. Just think of an ecommerce business where content marketing, SEO, Google AdWords, Facebook Ads, retargeting and email marketing may be used for customer acquisition and retention.
Beyond a certain level of complexity and size, all these tasks are simply impossible to perform by a single person.
For this reason, it’s worth assessing what kind of resources you have and what you will need in the future.
This largely influences what type of team should be employed and whether you are able to build such a team.
Allocating tasks and responsibilities depends mainly on 3 factors:
- Quantity of tasks
- Size of the organization
- Available budget
These factors usually operate parallel with each other. This is good news because you can make estimations based on them so that you can build the proper team structure for executing the necessary projects.
When looking at the marketing solutions and channels as a process, we can define 3 main phases:
- Traffic generation
- Soft conversion
- Hard conversion (sales)
These elements are the stages of the sales funnel. You start “loading” the users (e.g. readers) at the mouth of the funnel and try to guide as many of them as possible over to the next level.
The hard fact is that you’ll lose a number of them at each stage.
Thus, for the whole process, the conversion rate is 2/100 (20%x10%), which is 2%. So finally you managed to convert 2 visitors out of 100.
Traffic generation takes place in the top part of the funnel.
This is called top-of-the-funnel (TOFU). The middle part is called the middle-of-the-funnel (MOFU) and the sales (hard conversion) part is the bottom-of-the-funnel (BOFU).
Team size: 1 person
If the whole process is managed by only one person, all three functions have to be performed by the same individual.
They are called “full-funnel” marketing experts.
If you can employ more staff, then you can separate these parts and assign each to different people.
If we take a look at content marketing as the main marketing activity managed by one person, he or she will have the following tasks:
- Generating content ideas
- Creating content
- Search engine optimization
- Content distribution
- Managing social networking accounts
This specialist needs to be good at creating content strategy, copywriting, SEO, email marketing and social media communication.
Needless to say, it’s not an easy job.
Team size: 3 people
That’s why it can be a good idea to hire different people (even interns or trainees) for different tasks.
These structures work mostly for teams of 2-5 people.
Here, with option 1, the 3 specializations are assigned to 3 different professionals.
With option 2, traffic and soft conversion are typically in the hand of one person. But it’s also possible to have soft and hard conversion handled by one expert.
The point is that the three fields are now separated.
As the size of the team grows, this hierarchy can be divided even further.
Team size: over 8 people
These tasks are completely separated with a staff of 6-8. If we go further, one task can be fulfilled by more than one person, or even by a team.
In this case a dedicated marketing manager (Head of Marketing or Chief Marketing Officer) is needed who’s not into content creation or other specific projects, but coordinates his team.
As the size of the teams grows, these organizational charts get more and more complex.
You can see above that 4 different professionals manage traffic generation and content creation:
- One person builds and maintains the website’s blog.
- Another one is responsible for layout and design.
- A third one for SEO.
- The fourth person elaborates the content strategy, writes blog posts, shoots videos or manages social networking.
The largest team I’ve been ever part of, was made up of 14 people. We were in charge of the entire online marketing for a US company.
The Head of Marketing coordinated the team, not participating in the actual content creation and distribution.
Almost half of the team (6 experts) were not employees, but freelancers.
I focused solely on SEO. I didn’t have to deal with email marketing, web design or other areas.
This was a genuine, full-size online marketing team.
Roles in a digital marketing team
Briefly, let’s take a look at what kind of competencies are needed in such a full-size marketing team.
Head of Marketing
- Coordinating the team
- Identifying and filling talent gaps
- Hiring staff
- Setting objectives and tracking performance
- Results-oriented, prefers data-driven marketing
- 2-3 years of experience in online marketing in at least 2-3 different fields
- Good communications skills
- Team player
Blogger, content writer
- Writing content on the basis of the scheduled topics
- Giving feedback to and editing guest posts
- Editing and formatting articles
- Being familiar with the given industry
- Good writing skills
- Can work independently
- 2-3 years of relevant experience
Social media manager
- Managing the social media accounts of the company
- Summarizing or compacting the published pieces of content, preparing them for sharing on social networking sites
- Moderating and answering comments and feedback
- Content distribution and promotion
- Advanced communications skills
- Continuous availability
- Knowledge of social media channel mechanisms
- Performing on-page and off-page SEO tasks
- Cooperation with bloggers and content writers
- Defining organic traffic objectives and tracking performance
- Following SEO trends and applying up-to-date techniques
- 2-3 years of relevant experience
- Thorough knowledge of SEO, analytics and keyword research
- Data driven attitude
- Good communications skills
- Visual enhancement of written content
- Cooperation with other content creators
- Creating visuals for content to be shared on social media websites
- Preparing presentations and infographics
- Willingness to create design relevant for the target audience
- Being open to design ideas other than his own
- Relevant experience
- Creative thinker, but effective graphic expert
- Fast and reliable
- In-house or agency experience is an advantage
All of these competences are rarely present at one single company.
That’s why freelancers, e.g. content writers, designers or SEO experts, are often involved in different projects to perform the needed tasks.
Of course, further specialists can be added to the team if needed, for example an email marketing or an analytics expert. In the case of an ecommerce business, an RFM model or a transactional email specialist may be hired as well.
Generally, it’s worth listing first what kinds of tasks are to be performed and then structuring the ideal marketing team can take place.
When doing this, you can rely on your own experience or get ideas from other players in the sector.
Here’s a useful tip:
- Find an international company that has roughly the same size and profile as your business
- Check on LinkedIn who work for that company
- Studying the job titles you can easily sketch the organizational chart
A simple example:
Run a search for Shapr3D on LinkedIn. You’ll get 13 results:
- If you check all these people one by one, you’ll realize that 3 out of the 13 don’t work for the company: the company name is present in their profile as a skill
- 1 person is not with the company anymore
- 2 people are advisors
- The actual workforce here is 7 people: 1 CEO, 3 developers, 1 product designer, 2 marketing specialists
- You could probably draw their organizational chart right now
Also, your desired company structure, much larger than that of a 7-member startup team, could be drafted as well with this same method.
Run another search on LinkedIn for „BioTech USA marketing”, then you’ll find those who work for Biotech USA and are also marketing specialists:
Job titles such as these are coming up:
- Head of Online
- Digital Marketing Strategist
- Marketing Manager
- Online Marketing Analyst
- Junior Marketing Manager
Now you can easily create a list of the different responsibilities and then define the team and task hierarchy.
The sheer size of the team is not the only thing, of course, but it can be a fine indicator for gauging the quantity of tasks and what kind of output can be expected from such a team.
If you are focusing on content creation, then it’s worthwhile to check how much time it takes to create a piece of high quality content.
How long does it take to create some good quality content?
Before answering, first you need to study these aspects:
- Do you have all the necessary resources within the company?
- Do you have the money to hire experts?
- Do you have any experience in content creation?
According to my experience, a well written and nicely formatted and designed article takes at least 1-2, but preferably 3-4 days to complete.
I can also mention a piece of content that was prepared by 8 people for 3 weeks. The biggest thing we created was finished after 2.5 months, consequently achieving much better results than the less work-intensive materials.
I came across this research a couple of years ago, prepared by TechValidate after questioning 236 companies.
According to their findings, a good piece of content mostly takes 2-5 weeks to complete. I can strongly confirm this.
