VTEX Blog - How is high-performing e-commerce managed?

How is high-performing e-commerce managed?

Rafael Passos
Rafael
25 May 2018
Reading Time: 5 min

All high performance online store management is based on the PDCA cycle.

The PDCA cycle (plan, do, check, act) is just way of creating and executing your action plan, checking for deviations from results and acting to correct any deviations.

Be aware of the difference between the last step (act) and the second step (do). There lies one of the big differences between aggressive growth companies and those that grow along with the market.

The action plan implies a prior alignment of a set of actions that will be carried out by your team for a certain period of time. So the idea is to get a certain expected result – “do” means precisely the actions that will be taken to reach this goal.

The problem is that many companies get stuck at this point and never get to “act”, which means executing an unplanned action, based on the analysis of deviation from the goal you have set. Often, we have to drop something we have planned, due to lack of funds or the plan being inefficient.

Deviating from what you planned is natural. Since the business environment is extremely complex, it is night impossible to see action plan generating 100% of what you had planned.

The same basis for this reasoning is seen in Steve Blank‘s celebrated dictum: “No plan survives first contact with customers.”

We are suggesting that your company should react to its results immediately and not wait for the next planning cycle. For high-performance online stores, key metrics have to be tracked in real-time and corrective measures taken immediately.

Not doing this would be like plotting your route when sailing a boat, seeing a storm brewing in the sky ahead of you, and then plunging headlong into it just because you have previously decided to follow this route.

“Act” here means moving the boat`s helm. It means realizing that a plan is just a guide for a route rather than a straitjacket.

How to apply the PDCA cycle to your e-commerce?

Action Plan

Every business aims to generate profitable long-term sales numbers. Your action plan has to ensure these 3 pillars.

So all e-commerce sites should start by setting targets for sales, profitability and quality, and the latter is the one that ensures long-term sales and profitability.

The right way to plan for sales is to do it category by category, analyzing the previous year’s history and seeing whether there is a growth trend or falling sales. After doing this for each of them, we get planned global sales for the e-commerce site.

Sales of each category should then be broken down monthly and seasonality of items in the market should be applied, given the sales history. On this basis, we get the e-commerce site’s monthly sales.

Once a monthly sales total has been planned, we have to apply daily seasonality to reach planned daily sales. Using these numbers, we can create a good Commercial Action Plan.

Each activity in this action plan is called a commercial action.

They have just one goal: reaching the sales target in a given period of time, for which I would suggest 15 days.

Suppose an e-commerce site has a 1 million monthly target. Within seasonality, the first fifteen days have the greatest weight. So the fortnightly targets comes out at 700,000.

The plan of action should answer the following question: what shall I do for the next 15 days that will enable me to sell 700,000 Brazilian Reais?

Here is an example of an action plan for a White Line and Home Utilities company:

We suggest creating this plan of action at a fortnightly meeting that plans the next 15 days’ actions, at least 4 days before the plan’s Day 1.

Executing the Action Plan (do)

Executing your action plan means making each of your commercial actions happen.

Everything starts with a detailed briefing for the action, highlighting which products will be promoted, the commercial argument that has to persuade customers and distribution locations on the site itself and through external media channels

After briefing for the action, your head of communication should create advertising pieces, your website manager should prepare the campaign’s exhibit places and the campaign’s distribution people should align with your marketing agency.

The distribution guy should also align media channels and prepare the right UTM parameters for the commercial action, which are essential to record results in a tool such as Google Analytics.

Once everything has been prepared, the campaign is uploaded to the site and external communication is triggered. People start visiting the site and your plan has its first contact with customers.

Monitoring deviations and result (check)

Once your action plan is up and running, we have to monitor its effectiveness by looking at daily sales.

For more mature operations, companies get their hourly sales curves for real time comparison with planned numbers and the previous year’s.

If the sales target is higher than planned, everything is going well and we should stick to the plan.

If the sales target is not good, we have to act to correct the deviation.

There are 3 major retail metrics that explain sales: sessions, conversion, and average ticket. Every alteration in sales is reflected in one of these three metrics.

In the case shown below, the weak metric is volume of sessions:

Action to correct deviation (act)

Suppose that what happened was precisely the deviation shown in the above example.

Since our daily monitoring showed that sales are below target and the reason for this deviation was the volume of sessions on the site, we have to act immediately to correct it.

If your company has an agency monitoring traffic, you should call them and ask which channel had low traffic.

For example, suppose the low-traffic channel is Google. Possibly, in this case, the action we planned to distribute through this channel – “10% mark down off low-turnover refrigerators” – was not having an effect. Or some other perennial campaign that is already running is no longer effective. Before analyzing the situation, we have to create new art to communicate the refrigerators or create a new action that responds on this channel and drives the quality traffic we need to close sales.

Another possible solution would be to create a third campaign based on high weekly turnover products and communicate extensively on other media channels, which would compensate for the abovementioned channel’s low flow.

For any deviations from the 3 key metrics (sessions, conversion and average ticket), we may take short-, medium- and long-term measures.

Short-term actions focus on displaying products and campaigns on the site and re-allocating investments in commercial initiatives that are already on the air.

Medium-term actions focus on creating new commercial initiatives.

Long-term actions are focused on procuring new products to sell, commercial partnerships and deploying technological alterations.

As you may have realized on reading this, high-performance e-commerce management involves not only the traditional cycle of planning, executing and measuring the results from marketing and sales actions, but also and particularly knowing how to anticipate and react to unplanned deviations. This means the store will be more likely to reach the targets set for a given campaign.