Find out WHEN your eCommerce site goes down

It happens, no website is up 100% of the time, even if we’d like it to be!

However, you want to know if your website goes walk about and somebody is on the case.

Want a free tool that will email an alert when it happens?

I use Uptime Robot and love it.

It’s especially useful for WooCommerce websites that need hosting (a server where your website lives).

If you’re using Shopify, there isn’t a need, because they look after the hosting and will know when it goes down.

If it does go down, you can be rest assured there are hundreds of techies in Canada (where Shopify is based) have dropped their hockey sticks and are sorting it as quickly as possible.

Is eCommerce profitable in Australia?

Oath!

(For the non Aussies, yes.)

However, as with any business it depends how you run it.

Remember an eCommerce store isn’t just a website. Your business needs to be set up in a way that allows you to make a profit.

(You know taking more money than it costs to sell stuff)

What profit margins can you make?

The term profit gets thrown around a lot. It has many different meanings, and can be before or after taxes and include other costs etc.

So lets define what profit is for an Australian based eCommerce business.

Our geeky accountant friends call it “Net Profit”. That is the money left after everything is paid for except for income or corporation tax.

I say income or corporation tax, because this depends on your businesses setup (sole trader, limited company, partnership etc).

Just to hammer home the point, Net Profit is profit left on paper (not cash in the bank, which is different) after all expenses are paid for.

In an eCommerce business, the main expenses are…

  • Paying for the product (Cost of Goods Sold COGS)
  • Getting the product to your warehouse
  • Advertising
  • Website fees
  • Staff
  • Delivery
  • Office/warehouse rent
  • Accountants and other “professional” fees

To name a few, but there are others, depending on your business.

Yeah, yeah, yeah we get it, what percentage can you make?

I’ve seen good eCommerce businesses consistently make a net profit of between 5% – 25% (And lots of badly run ones lose money).

For example, if the eCommerce business sells $1,000,000 AUD a year (It’s always AUD because Boom Ecommerce is about helping Aussie eCommerce businesses), then they are making a Net Profit of between $50,000 and $300,000 a year.

The (Net) Profit margin depends on your eCommerce setup.

Successful eCommerce businesses with high volume sales often make lower margins. For example, Amazon is all about growth and its net profit margin in 2019 was 3.6%.

But lets face it most people reading this aren’t Amazon (If you’re reading this, Hi Jeff).

Lower volume business can achieve high profit margins, this is where you see the 15% + profit margin businesses.

More on those types of businesses later in the post.

Ecommerce business types

Not all eCommerce business are the same. The profit and longevity of them often depends on the business model.

What is the point of making 40% profit margin for 2 months, when you can make 25% for 5 years!

If you’re all about the get rich quick scheme dream, you might as well stop reading now. We’re dealing with reality here, not Insta ads selling you the dream of a no work lots of cash business.

With that out of the way, lets look at some different eCommerce business models and the profit they can make.

Dropshipping – Bad

It sounds simple, all you do is find a product someone else has made (normally on Alibaba). Set up a website, run some ads, cross your fingers and hope you sell loads.

You’re aiming at high volume sales (if it’s high margin, everyone and their dog copies you. Then you end up competing on price which ends up in a race to the bottom on price).

If you’re lucky, after all your costs (mainly advertising) there is some money left. In most cases not because you’re dealing with 1%-9% profit margins.

Then you’ll have to deal with all the angry customers who have been waiting a month or more for the product they fell in love with on Insta because dropshipping delivery times are REALLY slow.

You may be sensing I’m not a fan of this type of eCommerce business? You’d be right, it’s not a sustainable business model, it’s get a rich quick scheme that works for less than 1% of people.

That in my humble opinion isn’t a business.

Great article here by Wired UK from a drop shipper on the reality of it.

Reselling – Better

You buy products from brands and resell it. For example, Footlocker is a reseller (mainly). They buy Nike and sell them.

The amount they make from each sale is less because Nike has to make a profit too. Foot Locker doesn’t have to to pay for all the advertising, Nike does that and creates the demand.

Although this eCommerce business model is vastly better than drop shipping and very common, you’re competing with other eCommerce businesses that sell the same product.

The challenge here is eCommerce businesses often resort to discounting to sell, which reduces your profit margins and profits.

Add to that, it’s easy for the product manufacturers to sell direct. Nike announced in Aug 2020 it was starting to shut down wholesale accounts. This shows a clear intention to cut out the resellers.

