12 September 2022
Shopify brands are rewriting the marketing playbook
Tapcart's Gabrielle Wooden on the evolution of ecommerce practices, and marketing's shift beyond social media.
Tapcart's Gabrielle Wooden on the evolution of ecommerce practices, and marketing's shift beyond social media.
In a tech-powered business, constant evolution is critical.
Given that every business now runs on technology, this statement might feel like a given. But at times, it can run counter to the modes of modern work culture.
Professionals seeking to deliver for clients and team members tend to like to develop optimal processes and practices for operating, distill them into workable tasks and continuously communicate how they can be completed successfully. That way, they become easily repeatable.
It would probably be easier for this cycle to keep continuing if the technology around which those practices were built always remained the same. But the incremental improvement of software over time and the business imperative for the top tech companies that build that software to stay a step ahead means that change is a feature of tech-driven disciplines, not a bug. Just as tech is iterative, so, too, are the business strategies it powers.
While this must be welcomed, working to keep up can at times be dizzying. In those moments, it’s important to remember that this constant change is built on a foundation. There are elements that are likely to remain in place, even as others are altered, deprioritized or replaced altogether.
That dynamic is playing out right now in ecommerce, especially among businesses that sell direct-to-consumer through their own digital stores.
“There are a few long-held best practices that I think are going to be sound well into the future of mobile shopping, and then there are a few best practices that I do believe are a little bit outdated,” Tapcart Senior Content Marketing Manager Gabrielle Wooden said.
As a company that helps Shopify store owners build no-code mobile apps, Tapcart has a front row seat to the shifts that are coming about as a result of changes to the platforms that power the internet, and new tools that help brands more effectively reach and convert customers when they use phones and other devices. The company on Monday released a new report that identifies eight trends for the holiday shopping season titled BFCM: Peak Szn 2022. In a recent interview, Wooten shared what is foundational, and what’s changing.
Wooden said the following longstanding elements will remain important for every store owner to continue to upgrade:
Optimizing site speed is an important building block of a great experience. If pages load quickly, customers can easily navigate a store. On the other hand, if a page doesn’t load easily, it could be a reason that they end up heading somewhere else.
The likelihood of losing a customer only increases as load times go up, especially after crossing the 1 second mark. A recent study from Deloitte found that the probability of bounce increases by 32% as page load times go from 1 to 3 seconds. When they go from 1 to 5 seconds, the likelihood a customer will leave increases to 90%. On the other hand, the study found that changing speed by .1 seconds improved bounce rate by more than 5%.
Keeping a constant eye on site speed is necessary from the start, and continues to be a key metric as more elements are added to a store. It’s a behind the scenes function that can make a big difference.
“As you build content, as you add more images or increase the size of the image – there's so many little things that you do in the building of your website that can contribute to prolonged loading times that people can lose sight of,” Wooden said.
Streamlining checkout has long been a focus of ecommerce stores, since the moment of payment is the make-or-break time when shoppers decide whether they will buy an item, or abandon cart. It's why one-click checkout is a common goal.
“Similar to how we are using site speed as a long-term benchmark to be measuring, having a checkout process that automatically populates all of their information, has their credit cards and so on is going to help incentivize that purchase and will also interestingly increase the order value as a result,” Wooden said.
Yet there are other areas where bigger changes are taking place, and professionals are seeking to write entirely new parts of the manual. The major practices undergoing change right now are those that brands employ to attract users to their stores. For a decade, advertising tools on platforms like Instagram and Facebook helped stores acquire and retain customers straight from social media. But privacy-oriented changes by Apple and rising competition for space among brands over the last two years have challenged those approaches.
Now, marketing on these platforms is getting more expensive. Tapcart found that the cost per 1,000 sessions (CPM) increased by 89% for Shopify stores in the last year. During high traffic times like the upcoming Black Friday and Cyber Monday, prices are only expected to increase given the elevated competition during this time.
