Deconstructing the universal formula for e-commerce operations

E-commerce operation is the most special operation position in the entire operation field. After all, among all Internet companies, e-commerce companies undoubtedly account for the largest proportion. Moreover, the e-commerce model is also constantly evolving, from traditional e-commerce to new media e-commerce, to community group buying e-commerce, and the hottest live streaming e-commerce nowadays.

No matter what type of e-commerce it is, its essence is to sell goods. How long a store can last and how big it can be depends largely on its operational capabilities, in addition to its product quality. Therefore, as an e-commerce operator, the skills required are higher than those of other operation positions.

I don’t know when it started, but practitioners in the e-commerce industry began to blindly pursue strange and tricky techniques. For example, articles or courses such as “How to quickly create a hit product”, “Get on the homepage in 7 days”, “Newbie traffic exceeds one million”, etc. are very popular. In fact, these are just exploiting loopholes in the platform. You can't say it's useless, but it's definitely not a long-term solution. And it carries a fairly high risk.

So, as e-commerce operators, how should we learn or improve our professional abilities? In fact, this should go back to the underlying logic. Only when you have mastered the most essential things and then add the above decorations, everything will become meaningful.

The universal formula for e-commerce

There is a so-called universal formula in the e-commerce industry:

Why is this formula called a universal formula? Because no matter from which angle you look at it, this formula has certain guiding significance.

The first thing is definitely sales volume, so that everyone engaged in e-commerce can be very clear about where their sales or profits come from! And what factors affect it! At the same time, for operations staff, data analysis can be used to understand what the store did not do well in the entire process! etc. It can be said that many e-commerce operations now use this formula to guide their work. Therefore, this formula can also be regarded as the underlying logic of e-commerce operations.

But there is a problem here, I wonder if you have noticed it? It may be precisely because of this problem that more and more people engaged in e-commerce are now overly pursuing traffic.

The problem is the order! In other words, for a store, which factor should be the most important?

Sales = traffic × conversion rate × average order value × repurchase rate. This is an analysis from the user's perspective. It represents the user's behavioral trajectory, which is what we often call the user path. After all, referring to the funnel model analysis, the bigger the opening at the top, the greater the boost to the final sales. But this shouldn’t be the case for you if you’re a company or a store owner.

Product Selection

We must know that no matter what kind of e-commerce model it is, no matter whether it is a corporate or individual merchant. The most important thing should be your product. In the currently most popular live streaming e-commerce, the most important and core ability is the ability to select products. Because this largely determines whether your store will be successful in the end. In this formula, the factor that represents the ability to select products is actually the average order value.

In addition, as refined operations are gradually gaining attention, operations are beginning to shift from traffic operations to stock operations. The cost of obtaining traffic from outside is getting higher and higher. More and more companies and businesses are beginning to pay attention to the construction of private domain systems. If you want all of this to operate for a long time and develop healthily, the first requirement is that your product must be strong. Even if not all products are of high quality, at least they should not be defective products or products with obviously poor price-performance ratio.

Maybe you will sneer when you see this, thinking that the average order value is just a price. What is there to talk about? Do I have to offer promotions at low prices every day? Even if the cost is bearable, the profit will not increase!

Yes, if we analyze it purely from the perspective of the formula, the average order value is just a number. But for e-commerce operations, average order value is more than just a number. Whether it is keyword search promotion in traffic or activity positioning in event operation, it is actually inseparable from the product capabilities. After all, no matter how fancy your traffic-generating copywriting or event format is, in the end you still have to rely on the product's capabilities to attract, retain, and convert users. The reason why more and more people are beginning to pay attention to the so-called content operation is because it can help us refine product selling points to meet user needs.

So since this universal formula is the underlying logic of e-commerce operations, why not go a step further and see what is behind each component? !