This process includes finding a topic, research, writing, design, SEO, publication, distribution and tracking.
Of course, you can come out with some content faster, but if you don’t want to compromise on quality, you need to calculate with weeks, rather than with hours or days for preparing a fine piece of work.
The most time consuming types of content are mainly these:
- ebooks, whitepapers
- product demos
- case studies
Less time consuming projects:
- blog posts
- news, PR articles
Knowing your time limits is important so that you can properly allocate the necessary resources and schedule content releases well in advance. It’s worth publishing content on a regular basis, e.g. every Wednesday.
A lot of small companies or startups have a one-person, full-stack “team” who is responsible for several types of marketing tasks. There are also lots of small, 2-3-member teams.
It’s important to note that as your company grows, the complexity of responsibilities will grow as well. And this can mostly be solved by expanding resources, which is worth preparing for in advance.
This can be done most easily by studying the marketing team structure of other companies.
LinkedIn is a good tool for that. But you can use Facebook as well, although here fewer people give their company information.
So the tools are available, now the only thing you need to do is use them!
Restructuring a poorly performing team
You probably want to ask: what if you don’t want to build up a team from scratch, but make the existing one perform better?
The reason for that may be having new kinds of tasks, some competencies need to be reduced or someone underperforms.
In this case, two aspects are worth considering:
- The will, skill and knowledge of the specific person
- The time and expertise needed for fulfilling the given task
If a task needs a person with much higher expertise than the existing employee has, you have the following options:
- Hiring a senior level specialist. Giving some other task to the junior team member or laying them off.
- Hiring an advisor who will mentor the junior member to be able to cope with the challenges in a given time.
You need to identify which element of the will-skill-knowledge “triad” is the weakest. If the team member is passionate and smart, but lacks the appropriate knowledge, it’s not a big problem.
If someone is motivated, but unskilled, then his skills need to be developed. If there is passion, but all the rest are missing, it is very likely that cooperation will not work.
Still, it’s very hard to predict whether a person will become a top-notch expert or not, but it’s a fact that if there are serious problems with any 2 elements of the will-skill-knowledge set, you have chosen an underperforming colleague.
In this case you can think about assigning different tasks or a position to the person in question. If this seems impossible, you need to get rid of him.
A lot of times it happens that even if you know what kind of tasks need to be carried out, you simply cannot find the right people for that who would be able to join your company immediately.
The reasons may vary: there is a shortage of experts in that field, your project is not attractive enough or you don’t have the funds to hire the right professional.
There’s no easy way around in these situations, but if you manage to identify the main blocker and try to remove it, you have better chances to solve such a problem.
Here’s some help:
- Identify the problem, i.e. the main obstacle
- Elaborate a step by step strategy for solving it
- Break down the strategy into action items
- Set a time limit for solving the problem
- Do it step by step
If you go in the top-down direction, which is defining the necessary tasks by focusing on the objective, then you obligate yourself as well as the team to develop on an ongoing basis.
Most professional marketing teams have a quarterly or half-year plan broken down into monthly and weekly sprints.
They see clearly the objectives to be met in 3-6 months, discuss tasks every month and schedule them in weekly sprints.
Weekly meetings help allocating short term tasks effectively. Monthly and quarterly planning supports greatly mid and long term targets.
As for lots of markets, it’s also true for the online sector that it’s rather saturated in terms of human resources.
This means that there is a huge number of copywriters, content marketing specialists, but as you take a look at higher altitudes, the “air becomes thinner and thinner”.
There is a relatively low number of very good online marketing experts, not only locally, but on an international level as well.
This, however offers some excellent opportunities. If you find someone with a large follower base with whom you can cooperate and develop a partner relationship, then you can reach not only your own target audience, but theirs as well.
“Hunting down” such influencers may take a considerable amount of time and energy, but it can well worth the effort. You can appoint a team member to find and communicate with the influencers or the Head of Marketing may be given the task to regularly meet and talk to such people.
Personal relationships of the kind can lead to future cooperation helping to raise brand awareness, increase website traffic, get valuable backlinks (important for SEO) or can be useful for hiring purposes.
Just imagine that a highly praised marketing professional writes a detailed case study about your company on his own blog that has thousands of visitors a day.
Wouldn’t it be useful for your company? Of course it would.
We’re going to talk about the following:
Gaming glasses and social networking $1000 with tea, in 3 days T-shirts, 3 weeks and $1249 The 24-hour challenge Again, 24 hours: with some beef The THEGREATBUILD project Beards: $120K per month More ecommerce stories… 6 points to consider
Corey Ferreira, a member of the Shopify team, launched an online store just to be able to make a case study out of it.
Since previously they built stores on the basis of dropshipping for case studies, Corey now tried something different.
He imported goods directly from a Chinese manufacturer. Before choosing his partner, he set the following criteria:
- The product had to be light and small enough to fit into a shoebox.
- It had to be relatively cheap in the range of $1-10 so that costs could be kept low even in the case of a larger order.
- A product with a profit margin potential of 50%+ would be ideal.
Corey excluded electronics and foods right at the beginning because they are risky: they can break or expire.
He wanted a product to serve a niche market of passionate people.
He then didn’t identify the product, but the target audience, in this case: gamers. It was a rather easy choice since Corey is a gamer himself so he knows the needs and problems of this target group.
One of their common problems was eye fatigue to which one solution was to wear glasses that block blue light.
Once he had the idea, he started doing some research.
Corey first looked for similar products on the net to see how much users were willing to pay for them, which types were more popular, what kind of feedback shoppers gave, what styles were attracting and who the main competitors were.
Google Trends also provided some valuable information: search terms like “gaming glasses” and “blue light blocking” had uptrend patterns, so demand was very likely expanding for these products.
Next, the supplier was to be found: Alibaba offered the best options.
Here you can look for both products and suppliers, searching with product keywords and then revising the searches with the keywords the suppliers used the most is a smart idea.
When making a list of the potential suppliers, minimum order quantity, keeping the budget low, was a very important criterion.
Corey then contacted each supplier in a message and recorded and tracked the answers in an Excel spreadsheet.
Alibaba’s system also helped him find out which of the suppliers were a trading company or a manufacturer (the latter is likely to offer lower prices), how long they had been in business and what kind of reviews their products got.
It was also a factor how much the company specialized in manufacturing glasses.
After getting price offers from the potentially most reliable and specialized firms, Corey then calculated that after his initial investment of $700, how many glasses he needed to sell to break even. (This number was to be relatively low, in this case 22, considering the desired margin to be very high.)
The estimations couldn’t be very precise, social networking site performance is hard to foresee, especially if you want to introduce a rather new product without any prior experience with it.
Corey created his online store on Shopify, of course. He chose a template that helped to focus on one product only instead of having a catalogue like appearance.
He registered the domain name syghtglasses.com.
On top of some basic information, he also created interesting and useful content that highlighted the product benefits and also provided the users with some scientific background about the glasses.
First he studied the product pages of competitors and then looked up many customer reviews on Amazon and product tests on YouTube, to get an idea how people talked about their problems and how the glasses helped to solve them.
He also used diagrams and high quality photos of the products to make the content even more attractive and valuable.
Corey was lucky to have some professional photo equipment available at his office and a colleague having some photo shooting experience also helped him.
If you don’t know how to take high quality product photos, don’t try to save on that. We have written about how important it is to show the customer what he’s about to buy in the best possible way.