Not ideal, but all being well you can get 10% – 15% net profit margins.

$1,000,000 in sales $150,000 profit on top of what you have paid yourself (depending how you structure your business, there is always a “depends” with accounting!)

Direct To Consumer (DTC aka making and selling directly) – Best

Get it made, sell it directly online.

An example of this is All Birds. If you haven’t heard of them they make stylish, comfy and environmentally friendly shoes.

Then sell them gloably through their site.

Because they cut out the middle men, manufacturing brands (i.e. a Nike) and the retailer (i.e. a Foot Locker) they get their product for cheaper and control the price (very few other sell them, so less competing on price).

They do have to deal with the manufacturing, but that has become much easier these days.

These Direct To Consumer brands, if run well and aren’t spending everything on growing, can get sustainable profit margins of 15% – 25%.

Another poster child DTC eCommerce business is Gym Shark, which is a well built profitable business.

If you want to know more about Gym Shark there is a great review by Jason Andrews from SBO (Specialist eCommerce accountant in Brisbane).

Hello to you Direct To Consumer eCommerce business model!

Why is DTC (making and selling directly) the best eCommerce business model?

In summary of above…
(You read all of the above right?)

Better more sustainable Gross Margins which allow you to pay your other bills like staff rent and marketing and still have money left for profit.

Is Australia a good place to run an eCommerce business?

Yes, but it does have some challenges compared to other English speaking countries.

On the plus side

  • Less competition
    The population of Australian in 2020 is 26 million, which is significantly less than other English speaking countries, so the basic economics means there is less competition, lowering advertising costs and choice of products for customers.
  • Less savvy competitors compared to the US and UK
    When I first arrived in Australia in 2011 I was amazed at how little eCommerce activity was happening, especially from big retailers.

    Things have changed since then, but the competition here in Australia generally isn’t as savvy (don’t take that as slur, I love being an Aussie citizen). This means you can take inspiration from overseas and be one of the first people to do it here.

On the negative side

  • Population is smaller
    The pool of people we get to sell to is smaller, so if you just sell in Australia your growth will be limited. Not a bad thing but if you have a low margin product that you need to sell high volume of, you’ll need to expand overseas.
  • Delivery is difficult
    S’traya, she is a big old place. In fact, it’s roughly the size of Europe. This makes it difficult to delivery quickly and cheaply, which is key for eCommerce success.
  • Less people shop online
    The COVID pandemic in 2020 has changed this, but the percentage of online shoppers in Australia is still behind the UK and US.

Do I need a big eCommerce business to be profitable?

To the contrary, big eCommerce business can be very unprofitable.

Large eCommerce businesses have this strange fascination with growing really quickly (I think they get jealous of software businesses that can scale quickly).

To grow quickly they spend a lot on advertising which often means they lose money.

They justify this with saying we’re worth $X.XXX,XXX because someone bought 10% of our business that is losing money for $XXX,XXX.

Koala mattresses in 2018 was a very good example of that, they were losing money on revenue of $40m (AUD) See this AFR article.

How can I make sure my Aussie eCommerce business is profitable?

5 main areas you need to get right…

  1. Have a product that people want (Duh)
  2. Use the right technology for your needs (Your nephew can’t or won’t build it for free)
  3. Have a healthy gross profit margin
  4. Make sure target customers see it (promote it)
  5. Hold stock in Australia so you can deliver quickly (Customers don’t like waiting)

If you want to learn more about these 5 areas, sign up for the Boom No BS Ecommerce Tips.

Is your eCommerce reporting wrong?

Setting up tracking arrrrrrrrrrrrrrrrrrrrrrrrrrh!!!!

Achieving accurate eCommerce tracking to get reporting accurate is about as easy as getting someone from NSW to shout “QUEENSLANDER”.

Really hard, but not impossible.

Why is eCommerce tracking important?

It tells you where sales are coming from, but most importantly, if set up correctly, will tell your advertising accounts (Google, Facey etc) who bought from you so they can go find other people like them. This will give you a better return on your adspend, a key metric to being more profitable.

Why is setting up tracking so hard?

I’ve never seen a perfect setup, there is always something that is just a bit off.

Most of the time it’s just plain wrong!

The issue is some any different systems talking to one another, and it can break really easily.

Add on top of that, each system/company (Shopify, MailChimp, Google, Facey) all want to prove they are giving you the best return.

How can I make sure my tracking is correct?

Smart question, glad you asked.

You could spend many months learning how to do it. For example there is a brilliant course by Love Data on how.