At the same time, paid marketing isn’t as effective as it used to be, as new user acquisition and conversion rate from these strategies is falling.
“Stores are needing now more than ever to figure out how to pivot away from this previously reliable best practice on how to acquire and retain their customers and drive traffic to their site, and create new, innovative ways in which they can drive that traffic,” Wooden said.
To be sure, Facebook and Instagram are still used as marketing channels. But many stores are now viewing them as being just a couple of the options among an increasingly diverse mix of marketing channels, and they must be especially cognizant of the budget dollars they dedicate toward them in an environment where the money doesn’t go as far.
Increasingly, a world of paid marketing is shifting to one of owned marketing strategies.
To change tactics, one also must consider how they must shift mindset. The performance marketing strategies that developed over the last decade centered social media. With those channels becoming more difficult to navigate, it is necessary to look for new places to reach customers. That is leading to more exploration of other areas where people spend most of their time online. As a result, email and SMS marketing are being discussed more frequently. After all, they offer direct access to a person’s inbox, where they are most likely to check multiple times a day. And there is the potential for brands to own the relationship more directly through these channels, rather than mediating the touchpoints through third party platforms.
But there are drawbacks inherent with each of these approaches. Email inboxes are notoriously crowded. There are work messages, newsletters and promotional offers from many other brands. Text messaging via SMS is great at providing conversions, but it is expensive.
“It costs more to reach 100 sessions, even more to reach 1000 sessions and even more to reach 10,000 sessions,” Wooden said. “So with each SMS text you send, the price increases.”
Tapcart is eying another valuable piece of mobile real estate: The home screen. Push notifications can be a valuable way to reach users and engage them, Wooden said.
Push notifications, which are available to Shopify stores through a mobile app, offer the ability to reach users directly in a space where they are frequently checking. They are also free and unlimited to send, so there isn’t the same issue with compounding costs.
“We are thinking of push notifications as a valuable antidote to paid advertising issues,” Wooden said.
In any new area, a considered approach is necessary. Given the prominence of home screens in the digital lives of shoppers, a store must take care to respect the space. A message that involves discounts or direct sales might not always fit best. Rather, consider how to provide value in a way that makes sense for the medium.
MantraBand ties push notifications back to its mission: Inspiring people through positive messages. It makes bracelets with messages that uplift. So with push notifications, it doesn’t deliver deal notifications, but rather quotes of the day and positive messages, Wooden said. The content is complementary to its product.
The messages, Wooden said, “are reminding the consumer of their values and how the consumer shares those values with you,” Wooden said. “These are little ways in which we cultivate brand loyalty through different touchpoints where we might meet our customers.”
With a new channel to attract users, it’s also necessary to consider how to measure success. With Facebook advertising, new customers and conversions were the key areas to track, along with return on ad spend. But when it comes to channels where repeat touchpoints are possible, retaining the customers one has attracted becomes an important area to center. Customer Lifetime Value (CLV) is an important metric in this equation.
It's also worth keeping in mind that this approach tends to center loyalty. This requires rethinking what an individual customer means to a business. The recently-released Visions report from Future Commerce found that only an average of 5-9% of new customers will ever reach “loyal” status. However, this group tends to make major contribution to the bottom line, sometimes driving 20-30% of annual sales. Create points to connect to this audience repeatedly, rather than attract them for the first time.
“Making sure that you are crafting experiences that cater to the interests of your consumers beyond the product you're selling is a strategy that we think is going to become less fluff and more something that is deeply tied to the bottom line,” Wooden said.
The evolution is not just taking place in the technology, but in the strategy that governs how a store deploys it, and the definition of how it can bring success.
Consider all of them to determine the path forward.
The no-fee subscription program is adding customers, and they are spending more over time.
When it comes to pets, loyalty is a valued trait. Chewy is showing how the same is true for online sales of pet products.
At a time when recurring revenue is more important than ever for brands and retailers, the pet ecommerce marketplace is growing uptake of its program that automatically replenishes goods.