Building up social networking channels came as the next step – strictly on the basis of brand identity and design, with the appropriate language on the selected social platforms (Twitter, Instagram), using coupons for making offers to the target audience.
First, Corey gained followers on these two sites by following brands with similar products and after a few days, with the help of TwitNerd and Unfollowgram he unfollowed those who didn’t follow him back.
Instead of creating his own content, as time was limited, he chose to curate and share content: interesting news, articles and visuals, using Buffer and Latergramme.
In the meantime, a smaller circle (friends, family and colleagues) could take a look at the products to give some feedback according to which he could further fine-tune strategy and content.
Corey also featured the product on Reddit with the title “Anti eye fatigue and eye strain gaming glasses”, which worked very well increasing the online store’s traffic and also generating backlinks from those who encountered Syght Glasses here.
As orders were coming in, Corey started to set up an affiliate programme with the help of Affiliately.
For this he needed to find influencers who could promote the product effectively. Corey’s plan was to find gamers with medium-sized audiences on YouTube and Twitch.tv.
Finally, after some email correspondence and sending out free samples, 4 gamers joined his affiliate programme and 3 YouTube influencers created video reviews on the glasses.
A nice sales boost was due to special coupons for the followers of an influencer on Instagram (140,000 followers). The retargeting campaign on Facebook and using Google Sopping also proved to be profitable.
Overall, Instagram and Google Shopping performed beyond expectations.
There’s a scenario for further growth, of course – blogging, i.e. creating and sharing quality content, posting videos on YouTube and also expanding the affiliate programme.
After 5 weeks, Corey made a total revenue of nearly $2500, selling 61 glasses all together.
You can read the whole, very detailed case study here.
Let’s summarize the key learnings very briefly:
- Plan your actions and do your research with patience and thoroughness, because in this phase you can find out whether your product will be successful or not.
- Get to know your target market as much as possible – it’s not enough to give them some good solution, you need to present it in their own language using the right channels.
- Do not rely on one single platform or device: you can run a dozen different social, advertising or content sharing campaigns even with a tiny budget. Select these carefully.
Another test from Shopify. This time the product was tea.
Richard Lazazzera, with some of his co-workers, began this case study project with a very limited budget and time frame.
They launched their ecommerce business with $500 and gave themselves only 3 days to succeed.
In the beginning they agreed that they would sell matcha tea, a type of Japanese green tea powder. They found that it was trending up nicely in Google Trends.
And it’s not only getting more and more popular, but it’s also small in size, easy to ship, demand is constant throughout the year, and it’s consumable so there’s a good chance to retain loyal shoppers.
The team chose the dropshipping model.
They simply looked for potential suppliers on Google and then asked for sample products. Now, knowing the dropshipping costs, they set a price for their branded product.
They used a business name generator tool that listed a good number of options for a domain name based on the word matcha. Then they chose the brand name they liked the most: “Hello Matcha”.
Because of the time pressure, they photographed the product with a smartphone, but it was satisfactory, especially after some adjustments with an image editor software.
Next step: setting up the online store.
A major chunk of the budget, $180, was spent on buying a professional Shopify theme, which is very easily customizable.
To make the store look and perform great, the following assets were needed:
- A hero image for the home page (primarily to show the main product and brand benefits),
- High quality product photos,
- About page copy with the most essential pieces of information,
- Home page copy introducing the unique value proposition which makes it clear why they should be chosen over a competitor.
The basic idea behind the marketing strategy was rather simple:
Try as many channels and devices as possible in order to see which work the best and then go for maximum effectiveness.
- First, they exploited personal outreach: friends, family, professional contacts who they thought would be interested in the product.
- com: to make best new products known. Nearly 1000 visitors came from this website.
- Reddit: since direct sales efforts are not very welcome here, Lazazzera’s team searched for tea related content, using BuzzSumo, which had been very popular during the past 6 months. In the end, they “repackaged” an already popular video about teabags and created a list post based on this with useful tips.
- They collected photos from the posts that had performed best over the previous year in a subreddit on teas and wrote another list article based on them. Although these two posts did not have immediate results, these ideas can be very promising in the long run.
- On Instagram they looked for influencers with hundreds of thousands of followers to use sponsored posts. The limited budget and time frame did not let this project unfold, they only managed to gather followers, post and like the posts of others. It’s not known how many customers came from this channel, since you cannot place links on the posts.
- On Pinterest they looked for opportunities for a sponsored post. They tried a health and fitness related account with over 11,000 followers for $20. They published a post on their own blog featuring a recipe for Starbucks green tea latte with a photo that could be pinned. This did not sell either, but, again, a smart way to boost awareness, it generated 50 repins and 17 page views in the end.
- With a fast and well targeted Facebook ad campaign they managed to attract visitors to the page and made one sale as well.
- Twitter wasn’t used extensively, but they each tweeted out the new store and got some retweets generating 184 visits and one sale.
In the end, after only 3 days, total traffic was 2414, 94 reached checkout and 32 made a purchase. Total revenue was $922.16.
The lion’s share of the total budget was spent on starting the business, paying for the products, the labels and for shipping. As we can see, they spent quite little on online marketing.
Despite the considerable one-time startup costs, they still made a profit of $56 in 3 days, which is not bad at all.
Tucker Schreiber from Shopify gave himself one month to build up and run an online T-shirt business successfully.
He first wanted to find the right audience – which wouldn’t need to be built up, but already existed.
He set the following criteria to be matched:
- It should be a „feel good” topic, so that selling the products can make him happy and proud.
- The target market is developing continuously and is not likely to disappear.
- It comprises an active community in which the topic has the potential to go viral.
- Approachable influencers: social media users (e.g. Instagram, Reddit) with large numbers of followers that are willing to promote the brand for just a little compensation.
- Flexible design idea: if it works for T-shirts, it would be good to use it for mugs, bags, pillows etc.
Tucker first moved to one of the largest and most active online communities: Reddit.
He saw a great potential in the dog community. He believed funny and creative dog T-shirts would be very popular.
After a few Google searches, he then identified which dog breeds were the most popular.
The next step was to find established communities on Reddit built around specific breeds and have a look at the competition: what kind of products were already selling.
The search term “dog owner shirt” proved to be effective to find quickly a wide range of such products.
Finding a brand name was the next challenge: it had to be cute and easy to remember, easy to pronounce and social accounts had to be also available for this name.
Here, too, a business name generator tool was fired up and finally the name THINK PUP became the winner.
For the sake of the experiment, Tucker didn’t purchase an online store theme, but chose a free one which he tailored as much as he could to best match his expectations.
Here’s a few conscious decisions he made about the design:
- He removed the navigation to make visitors scroll down or click a product.
- All T-shirts were shown on the front page.
- He modified the checkout, adjusted the colours to match the brand’s.
- He kept the store design as simple as possible, only having the FAQ, Contact and About pages.
Tucker knew very well how he wanted to build up his product pages.
The following elements were necessary to appear:
- Product name
- Available sizes
- Garment description
- Shipping times
- Related products
- Product photo
The first step in marketing was to start activities in the social networking channels – Facebook, Instagram, Pinterest and Twitter pages were launched.
A product was posted in a subreddit featuring new products. Although the audience is general, here on /r/shutupandtakemymoney, purchase intention is very strong.
