eCommerce Brands Need to Adopt Private Equity Model for Success

– Many eCommerce businesses lack a differentiated product and sustainable business model.
– eCommerce brands should adopt the Private Equity model by trimming unprofitable aspects, streamlining operations, and focusing on customer experience and data-driven decision making.
– Businesses that are reactive rather than proactive in the current environment may struggle and potentially be bought for low prices.Adopt the Private Equity model for eCommerce businesses by trimming non-profitable aspects, streamlining operations, focusing on customer experience and brand building, utilizing data-driven decision making, seeking differentiation, and knowing specific positioning within the market.Real talk, a lot of eCommerce businesses are discovering that they don’t actually have a substantially differentiated product. This means they don’t have a sustainable business model. I called this out last year, and we’re just now seeing how bad it is for some brands. Here’s the perfect storm:

1. Commoditized goods that are easy to copy or replicate.
2. Items that are only purchased once.
3. Noncohesive marketing strategy outside of sales-driven initiatives.
4. Lack of data or leveraging data in a meaningful way.
5. Lack of understanding around technology and how to position a brand in a post-privacy world.
6. Pivots to expand a line rather than contract and focus on core success.

In short, more eCommerce brands need to adopt the Private Equity model:

1. Trim anything that isn’t making money.
2. Streamline operations wherever possible.
3. Look to spin out parts of the business that are doing well.
4. Focus relentlessly on customer experience as it relates to brand building.
5. Ensure the brand is known for something and can be associated with that feeling.
6. Obsess over data-driven decision making and let it guide strategy.
7. Know the specific positioning within a market and focus on it.
8. Seek out differentiation at all costs.

These are two completely different approaches to running a business, and they make all the difference. A lot of stores really aren’t businesses that are capable of succeeding based on the fundamentals in the current environment. Get ready for a lot of businesses to get bought up for pennies on the dollar. Remember, at best, an eCommerce brand is worth 2x revenues. I’d guess that now we’re going to start seeing a lot of transactions at less than 1x as the fire sales start. I’ve also noticed a trend: a lot of businesses reach out to chat when it’s already too late. Being reactive in this environment will put you out of business. #ecommerce #strategy #marketing

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