But lets face it, you’ve got better things to do.

I used to try doing it, then I found someone who is amazing at it!

Now for every project I work on or help with I get them to do it.

If you want their details, just contact me, and I’ll pass on their details.

You’ll be glad you did.

Who you need on your eCommerce team

You can’t build a great Aussie eCommerce business without a little help.

But what type of team do you need?

Choose people who get your brand/product

Anyone who uses or has a genuine interest in your product will understand what customers want, because they are customers! This will help your eCommerce business serve customers better.

“Serving customers better” is often said, but rarely done. This will become your competitive advantage as eCommerce gets more and more competitive.

Ecommerce really clicked for me when I started working for Billabong. As a skateboarder and snowboarder, I was the target customer. This helped me apply my technical eCommerce knowledge to a brand I understood.

They can be based anywhere

Long gone are the days you could only work with people driving distance from the office. With remote working becoming the norm, you have the whole of Australia or wider to choose from.

Aren’t “Experts” expensive?

“Experts” tend to be technical experts, i.e. Facebook marketers. Too much importance is put on this.

You need experts on your customers who are good at solving problems.

They can learn Facebook marketing (plenty of good free courses out there) or good customer service.

What about overseas?

Like most things in life, it’s all how you do it.

We’ve all heard the horror stories, but it can work really well.

Need a specific technical skill like website coding and know exactly what you want? Someone overseas who is cheaper can be a good way to go.

However, you can’t expect a Philippino who has only lived in Manila to write a useful guide on where to walk a dog in Perth.

It’d be like me writing about the best dog walking locations in Russia. I’ve never been and don’t have a dog!

Do I need full time employees?

No, not for every position. You can have contractors for things like advertising, web development and quality assurance in the factories.

Are you posting and hoping?

The biggest mistake I see Aussie eCommerce stores make is posting an update on Facey or Insta and expecting sales.

Unless you have amassed loads of followers (100k+) or have a very engaged established account (pre 2016) then very few people will even see your post, never mind click through and buy from you.

The latest stats show only about 1% – 6% of your followers in the Asia Pacific region will see your post.

Ya what?

Yep, Facey wants you to pay to boost those posts or run ads to get to your followers.

Unless you boost a post (pay) then it is pretty much a waste of time.

“My mate who is a social wizz, they do it all the time though”

It did used to work. When Facey was building it’s customer base it was basically free marketing.

But guess what, Facey is now a publically listed business that needs to make bigger profits every quarter. So now they charge us.

How do I use Facey and Insta to get sales then?

If you’re not running any type of advertising for your eCommerce store you’re going to be waiting a long time to make sales.

If you’re not sure how to advertise your eCommerce store, watch this video.

Quick win for more Facey and Insta sales

Running ads on Facey and Insta (not just posting and hoping) then you should already be making sales.

However, there is a very common mistake most Aussie eCommerce businesses make with their ad setup though.

If your ad campaign goals aren’t set to conversions and the conversion isn’t a purchase or add to basket, then you’re missing out on sales.

Setting your campaigns to conversions tells Facey and Insta you want people that buy online.

You do need to have conversion tracking setup (which can be a pain).

I’ve seen lots of campaigns set to “traffic” or “engagement” because they’re “nurturing the customer along their journey” or some other weird marketing phase that looks good in a preso.

Stuff that!
Maxout showing ads to people who are ready to buy now. Once maxed out you can look at doing branding with engagement and traffic.

Remember, most Facey and Insta ads charge you for Impressions (views of your ads) so they want to show your ads as much as possible. We want sales, cash in the bank.

It’s very common to have social ad accounts set up this way if the person running it is used to selling non eCommerce products or services, as they often have a longer time to purchase.

All social ad accounts I run for my eCommerce business are all set to conversions as a goal.

Do it and get more sales.

How to forecast startup DTC eCommerce sales and costs?

You know what to sell, the site is being setup or you’re already trading.

But how much revenue will your Direct To Consumer (DTC) eCommerce brand do and what will your expenses be?

Excel is demanding answers, and your pulling more figures out of the air than Trump!

Sound familiar?

You’re not a lone. To make things worse it’s the most important thing you’ll do in your eCommerce business.

However, to create an accurate forecast you need previous sales data.

If you’re a start up, you don’t have that.

Bugger.

Start up DTC brands need to take a different approach to forecasting

Ideally you’d know your eCommerce conversion rate and how many visitors you can get with all your marketing activity (you have a marketing plan right, course you do).