It had a huge success right on the day of posting, probably because of the funny product itself. During a few hours, the number of active users on the website was 40-70 at any given time.
The T-shirt gained further awareness elsewhere on Reddit and finally more than 10,000 visitors came from here and 18 items were ordered for $522 all together.
And this small campaign didn’t cost anything.
Additionally, thanks to Reddit, a product blog also featured the shirt and resulted in two orders.
Next, the Facebook groups were to be conquered.
Tucker joined different dog breed specific groups, but in the end he did not make any sales from them. He simply posted the products without any prior or further activity.
Tucker had thought about gathering email addresses for remarketing campaigns, but he missed this opportunity when so many visitors were pouring in from Reddit, which he hadn’t expect at all.
Learning from it, he immediately set up an exit intent popup, which offered a 5% discount for an email address. All in all, this technique helped to get 30 email addresses, with a conversion rate of 1.34% (visitor to email address).
Next came Instagram. Sponsored posts helped to get 300 followers.
Tucker used a UTM parameter generator and a URL shortener to track how many users were coming to the store from Instagram.
Content was not too complicated here: cute and funny images of dogs. He used relevant hashtags to get followers in the desired target audience.
As followers started to appear, he looked for influencers with over 100,000 followers that were willing to post sponsored content for under $100 and every picture they posted would have a few thousand likes regardless of what that actually was about.
Because of the limited time he spent on dealing with the Instagram campaign, there were only a few sales in the end.
Facebook came next.
Here he wanted to reach out to those who already had visited the store, added a product to their cart, but did not buy anything.
He started to run campaigns with precise targeting, primarily with a focus on websites, forums, magazines, clubs etc. for dogs.
Facebook finally proved to be an appropriate tool for promoting the T-shirts generating a good deal of engagement and a few sales.
Tucker also sent emails to cart abandoners achieving a 10.5% click through rate and one sale, totally for free.
After the 3-week experiment Tucker sold 43 shirts making a revenue of $1249. Marketing and setup costs were only $260. After deducting product and dropshipping costs a profit of $148 was realized.
You can launch an online store and make it profitable even in one single day.
Richard Lazazzera proved that it’s possible. He created unique T-shirt designs featuring the metro stations in Toronto.
Finding a business name took about 3 minutes, naming his store after his favourite station located in the neighbourhood where he had grown up and started his first businesses. He called his store Finch’s.
For marketing, understandably, he needed more time. He had a great idea that was very close to newsjacking.
Coincidentally, the subway line had celebrated its 60th anniversary just the previous week covered by several news portals and bloggers.
Richard contacted one of the authors and asked him if he was interested in writing about the brand new “subway shirts”.
The next morning a post was published about the store and traffic started pouring in.
Richard spent $24 on setting up the store (fixed costs) and it cost $13 to print and ship a shirt (variable costs). The revenues for the first 24 hours amounted to $348, resulting in a profit of $211.
Basically, he built up a profitable online store within one day and with a tiny budget, which can bring him further income in the future, especially if he puts some extra effort into marketing.
The core takeaway of this case study is that if you haven’t yet started your online shop because you’re still waiting for that perfect idea or time, you’d better take action now.
With commitment and a fairly nice product idea you can start your business with a very little investment and can earn money quite fast (not to mention a ton of useful experience you gain along the way).
Noah Kagan, too, chose to set up a one day challenge with launching a very simple online store.
He decided to sell beef jerky. He found a brand name very quickly: Sumo Jerky.
First he answered the following questions:
- How often do they eat jerky?
- Where and how do they decide to buy jerky?
- What would make them pay for jerky right now?
- What’s their hesitation in not buying right now?
The target audience was healthy eating young professionals.
Setting up the store took only some minutes. Noah started to deal with selling as soon as it was possible. He sent out personal messages to his friends, acquaintances and offices he believed would be interested, while he began to promote his business on Facebook and Twitter.
He then asked for referrals in emails asking his friends to send the referral email to their friends as a favour.
Noah, after 24 hours, made $3000 in total revenue (pre-orders), which is quite remarkable after such a “basic” marketing campaign.
You can check out the whole case study here. Recommended for every beginner e-merchant.
Once again, we get back to Lazazzera, because it’s another great case study: a project (Finch Goods Co.) documented in great detail for several months.
This is an online store, which is not simply an experiment, but also a source of income for the ecommerce expert.
It offers premium products for men. It’s USP is having the best products of different categories available in one place.
According to Lazazzera, success can be achieved if you do everything not to let the visitor leave without making a purchase or at least make them return later.
To make it work:
- He sends emails to cart abandoners, and tries to lure them back to the store. Here you can learn more about shopping cart abandonment.
- He runs loyalty programmes, gamifying every phase of interaction: you can collect points by registering, writing your opinion about a product and making a purchase.
- He applies one of Robert Cialdini’s 6 principles of persuasion: reciprocity. It states that if you do something good to someone, they will feel that they should give something back. For this reason, Lazazzera gives small presents or hand written notes to his customers.
- He keeps inventory to a minimum: curating products, he does not want to tie up large funds in inventory.
Here you can study the whole 6-month project in 14 chapters.
The story of Beardbrand shows you how to build up a fantastic brand with hard work and commitment.
Exploiting the uptrending popularity in wearing a beard, the Beardbrand team started to work very purposefully.
Right from the first moment they aimed to create and maintain a persistent brand image of the store, every product and piece of content – to have their target audience like them and become loyal to them.
The team knew they would make a long term decision and when they invested their money they were confident that returns would be coming in steadily after a time.
Eric, one of the founders, says there were 3 main factors that made them successful:
- Taking care of the target audience. Every piece of branding activity, content and communication was prepared in a way that the “urban bierdsman” would like it, identify with it, get a solution to their problems and have their needs met.
- Optimizing website content. Beardbrand puts a lot of effort into creating content both in terms of writing posts and shooting videos, which makes their target group loyal in the long run.
- Competing on quality instead of price. The products are of premium quality, but it’s not enough: they also provide premium customer experience with packaging, shipping, special deals, custom offers and so on.
Read the full story here. If you want to build a serious online business in the long run, don’t miss it.
If you just can’t wait to start your store, Tomas Šlimas’ guide shows you step by step how to do it.
It’s a simple and basic ecommerce store, of course, here he presents setting up a store for non-branded women’s clothing.
However, if you’ve been hesitating to take action, despite the fact that you already have the big idea, this guide should inspire you to get started.
Shopping cart abandonment is probably the most painful issue for e-merchants.
If you want to know how to tackle this problem in practice, visit MarketingSherpa and read this article about Envelopes.com by Adam Sutton.
Within two years, they cut checkout abandonment rate from 51% (2011) to 31% (2013), which is an amazing figure.
They revised and rebuilt their product pages and the whole checkout process. What did they do exactly? Read about it here.
By tapping into the power of user generated content and social proof.
But that wasn’t all.
They also inspired their audience to share their photos and comments on the social networking sites as well as optimized their product pages.
Noah Kagan has already been featured here. Now the former employee #30 at Facebook shows you how to build up an online store in 5 days that will bring you $4000 every month.
It’s an amazingly detailed case study packed with numbers, strategies, tests and results. We don’t even try to sum it up. Read it here.
Edible Arrangements faced a problem that many e-merchants may also have: they had a great service offer (same day delivery), which no one asked for since they simply didn’t know about it.
