E-commerce operations: 3 viewpoints, let’s talk about online/offline traffic thinking!

01

What is online traffic? ——It is the number of times your access tool is opened.

When it comes to online traffic, we attach great importance to it. Online, the number of tool visits determines the final business transaction. In an Internet environment, the number of tool accesses can be accurately recorded. Therefore, traffic becomes a very important indicator that can be paid attention to and analyzed.

Offline customer flow refers to the number of customers entering the store. In fact, offline retail companies attach great importance to customer flow. Some companies regard the passing rate (how many customers pass by the store), entry rate (how many customers enter the store), and purchase rate (how many customers who enter the store generate purchase conversions) as very important management indicators.

However, the differences in traffic management methods between online and offline are:

There are link records online, which can accurately generate visit records; however, offline retail companies do not have customer links. Ultimately, the customer's purchase performance can be recorded as a sales record through the POS machine, but it is impossible to make accurate records of customers entering the store, nor can it make accurate records of the consumption attributes of purchasing customers.

In fact, the bigger difference in this regard lies in the links. The important value of links must not be underestimated. In an environment with links, not only can the changes in a company's traffic be accurately recorded, but more importantly, by establishing such links, effective activation of customers can be achieved.

Offline retail stores have no customer links, and there is a disconnected relationship between stores and customers. Although the POS machine makes a record of customer consumption, it can only make a sales record and cannot achieve the goal of activating customers. Therefore, faced with the continued decrease in the number of visitors and transactions, we are helpless.

Of course, the current performance of online e-commerce platforms in activating customers varies greatly: small platforms are better, and large platforms are worse.

02

For offline retail, there is basically no concept of traffic cost, only the concept of total cost of the store. However, for online retail, special attention is paid to traffic costs.

The online traffic costs basically include promotion costs, transaction subsidy costs and other related expenses. Currently, in an environment of fierce competition and peak traffic, online traffic costs are rising rapidly.

According to relevant reports: The traffic costs of Taobao and JD.com are more than 200 yuan, and the traffic costs of some vertical e-commerce companies are around 400-500 yuan. Pinduoduo is also facing a rapid increase in traffic costs, from 20 yuan and 40 yuan to around 140 yuan in 2018.

In fact, traffic cost is a very important operating indicator.

This involves a very important retail concept - customers create value. Whether it is online or offline retail, it is always customers who create value; the operation of an enterprise is always about continuously creating customers and building customer value. The concept we want to establish is that the cost of operating customers must match the value of operating customers. If customer value cannot cover customer costs, the outcome will inevitably be a loss.

Offline retail companies should also establish the concept of traffic costs and calculate traffic costs well. The traffic costs of offline retail stores can also be calculated well, including: rent, water and electricity, marketing promotion and labor costs. Because these expenditures are ultimately for the purpose of creating traffic.

The difference in traffic costs may be quite large between different business formats and between different cities.

Take a convenience store as an example: if the rent is 100,000 yuan per year, the labor cost is 300,000 yuan per year, and the marketing promotion and water and electricity costs are 50,000 yuan per year. If a store has 500 visitors per day, the daily traffic cost is less than 2.5 yuan.

However, the range of online and offline traffic varies greatly. Theoretically, the range of online traffic can be infinite, while the range of offline traffic is relatively fixed in the traditional business district.

When faced with traffic costs, from a business perspective, your ultimate goal is to determine whether your customer value, that is, the value ultimately generated by customer purchases, can cover your costs.

From the above data comparison, it can be seen that the traffic costs between online and offline are very different. However, why can such high online traffic costs cover total operating costs, while offline traffic costs are so low and still causing some problems?

The ultimate reason may come from customer value, that is, customer purchase contribution.

From some data we have seen, the annual purchasing value of JD.com's customers can reach about 1,700 yuan, Taobao may be a little higher, and Tmall is even higher. Of course, Taobao does not operate its own business and is not comparable to JD.com. Hema can achieve 6,900, which may be relatively high at present.

However, the customer contribution of offline retail enterprises is very low. At present, since most offline retail companies have not yet established customer links, there may be a lack of accurate statistical records, but from the customer value contribution data we have seen, most of them are very low - the average annual customer purchase contribution may be less than 1,000 yuan. Another major reason may come from the customer base. The customer base of online businesses is relatively large, but the customer base of offline stores is relatively fixed. The online drainage space is relatively large, while the offline drainage space is relatively small.

03

Marketing is all about traffic. Currently, offline retail companies must change this traffic mindset.

• For online retail, without the relatively stable traffic of offline retail, all effective means must be taken in the virtual cyberspace to direct traffic to stores. Without traffic, there would be no online retail.
• For offline retail, in the face of the current retail environment, it is also necessary to change the traffic thinking. Only by changing the traffic retail thinking can we effectively overcome the current situation of a continuous decline in the number of visitors.
• For retail companies, sales = number of customers * average customer spending. In the current environment, the focus of business operations needs to shift to the number of visitors and traffic. Hema has abandoned the theory of average order value, which should be the result of shifting its business focus more to the traffic end.

Traffic needs to be managed through operations. For offline retail companies, they cannot rely on the traditional thinking of attracting traffic with goods. Instead, they should adopt more effective traffic diversion measures to effectively manage traffic.

Both online and offline retail are currently facing the reality of traffic peaking. The future retail logic must shift to creating customer value. From a certain perspective, the cost of attracting customers is relatively fixed, and how to increase customer value will become the focus of retail operations.

Whether it is online or offline retail, companies cannot always focus on attracting traffic, but must gradually shift the focus of their operations to creating customer value. Only by managing traffic well and creating higher customer value can we achieve better business goals.

At the same time, traffic will definitely be a very important resource in the future. Online companies are desperately looking for traffic and spending huge amounts of money to direct traffic. They are also paying attention to offline traffic, especially the relatively low offline traffic costs. For offline chain enterprises, how to manage the current traffic and make it play a greater value is a new issue that enterprises need to seriously consider.

In fact, in the Internet environment, traffic must become a form of Internet connection. Without connections, the value of traffic cannot be expressed. But if it becomes a link relationship, and your traffic and your customers become an online method, then it becomes a very important and very valuable traffic resource.

Establishing customer links is an action that offline companies must complete, whether it is to effectively solve current practical problems or to conduct research from the perspective of traffic in the future.

Author: Bao Yuezhong

Source: Bao Yuezhong