However, until you start selling you won’t know these figures, and averages, in this case, are about as useful as a drunk bogan at an economics convention. Entertaining but ultimately a distraction.

Every site performs very differently.

You’ve told me all the things I can’t do, what is the answer?

All smart DTC eCommerce sites buy and hold stock so they have higher margins and quick delivery times.

If you’re drop shipping I suggest you pay an online guru who works from a hammock far to much money to help you and find out it doesn’t work. See you in 6 months.

Anyway, you have or need to commit to certain amount of stock. The more stock you buy the greater the opportunity for sales.

Buuuuuut the more stock you buy the greater the risk.

Time to put on the big girl/boy pants and commit some cash. Otherwise this thing will never work.

Take your stock cost amount (what you paid for it), lets just says it’s $10,000AUD (At Boom Ecommerce it’s always AUD, because we’re about helping Aussie Ecommerce stores).

Work out how much you plan to sell that stock for. Lets say your gross margin is 50% your retail value is $20,000AUD.

You can only sell the stock you have, so until you order more, your revenue will be $20,000AUD.

Now split that into months.

The amount of months will be depend on how aggressive your marketing is.

If your approach is “I’ll build my site and they will come”, then forecast those sales to be over 120 months or 10 years. Because unless you get so lucky that you should buy a lottery ticket, you won’t be selling much anytime soon.

Not sure where to advertise? Watch this Youtube video on “Where to advertise your eCommerce business in Australia” (That’s me in the video, hi Mum!).

Back to the forecasting.

You should now have sales by month for the stock you have, but what are your other major costs?

  • Advertising
  • Technology fees (Shopify, Xero etc)
  • Staff or warehouse fees
  • GST and other super fun taxes
  • Usual business costs

These will vary on your setup.

How much you spend on advertising will depend on your Gross Margin and how aggressive you want to be.

After 3 months of trading you’ll have some data to work with that will make for better forecasts.

If you’re not sure of any of the figures (start-up eCommerce costs or % of marketing spend to revenue) or terminology i.e. Gross Margin, how much you’ll need to get your DTC eCommerce business started, signup for the Boom Ecommerce Training course. It has everything you need to know.

Advanced Tip, How to track instore sales from social ads

If you work in, or run, a retail business that has an eCommerce and physical retail stores, this tip is for you.

You can track sales in stores after customers saw Facebook and Instagram ads.

Yep!

As long as the person in store asks for their email address (so they can email the receipt to the customer) then you can connect this to Facebook Ads Manager.

You can then generate a report in Facebook Ad Manager to show sales in stores.

It’s amazing.

I’ve seen 25% of in store sales be “influenced” by Facebook and Instagram ads.

To set this up, you need a service by a company called Yrecipts. They connect your in store tills to Facebook Ad Manager.

Your tills have to be PC based, so they can install a print driver on them.

Find out more here…

https://www.yreceipts.com/#live_purchase_data

What not to do in eCommerce

DON’T (repeat do not) send promotional emails every day to every email address you’ve ever collected.

Not matter who says it’s “best practice” to send emails everyday.

That is the definition of spamming people.

Only drongos do that.

Apart from the fact it’s annoying, customers will ignore them, your open rate will go down, and your email service provider (ESP, aka Mailchimp, Klaviyo etc) will start marking you as an untrusted sender and your emails will be less likely to get to your customers inbox.

If you’re not making enough sales, address the root problem, don’t spam the good people of S’traya.

How to advertise to previous customer with Insta

It’s easy to forget about your previous customers in the never ending chase for new ones.

Don’t!

As long as you have more than 100 customers you can advertise just to them on Insta, or Facey in Australia.

You’ll need either…

  1. 100 email addresses of customers
  2. A page that only customers have seen
    (i.e. purchase confirmation page)

Using either of these, you can create something called a “Custom Audience”. There are many great guides online on how to do this. Below is a good example.

AdExpresso guide to Custom Audiences

However, there are a few things that could be gotchas.

If you’re using email addresses, 100 have to match email addresses users login to Facey or Insta with. You really need 150 to be safe.

Planning on using option 2, targeting people who viewed the checkout confirmation page, the Facebook Pixel will need to be installed on your site.

If that sound complicated, you’ll need a bit of help from an expert.

Need a Facebook marketing expert, contact us. We’d be happy to put you in touch with someone based in Australia.

Boom doesn’t implement these, only train non technical Australians on how to get the best out of your store. Sometimes that means getting the experts in!