You can learn from this case study how they made the offer visible, how they communicated to their visitors in order to increase the number of same day delivery orders.
Finally, they achieved an 8% increase in same day orders.
The story of Company Folders is definitely worth reading as well.
Basically, there were some problems with the online quote form. Not only because it was rather outdated, but also because due to the huge product assortment, there could be 15 million different combinations of it, the system to be transformed was extremely complex.
At last, they redesigned the whole website and thus could raise conversion by 68%. Click here to find out how they did it.
Taloon.com didn’t make any radical changes: they ran an A/B test on their product pages to see how the social share buttons performed.
They performed in a negative way. Because after they got rid of them, conversion (add to cart) rose by 12%!
How could this be possible? You can read about the reasons here.
The case study of Express Watches helps to close an old debate: you can achieve much better results with promoting original products than with a bloody price war waged against your competitors.
Read more about how the watch ecommerce company became successful.
Underwater Audio had one major problem: a lot of users got lost in their sales funnel.
The visitors looked for specific products, but the majority abandoned the site after checking the product comparison pages.
Paperstone did it.
They displayed a small table including the prices of their competitors (which were higher, of course) on their product pages just below their prices.
As a result, conversion increased by 10.67%.
This is not competing on price, just communicating that for some products they have better prices than others, thus exploiting their strength of good prices.
For details, click here.
It’s a story of two friends who built up an amazingly lucrative business from scratch.
In the beginning, they sent out emails to their personal contact lists, and made their first $1000 in sales.
It’s a great case study about how you can open up ways to the public, how to use the media to boost sales, how to get a ton of attention. Read it here.
If you don’t believe it, then here’s Pixie Faire’s case study: the parents of a 6-year-old girl realized that clothes for dolls were very popular with little girls.
They now make sales of $50,000 every month.
A major takeaway here is that however special your target market may be, you can reach them and sell to them successfully.
Raw Generation played safe: they used channels where you don’t pay for potential purchases (like with Google or social networking site ads), but for actual purchases.
Of course, you give a higher commission thus making less revenues, so this deal sites model is not for everyone.
For them, it was well worth the effort to rethink their sales strategy in 2014, bringing them $96,000 per month. This interview explains how they did it.
Robert Nava spent a lot of time in correctional facilities from the age of 11 to 27. Then he stopped fooling around, made up his mind and built an ecommerce business which now generates $80,000 every month.
He started using the dropshipping model, so only a minimal investment was needed and promoted his store primarily on Facebook. See here how he achieved success.
Luxyhair.com focused mainly on one single channel: the world’s largest video sharing site.
Millions have watched their videos reaching an overall number of views of hundreds of millions.
Here you can find out how they used video marketing so successfully.
This story is really worth reading.
It’s about how a simple online shop’s simple product can go so viral that before shipping out the second round of orders, it can be sold for a 6-figure sum (in US dollars).
You can read the full story here on Reddit.
How an online hippie shop came into existence what challenges it faced…
It’s neither a success nor a failure story. You can see how they used online marketing and how hard an impact it was when Facebook organic reach collapsed as well as why it can be harmful if you take out too much money from your business.
Nevertheless, the author encourages everyone to start their business right away if they are thinking about it, because the experience they can gain will be priceless even in case it fails:
Another story from Reddit, which is also a great case study: you can see step by step how to make a subscription box service very successful.
You can read the whole story from the time when the store was bought, how the brand was built up and how lots of sales were made.
- Don’t think too much. If you’re not afraid to start, the faster you get experience and the sooner you can make your store profitable.
- Target influencers the right way. One single post by an influencer featuring your product can bring in thousands of visitors in the first 24 hours!
- If you want to reduce cart abandonments, send retargeting emails.
- Do you have a good offer? Highlight it and you have the chance to raise your sales by 8%.
- Harness the power of social sharing.
- Do you perform well on price comparison pages? Use price comparison on your own website and boost your sales.
All this said, of course, you should do some market research, choose your audience and product smartly, use appropriate marketing channels and make changes to your campaigns when needed.
The first method is used more often, although most companies aim to satisfy present needs, it’s still quite rare that they first build a customer base and then create a product for them.
If you have the big idea, the product, you’d better start a research. The first step is not marketing, or at least not the active part of it, as you don’t yet know what kind of marketing tools you should use.
The first step is to identify and get to know your potential market.
Then you can start formulating a strategy that fits that.
In this article we’ll go over every stage you should examine before setting up an online store.
We’re going to cover the following:
Before you begin your market research, let us tell you about some basic concepts.
Try to identify your target market as precisely as possible, even at the very first stage of the research.
Many rookies make the mistake of trying to shoot at the whole market. This is called TAM, Total Available Market, which is the entire global or regional market for a product or service. This is the largest set of the Venn diagram.
Inside of it, there’s a smaller set, SAM, Serviceable Available Market. This comprises those people that can be served in reality.
A horror movie wouldn’t attract families and a romantic comedy is unlikely to fire up action movie lovers. Your serviceable available market is made up of those who like the given genre.
Finally an even narrower segment can be identified: SOM, Serviceable Obtainable Market, i.e. those who we can not only serve but obtain as well.
If you have managed to define this core target audience, your serviceable obtainable market, then you can describe the segments and buyer personas.
Divide your serviceable obtainable market into major target groups – besides demographic data, take a look at through which channels they can be reached, what kind of media they follow, what kind of content they consume etc.
You can read about this topic in detail in our article about segmentation.
This scenario happens by chance most of the time: someone starts releasing content, say, writing in-depth technical articles or shooting and uploading entertaining videos on YouTube. If all goes well, a large and loyal group of followers develops, which has a considerable buying power.
Now the content creators realize that they can make money because of their popularity and start offering products. A YouTuber, for example, can start selling branded T-shirts, pillows and mouse pads.
Nowadays it’s getting more common that large corporations or marketing professionals start building up an audience prior to product development. They invest money, energy and time to build a group using content marketing.
1) You may ask your followers to fill in questionnaires, write stories or reviews in email, or you can even organize a game describing their problems (in the form of user generated content).
2) Next, some brainstorming and sketching of product ideas can take place, e.g. you can show your 3D models or animated drawings to the audience, ask their opinion about them and then you can fine-tune your product until it fully meets the requirements.
Of course, this process can be time-sensitive: if planning takes too long, someone might steal your idea, but it can also happen that consumer needs get different in the meantime. However, it’s extremely cost-effective as this approach makes pre-sales processes much smoother and ensures much better chances for success.
Before the Internet, telephone surveys or focus groups were used for gauging market needs. Nowadays, it’s basically enough to ask Google.
Google Trends helps you to find out how interest in different products or product categories changes over time: the graphs for properly selected keywords not only show search numbers for the past months or years, but you can see these broken down for regions as well.
It’s worth examining three things more in-depth (using more complex SEO tools, like SEMRush):
- How many organic searches were started for the given keyword?
- How tough is the competition (how much would it cost to advertise with AdWords)?
- Is there an uptrend or a downtrend?
It’s also worthwhile for you to watch social networking sites as well – for the reason that both content consumption and ecommerce started to shift towards these platforms a few years ago.
Find a tool with which you can track how the keywords, related to your products, perform on the most popular social media sites.
