Small business: Online retailing - Stefan Preston

Entrepreneur and investor, Stefan Preston. Photo / NZH

Stefan Preston, entrepreneur and investor, Ingenio, which has majority shareholdings in companies including bachcare.co.nz and lingerie brand, Rose & Thorne Design. He has had five rounds of doing e-commerce.

What should you think about if you are purely going to sell your product online?

If the internet is your only channel to market you need to be very sure of what consumer need is going to drive your business model. Proven business models for selling products include clearance of branded items at low prices, so-called "long-tail" product ranges whereby rare items that are inefficient to stock in physical retail formats are sold and convenience replenishment items like sports supplements and children's nappies.

What is the advantage of a bricks and mortar store?

Physical stores provide customers with a "five-senses" experience. Sales of many product categories are assisted touch, smell, and taste - all senses that are not supported in an on-line experience. Many products also need to be tried physically to build trust - for example building confidence in the consistent fit of apparel.

Where do retailers go wrong with online selling?

It's tempting to think about online retailing as an easy route to extra sales. But effective online retailing requires a significant commitment. Most product retailers need to think about the role that each channel will play in the overall distribution of their products. Physical stores can provide a deeply immersive experience which wins customers over to the brand. Selling products wholesale to department store retail formats can provide access to high volume sales and offer convenience to customers who shop those formats for efficiency but often do so at the expense of range and brand experience. Online can offer a very wide range to a dispersed customer base but the experience is very transactional and often lacks emotional resonance. Most product categories benefit from a portfolio of channels to market.

How do online retailers reach and talk to customers?

The retail brand that already enjoys brand relevance and awareness has a big advantage online. Strong brands will have high levels of direct enquiry. Brands that have a physical presence will actively market their commerce site urls using their product tags, retail point of sale materials and so on to encourage direct traffic. In addition to the physical world there are many on-line methods to drive traffic to your site including email marketing, natural search optimisation, paid search, social media and so on. It is important to narrow your focus to those methods that suit your objectives and the experience that is most desirable for consumers and viable for your business.

How do online retailers keep their customers loyal and coming back for more?

One of the advantages of online retail is the fact that you can collect a lot of data and can talk directly to your customers. This affords you the opportunity of considering your best customers as part of a club. This can be used to price-segment - for instance offering groups of profitable customers incentives to further grow their business with you. There are many forms of online loyalty schemes that encourage repeat purchase.

Apart from traffic generation, conversion of traffic to sales is critical. The design of the user experience online is critical - especially as users are increasingly used to very effective and well-designed on-line experiences. I have never met a web-developer who has any developed appreciation of user experience. We design our sites with interactive user workflow design specialists, work with prototypes and then tightly specify the user experience to our web developers.

Nothing is static online. We are constantly redesigning elements of our sites and using data collected via Google analytics and physical user tests to improve work flow.

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