E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
Many Internet retailers may think they don’t need a strategic plan, but without one they’re simply reacting to tactical moves by competitors, unanticipated fluctuations in supply or demand for their merchandise, or new industry developments, experts say.
To plan or not to plan, that is the question. Many Internet retailers, big and small, may think they don’t need a strategic plan, but without one they’re simply reacting to tactical moves by competitors, to unanticipated fluctuations in supply or demand for their merchandise, or to new developments in the industry, experts say.
“A lot of times a business will just roll along and there’s not much effort toward improving,” says Craig Smith, founder and managing director of Trinity Insight LLC, a consulting firm that works with e-retailers on strategic planning. “People spend their time putting out fires” instead of thinking about the future. A formal e-commerce strategic plan is one of the best tools for ensuring happy customers and profitability, Smith adds.
Online retailer Tool King recently completed its first formal plan. Owner Don Cohen used an ad hoc, informal planning style for the first five years of e-retailing before he felt the need to create something more structured. Cohen founded Tool King in 1978. It was a small regional hardware chain until one fateful day in 2000 when Cohen discovered eBay. Now Tool King is eBay’s biggest tool seller and also operates its own e-commerce site. The company racked up total sales of $36 million last year, 85% of it from online business. This year Cohen hopes to double that sales figure and has mapped out that and other goals in his new e-commerce strategic plan.
“When you’re smaller, strategic planning is not as important because you’re in a learning curve; but as you add more people and experience growth, you deal with lots of issues-like facilities, space requirements, fulfillment-and things become more complicated,” Cohen says. “You have to move from impulsiveness to structure and organization, and being able to define where the value is coming from.”
Developing the two-year plan took three months, during which Cohen and his top managers drilled down into all of their e-commerce data to identify what they were doing right, where they could improve and where new opportunities might be. Through that analysis, they concluded they could increase their initial revenue projections in their strategic plan for 2006 by 30%.
No matter who’s involved or what the goals are, any good plan should start with the numbers, many experts say. Tool King had lots of raw data, but the planning process inspired the creation of 17 new reports to track the numbers that would tell whether the plan was working and exactly where adjustments were needed. “If we can isolate a problem to a department, or even an individual,” Cohen says, “we don’t have to make sweeping changes.”