Such a tool is Keyhole, which measures real time the popularity of hashtags on Facebook, Twitter and Instagram. (You can use it also when you want to sell a seasonal product or create content with the help of newsjacking.)
If you see that the keywords, connected to your products, are not popular in social media, it doesn’t mean they don’t care about them – in this case you may only need to call their attention to these products and start creating relevant content and run promotions.
If you have defined your target group, then you can find those websites where they socialize, talk to each other, ask and answer questions etc.
On such platforms you can not only share your content, but also ask the users if they would buy your product at all. Additionally, you can gather some ideas about how you could improve the product – whether it fully meets the expectations, solves the right problem or has a good price.
If you find out, with any of the techniques, that there is considerable demand for a product, next you should run a competitive analysis.
Check how many ecommerce stores sell similar products, how successful they are, what marketing and sales strategies they follow, how they reach out to their audience etc.
It well may be that you don’t have your own products. E.g. you don’t have the time, funds or the idea for developing one, but you’ve found a market niche.
In this case you may look for somebody who has or had such a product and they are not your competitor. Here are a few solutions for that.
Just imagine: you have an audience that has purchasing power, they’re loyal, you can easily reach them. You have everything at your hands, but you don’t have a product and you don’t have the money to develop one.
Now, you can sell someone else’s product – you don’t need to start a lengthy and costly product development process. You can be a reseller or a distributor of a brand that has similar values to yours and that your audience accepts easily.
The greatest advantage of such a network is that the majority of the work has already been done by others so that it will not affect your budget considerably. Most probably the biggest costs you will face will be related to setting up your brand new online shop.
Dropshipping is becoming more and more popular among online stores as well. It gives you the opportunity to be able to sell products without having to make large investments. The idea is simple: the online store doesn’t have its own goods on hand, it “connects” the customer with a wholesaler.
The shopper orders the item in the online store, pays for it and gets it delivered by the wholesaler.
So the ecommerce store is basically an intermediary in the shopping process.
This model, however attractive it may seem, has some drawbacks as well:
- Because dropshipping is quite an easy way to do business on the Internet, there’s a lot of competition in terms of nearly all kinds of products.
- The wholesalers are generally not very good at online marketing, but on the other hand, the smaller online shops fight hard for market share. This often leads to price wars, which bites into the profits of all the competing participants.
- The process itself has a number of problems: you need to communicate with the wholesaler continuously and watch the inventory. And even in spite of this, it can happen from time to time that a product is not available anymore after a customer has ordered it. This may result in customer disappointment and loss of trust.
- The involvement of a third party makes the sales process more complicated ‒ more paperwork, more things to keep in mind, more complex accounting.
- Marketing the products can be problematic too. It’s always easier to sell your own products since you know them inside out, you know exactly what they’re capable of as well as what it’s like using them.
- This can be quite difficult with a product you’ve never held in your hands, never used to solve a problem. So your communication about the product may not be 100% credible and answering questions in this respect can be problematic.
If you know exactly what type of product you want to sell, the simplest way is probably trying to find the manufacturer and then ask for a list of wholesalers.
You may start your search on Google, but keep in mind that such wholesalers are not very easy to find – they are quite inexperienced in online marketing, having old-fashioned websites etc.
Despite this they may turn out to be good partners, so don’t judge on appearance.
A lot depends on what platform you use to sell your products. There are many free and paid ecommerce systems out on the market.
We’ve compared the most popular ones in several articles here.
After having looked at these comparisons, you’ll probably have a more precise idea which platform suits best your expectations.
In a few words, let’s summarize the key characteristics of the three major systems:
- Without any partiality, we can state that Magento provides the highest quality. This comes at a price, of course. The main benefits are: high capacity, lots of options and can be fully customized. You can create any kind of store you like, both on terms of appearance and functionality. However, professional developers need to be involved to build up the perfect store, and this costs money and time.
- WordPress based free-of-charge WooCommerce is another very popular platform. Since it is a WordPress “product”, it’s rather easy to use and can also back nicely any content marketing strategy. On the other hand it is not as sophisticated as Magento so it is not that customizable and features less functions.
- Finally, Shopify is a fine choice for simpler online stores with smaller traffic, where you can find an array of useful functions, e.g. a simple payment process. Unfortunately, because of its simplicity, it is the least customizable system among these three.
It’s also worth examining what exactly your target audience wants.
If your product is rather complex or you market various types of it, you may start a store in which the users can pick the attributes they are interested in and are provided with advanced search options.
If you offer only some simple products, then you should create a very simple purchase process where the user can select the desired items and after just a few clicks close their purchase.
There’s also the option that you don’t build up your own store, but offer your products on a different website. Your best choice may be Amazon.
On Amazon’s site, in the footer you can find “Sell on Amazon” where you can register for the service, after which you’re given the opportunity of creating a store within Amazon’s platform.
One disadvantage is that because of the commission you pay to Amazon, your income will be lower, but on the other hand your traffic may be quite high as the ecommerce giant is behind you.
Adding products is simple, the user interface is innovative – beyond giving the necessary information, you only need to check if that same product is offered elsewhere on Amazon’s platform.
When you’ve finished with the market research, product development and segmentation, it’s time to elaborate your sales strategy.
Luckily, a lot of materials are available for free on the Internet that teach you how to market and sell your products. You just need to invest some time and energy to take a look at these.
Content marketing, for example, is an excellent tool to build up your audience.
We’ve already written about why it is wise to run a blog page for your ecommerce store and how you can do it effectively.
We’ve also described how you can promote your content without spending any money.
Now let’s take a look at some free strategies that help you to raise awareness for your products without spending large chunks of your budget.
You can try a simple technique: watch how your competitors communicate about similar products:
- What kind of websites refer to them?
- Which are those websites that your target audience visit regularly?
- Where do they visit those websites (smartphone, tablet or desktop?
- From which points or sections of the page are they redirected to the given online shop?
Use Moz Open Site Explorer: you can find out which pages contain backlinks pointing to your competitor’s website and also what kind of content includes them.
You can promote this kind of content among influencers.
Don’t hard sell the products, just try to get attention and collect “likes” to increase visitor numbers of your website. You can focus on selling in a later phase of the sales funnel.
Send your pieces of content to influencers and with a little luck there will be some that will find them interesting and share them or mention them in their posts so that you’ll get valuable and relevant backlinks. This all will improve your site’s ranking and strengthen credibility.
Take advantage of guest blogging as well: find websites for which you can write articles as an expert.
Be active on professional sites, in forums and groups and build up your personal brand.
You’ll need to invest time in this to achieve awareness and acknowledgement, but in the long run it’ll be beneficial for your whole ecommerce business as well.
There’s a bunch of tools that are worth having before you launch your online store.
Now we’re listing those that you can use with only a minimal investment.
In the beginning they help to raise reach and awareness and then to sell directly.
Create your business accounts with all popular social media websites.
Creating and scheduling content beforehand make sure that you’ll post on a regular basis and making social posts published automatically can save you a lot of time.
However, you need to follow all activities and if you’re asked some questions or required to send some content, you should reply in a short time.
The aforementioned promotional and awareness techniques work best if you already have a blog page which is known and followed by your audience and also by a number of experts in the given field.
Plan ahead what you’re going to write about and publish content regularly.
Don’t forget that you’re not going for sales here, but to get more followers.