Chewy said sales from Autoship customers totaled roughly 75% of net sales in the first quarter of 2023, ticking up from 73% in Q4. That’s a new record for the program’s penetration. Autoship sales, which reached $2.08 billion, grew 18% over the first quarter of 2022.
Crucially, the program is also driving loyalty, as Chewy eyes bigger baskets and long-term relationships. With consumers pulling back on discretionary purchases, many retailers are eying ways to ramp up engagement with their best customers. Autoship is a long-running example that is seeing gains now.
The Autoship service allows customers to subscribe to regular orders of pet products, with no membership fee attached. It’s a particularly strong fit for pet food and other consumables, which tend to be bought and used in regular intervals.
“Our Autoship subscription service is a powerful tool for us, driving recurring and predictable revenue and long-term customer loyalty,” Chewy CEO Sumit Singh told analysts.
Responding to a question from analysts, Singh recalled a period soon after its 2019 IPO where 60% penetration for Autoship was seen as a positive. Singh said the growth since was a result of improvements to reduce friction in the customer experience, as well as the business model behind it.
The fact that it’s a free subscription is particularly attractive to consumers.
“In fact, it leads to a discount for the customers who sign up for that program, and that discount is funded by our vendors, so we don't have to fund it ourselves,” Chewy CFO Mario Marte said.
A “symbiotic relationship” between the marketplace and brands is at the heart of the program, Singh said.
“It's one of the more effective mechanisms to fuel brand loyalty for our supplier brands,” Singh said. "Their participation greatly showcases the value that both of us find in it.”
Overall consumer trends are also benefiting the program. In recent months, sales have shifted more toward consumables and healthcare as discretionary spending on hard goods softened. The essentials tend to be the products that are sent in the Autoship program, since they are in need of refilling.
At the same time, Chewy has expanded selection within the program. The number of SKUs available for Autoship has increased significantly in recent years. Chewy has also grown the categories of products available through the program. Healthcare was a newer addition to Autoship since its debut at Chewy four years ago.
“When you think about the proposition of a health customer, humans are bad at feeding humans medication. We forget to feed our pets,” Singh said. "So if you have the option of putting that on recurring delivery, combined with an ongoing engaged program and the notification engine put behind it, etc., etc., it fuels even stronger compliance rates.”
The shopper experience through Chewy’s site has also encouraged customers to build bigger baskets.
It all results in a reliable customer pool that is made up on not only repeat visitors to the marketplace, but signed up to a program that keeps them locked in with Chewy.
Ultimately, this is a base from which Chewy can continue to build.
When it comes to defining success of Autoship, Chewy doesn’t only measure the active customers it has in the program, though those are growing. The marketplace is also keying in on net sales per active customer, which grew 15% to more than $512 in the first quarter. Like Autoship penetration, this was a record high for the company. Both the number of subscribers and the amount that they spend are driving growth in the program.
Autoship also helps to drive increased customer lifetime value (LTV), which serves as a measure of loyalty. These customers tend to spend more with Chewy over time, so they are a crucial driver of long-term sustainability.
In the end, Autoship sales are good for the top line, as well as the bottom line. Repeat orders allow the company to better plan for shipping, so it can optimize its fulfillment network accordingly. This is especially important as Chewy expands automated fulfillment capacity through four new centers.
“Seventy-five percent of our sales going through the Autoship program allows a predictable, repeatable base of volume that allows us to fulfill that demand in a manner that optimizes asset utilization across the company and allows us to kind of flow that revenue, you know, into the bottom line,” Singh said.
A reliable revenue stream that drives growth over time is good for a business during any economic period, but it’s especially important at a time when many retailers have shifted from a mentality of growth to meet surging demand to profitability when consumers pull back. It’s also a bulwark against potential competitors who may try to replicate Chewy’s service. They may open a pet marketplace, but they won’t have all of Chewy’s Autoship customers.