Prepare useful quality content with which you can get ahead of your competitors. Read our article about the strategy you should follow here.
You can start collecting email addresses even before setting up your online store.
For this, it’s worth having a bait item that proves to be useful to your audience, at least so useful that they are willing to give their email addresses in exchange.
Such a bait offer can be a free e-book or video guide series or just a newsletter subscription that provide useful information.
Gauge what kind of information your audience is hungry to get and make an educational material of it that has more value than any of your competitors offer.
Make it available through a sign up page, so right after giving their name and email address, they can download this bait product.
Your email list starts growing immediately and when launching your online store, you’ll have a number of potential shoppers already available to whom you can send product offers.
No matter how awesome ideas you have at the moment, it’s not at all for sure that they’re going to bring you success.
It’s the preparation phase we’re talking about her.
Leave time for it. Don’t rush.
It’s not just about getting to know your target audience. You’ll also find out whether you need to fine-tune your product, what ways could work best to sell it and what communications strategy to apply in the future.
Follow the steps described above and you’ll most probably be able to kickstart such an online shop that will return your investments abundantly while truly making the life of your customers easier.
We’re going to cover the following topics:
- Sales Were Up But Habits Are Changing
- Online Sales Grow 11% in the US
- US Brick-And-Mortar Concerned with 2.7% Growth
- Amazon’s Record Sales and Device Success
- Will Voice-Based Shopping Dominate?
- 2% of Digital Procrastinators
- Declines Hit the Department Store
- Sears and Kmart
- Insight from CVS’ Closure Plans
- The 4 Big 2016 Takeaways
- Convenience Trumps Almost Everything
- Compete with Experiences
- Have a Digital Backbone
- Days Matter
Sales Were Up But Habits Are Changing
Mastercard’s SpendingPulse says that total retail sales rose 4% from November 1 through December 24. That’s a bit above the 3.6% growth estimate from the National Retail Federation. It’s also a nice boost over the 3.2% increase that was experienced in the same time during 2015.
The good news is that in-store sales were up overall during the holiday, the bad news for them is that they’re being outperformed by online sales.
Fortune estimates that online holiday sales grew eight times faster online compared to in-store sales growth.
Broad trends in most major sectors are that growth is occurring, but not always enough to put investors or business owners at ease. Clothing had an incredibly hard start to winter as the market segment’s sales rose only 0.1%. Appliances and electronics were up 8.5%.
This tough going for clothes is probably a big reason that we’re seeing threats to department stores and more apparel-centered storefronts.
Shoppers choosing online purchases and walking into fewer stores has shifted the retail landscape in profound ways, and not even the most established brands are guaranteed safe.
The holiday season also showed a mix of spending habits that will need more time to fully discover. For example, 64% of Americans who made an online purchase picked up their goods in the store and then made another in-store purchase during the weekend after Thanksgiving.
Online Sales Grow 11% in the US
Online sales are continuing their upward tick with at least an 11% growth for the 2016 holiday season. More than 21% of all holiday spending this season was done online, compared to just 15.4% in 2015. Whether it’s avoiding crowds or having more time to shop, it seems to be a trend that’s only going up.
Packages and shipping might give us the most surprising insight into how much online shopping has grown. UPS said it believes it will have delivered 14% more packages in 2016 because of the rise of online shopping to reach past the 700 million mark. FedEx also projected a 10% bump overall.
However, UPS also gives us a good idea that sales forecasts may trend down as more data comes out, as the brand expects to have shipped 5.8 million packages back to retailers during the first week of January.
Amazon was far-and-away the leader in the digital space.
It secured roughly 38% of the total online sales market for the US 2016 holiday season, while the next closest competitor was Best Buy at just 4% of the market.
Target has the potential to be a sign of hope for retailers based on its Black Friday deals, but much of this is focused on its digital footprint. Target reported its largest online shopping days ever during its “10 Days of Deals” promotion running from November 22 to December 1.
Online demand was significant enough to crash Target’s website during high demand. The company offered free shipping on all of its online purchases through Christmas, which is seen to have been a successful tactic.
US Brick-And-Mortar Concerned with 2.7% Growth
Traditional retail stores felt a significant blow to the growth they needed to remain viable, even when their online stores performed especially well.
When looking across research that’s come out for the holiday, brick-and-mortar chains had sales decline 12% in November. December was mixed, with traffic down 12% but the average transaction ticked up 5%. That pegs the growth for the period at roughly 2.7%.
It’s important to note that net sales were down 10% compared to 2015, and firms such as RetailNext say the overall growth is largely due to a 6.5% sales increase in the final days before Christmas. Its report notes that the average shopper was spending 11% more during that week across all channels.
Many big box retailers have announced dismal results, especially for their brick-and-mortar locations.
However, there were some interesting brands who bucked the trend:
Lululemon had a “strong” holiday season in stores and digital channels with mid-single digit same-store sales increases, increasing its Q4 guidance minimum by $10 million to the $775m-$785m range.
Ollie’s Bargain Outlet had a good season in its discounter locations with holiday sales showing a 16.3% gain overall, plus a 1.9% comparable store growth.
PVH Corp. recently raised its earning guidance thanks to the success of its Tommy Hilfiger, Calvin Klein, and Van Heusen brands’ performance, even in department stores.
Gap posted a 2% increase in sales across its footprint for November and December compared to the year earlier. Same-store sales rose 1% and 12% for its Gap and Old Navy brands, respectively. That appears to be the first such monthly Old Navy gain since early 2014.
Urban Outfitters had same-store sales rise 1.5% in November and December, led by gains in Urban Outfitters and Free People brands.
Here’s what helped, according to analysts:
- Wages are higher by about 2.5% compared to 2015 and continue to grow compared to recent years
- Overall employment continues on an upward trend, with unemployment reaching its lowest level in nine years in November, according to Labor Department data
- Gas prices remain low — this statistic may lose some significance in the future as the oil and gas industries are starting to hire more Americans and make up a greater part of GDP in the US.
- Consumer confidence levels in December hit their highest level since August 2001.
Amazon’s Record Sales and Device Success
Amazon had its “best ever” holiday season and noted a wide range of purchase stats including
- users buying enough luggage to fill 20 Boeing 747s
- and enough 4K TVs to reach the peak of Mount Everest more than 9 times over.
- Customers bought a watch, on average, every 1.5 seconds during the holiday season to the tune of 2.5 million.
The company didn’t divulge specific sales figures — keeping in line with past years — but the increase in purchases is worth noting as the company counts a growing number of Amazon Prime members. The Institute for Local Self-Reliance (ILSR) published a November study that says nearly half of all U.S. households are Prime members.
Slice Intelligence’s market research suggests that Amazon grabbed 38% of the online market share in the 2016 holiday season, up only slightly from 37.9% the year before.
The growth in overall online shopping means that a small bump was able to deliver a significant set of gains for Amazon — for clarification sake, the data suggests Amazon would’ve needed to increase sales by $200 million year-over-year to grow just one percentage point.
Will Voice-Based Shopping Dominate?
The ILSR believes that, even before the holiday season, Amazon was accounting for roughly half of US online shopping in terms of spending, and that half of online shopping searches start on Amazon’s site or apps.
There is the potential for that last statistic to grow even higher, as the company notes that use of its mobile app grew by 56% during the 2016 holiday season. Users are spending more time in the Amazon ecosystem, which opens fewer doors for rivals — whether they’re digital or brick-and-mortar competitors.
As Amazon’s personal assistant devices grow in popularity, there is even less opportunity for rivals. Alexa makes purchases directly on Amazon and re-orders take place without any additional interface.
49.2% of Digital Procrastinators
“Digital has taught people they can wait to the last minute,” Forrester Principal Retail Analyst Brendan Witcher said recently, and Amazon was the biggest beneficiary.
According to research data from Slice Intelligence, 49.2% of people making an online purchase on the Monday before Christmas fired up Amazon. Most analysts believe this was due in large part to a combination of available goods and Amazon’s two-day shipping offers.
Amazon’s share of online sales was roughly 25% on Black Friday and saw a steady rise to December 19th. Christmas day was also strong for Amazon, securing 46.1% of online sales that day — there hasn’t been much reporting on the “cause” for this, but it is likely a combination of extra-last-minute shopping and consumers testing out those new Alexa devices.
Declines Hit the Department Store
The department store market is worth approximately $165 billion in annual sales, but revenue has continued to fall at an annualized rate of 3.5% since 2011. More than 51% of those sales come from apparel, a market segment that’s both declining and heading online.
But, when looking at this holiday season itself, department store sales were down nearly 4.8%.
Consumers heading to the mall are shifting their attitudes and seeking out a way to easily and quickly make their purchase. The one caveat, per Deutsche Bank, is when an apparel retailer is offering a deep discount, but that means always competing on sale prices in a segment that already had thin margins.
Most major department stores have been slowly closing stores for a few years, with e-commerce competition getting much of the blame, and 2017 appears to have an accelerated path to turning out the lights.
As the holiday season came to an end, Macy’s announced it will be closing more than 70 stores ending 10,000 jobs due to a poor performance — these fall in line with its announcement last fall to close 100 stores in total — and are believed to be fueled by online competitors.
The company noted that sales declined 2.1% on a comparable store basis in November and December when compared to 2015. Macy’s also dipped its per-share earnings goal for fiscal 2016, which ends on January 28 for the company, from the $3.15 to $3.40 range down to the $2.95 to $3.10 range.
Jeff Gennette will take over as CEO in Q1 2017, though he isn’t expected to change from this series of closures.
Sears and Kmart
There are expected to be more than 50 Sears and Kmart store locations closed in the early part of this year, with liquidation sales at many of these locations already starting. Overall for its fiscal 2016, Sears will have closed more than 200 stores and leave it with less than 1,500 stores for the start of its fiscal 2017.
Sears has announced that revenue fell 13% in its most recent quarter, while losses grew from $454 million to $748 million. Same-store sales were down 7.4% on average across Sears and Kmart stores. That was the 20th straight quarter of missing sales and revenue targets.
Sears Holdings took out a $200 million secured standby letter of credit on December 29th in order to fund its operations.
Insight from CVS’ Closure Plans
CVS Health continues its push to becoming an integrated health care provider as much as a convenience store. This shift is causing the brand to look for cost-cutting measures, taking aim at an estimated 70 store closures in the beginning of 2017.
CVS’s decision-making was most likely not impacted by the recent holiday season. However, it’s shift toward healthcare services and related goods as a main revenue driver — especially as significant healthcare changes loom in the federal government — may point to the company’s change in thinking for more traditional models.
The brand hopes to develop a more consumer-oriented care model and put healthcare in a retail-like setting while scaling back in locations where it cannot deliver that value proposition.
Amazon deserves another mention because it is not only taking control of electronics and ‘smart’ stocking stuffers, but is reaching into the heart of these department stores: clothing and apparel.
Amazon has the potential to become the U.S. apparel retailer by the end of 2017 — not digital retailer, any retailer — with a projected 30% growth to reach $28 billion, according to Cowen and Co. That would give Amazon control of more than 8% of the market.
The 4 Big 2016 Takeaways
When it comes to the 2016 holiday, we’re looking at a growth of digital sales as well as strong returns for companies that run across multiple channels and make quicker market changes. There are four chief takeaways retailers should heed, some of which are in their controls and some that aren’t.
Convenience Trumps Almost Everything
Amazon is poised to become the largest American clothing retailer despite not having dressing rooms or a quick location to return goods or swap out for a larger size while you’re running your errands.
Amazon combines the ability to shop, do research, and solve problems in a single location, which you can access from any computer or smartphone, making it one of the most convenient shopping options possible today.
And, on those big deal days like Black Friday and Cyber Monday, you can do all that shopping in your PJs without having to stand in a single line.
Compete with Experiences
Brick-and-mortar retailers that are performing well are working to differentiate themselves from the online experience. They target shoppers who want more than just a quick experience and may need some additional help selecting their purchases.
Concierge services are designed to make customers feel special, and they are needed for big-ticket sales items.
Lululemon credits its shopping experience with leading to significant sales increases during the holiday season, engaging them across multiple channels.
Clubs and rewards memberships are common, but few have a significant benefit that customers can see each time they shop. Amazon was successful with the concept because its Prime membership takes away shipping costs for each and every sale.
In-store experiences don’t have as obvious a benefit, but a personal touch can improve and give the customer a reason to return. The personal relationship is able to drive that return visit if it feels helpful and treats the shopper as a unique individual.
The best example is found in banking. Roughly 90% of Millennials have a relationship with a traditional financial institution. The customer service can make-or-break their banking relationship much more than other aspects.
“Millennials are typically not scouring the Internet to find the coolest free checking account… They’re looking for things they identify with,” notes Avidia Bank Assistant VP of Retail Operations and Strategy CarrieAnne Cormier.
They judge the bank based largely on whether or not it can create a connection with them. However, going back to our first takeaway, the bank does need a convenient location to be successful. It also needs digital services that are not frustrating, which dovetails to our next takeaway for brands.
Have a Digital Backbone
Selling in more locations, especially on digital, is a necessity.
And that seems to be true regardless of brand. Customers are demanding more online access, and having a bevy of locations could drive traffic based on sales and promotions, as well as other factors.
And, it may pay to have channels that you don’t completely own. During the holiday season, Amazon had a 70% increase in third-party sellers using its Fulfillment by Amazon service. That did put them in the giant’s grasp, but Amazon shipping 50% more items from third parties means their products were delivered in two days and likely put under more trees and in more hands.
Our final takeaway is simple, but it’s also the reason there was a collective sigh of relief from most retailers this holiday: a few extra days can make all the difference.
The week before Christmas was the biggest in terms of point-of-sale results for most merchandise categories, both in-store and online.
Total dollar sales for the eighth week of the holiday season were up 16% compared to the same time in 2015.
This is important because this holiday season was 1% behind the 2015 holiday season leading into week eight.
The week ending December 24th saw sales of toys increase 26%, apparel 17%, high-end fragrances 16% and technology 11%.
Compared to the year before, the 2016 holiday season had two more shopping days; a shipping deadline that likely forced more people into physical stores to pick up goods bought online as well as last-minute; and had a later Hanukkah shopping season — Hanukkah was Dec. 6 through 14 in 2015.
This combined “more than made up for what was lost in prior weeks,” says NPD Chief Industry Analyst, Marshal Cohen.
The final boost for retailers might have come from timing, beyond their control, and we could be looking at a much lower growth rate if things were slightly different. Sometimes, it all comes down to a little luck.