So how do you choose products? (This is mainly for beginners or full-time/part-time newcomers who plan to enter the e-commerce industry. If you are already a veteran or a business owner, you can ignore it! Go directly to the "Conversion Rate" section below)

Regarding product selection, or what should a store sell? First of all, I hope everyone can understand one thing: big fish eat small fish, and small fish eat shrimps. No matter which e-commerce platform, what to sell and whether you can sell it are two different things. Although many categories seem to be feasible, they are not very friendly to small sellers, such as clothing, shoes and bags, food, furniture and appliances, etc. On the one hand, there is the issue of category qualifications, and on the other hand, there is the issue of operating costs. Don't be fooled by some big guys who emphasize the industrial chain. As a newcomer, if you need to support an operation team and connect with the industrial chain by yourself to do a part-time job, it is simply a fantasy. Of course, for enterprises or people with sufficient funds and resources, that is another matter. After all, the industrial chain is still very important. But before that, you need to figure out your position and the actual situation at this stage. So how should newcomers choose products? We can think about this problem with reverse thinking, that is, what things should never be sold. For example, clothing, shoes and bags, why? Because of this thing, the market competition is fierce, the requirements for selection are very high, and there are many specifications. If it is drop shipping, it is fine. But if not, the capital requirement will be very high. For example, if there is a skirt with many colors and sizes, how much money do you need to stock up?

So I personally recommend choosing some niche and unpopular products. So how do you find these unpopular niche products? Or what are the dimensions of judgment?

There are many ways to choose unpopular niche products. I will briefly introduce one of them here: for example, on the Taobao platform, you can use Business Advisor to select products. For example, if a certain category has a popularity of several thousand people, the conversion rate is above 10%, and the number of online products is not particularly large, then it is completely possible to do it. After all, niche products mean less competitive pressure. Although the market is not big, if you can do it well, the profit is still quite substantial.

Then when you find a niche product, you also need to check the qualifications required to operate this category (many times a product is illegal in this category, but completely acceptable in another category, so a small number of online products does not necessarily mean that there are few people selling them, this requires specific analysis of the specific situation). In addition, you also need to compare the market prices on the platform through the supply channels to see if there is any profit margin.

This is a simple product selection process. I won’t go into more details for now. Friends who are interested can leave a message. I can write an article on product selection when I have time.

Conversion rate

I personally think the second most important thing in the universal formula is “conversion rate”. Firstly, there are already too many articles on the market about how to efficiently acquire traffic, so I won’t go into details; secondly, in order to avoid wasting traffic and promotion costs, I personally think it would be more reasonable to pursue traffic only after ensuring that you have sufficient conversion capabilities.

Increasing conversion rate actually solves a problem: why are customers willing to pay? This depends on three aspects: user demand, user trust, and the opportunity cost of acquiring the product.

User requirements:

User needs are actually the selling points of the product, which is why it is necessary to sort out the product selection first. Whether it is the traditional e-commerce model or the most popular e-commerce live streaming model, the core is to constantly tell users that your product exists to solve one of their problems.

Whether it is the design of the main picture, the design of the details page, the writing of the product title, the division of categories, or the host’s introduction to the product, etc., without exception, they all stimulate user needs based on repeated emphasis on product features.

User Trust:

The reason why live streaming sales are so popular is that this form solves the user trust issue by relying on the link between the anchor and the fans. If you watch those anchors, you will find that they often call their fans their family members, or give their fan groups nice names like celebrities. This is to narrow the distance between the anchors and their fans, so that people will trust them.

Another example is the operation of the private domain system that became popular last year. The reason why the private domain is so popular is that, from the perspective of merchants, the existence of inventory can effectively reduce advertising costs and increase the repurchase rate of goods. But what is more important is to solve user confusion and eliminate various distrust issues that users have.

The last point is service. E-commerce attaches great importance to service, both before and after sales. High-quality pre-sales service can effectively establish initial trust with users; after-sales service can further improve user satisfaction, thereby establishing a foundation for word-of-mouth marketing based on user reviews.

The opportunity cost of acquiring the product

When your product can meet user needs and users have trust in you, this does not mean that users will pay for it. Why? There is a term in economics called: price-quantity scale! This means that price and sales volume are a scale. The higher the price, the lower the sales volume. And when the price is low, sales will naturally increase. Therefore, it is necessary to set a price that suits the user's psychology. Yes, it’s the part about product selection that I mentioned earlier. So do you understand? The opportunity cost of acquiring a product actually derives from product selection, so product selection is the first priority, and then we look for ways to solve user needs, gain user trust, and finally improve conversion rates.

flow

The most talked-about factor in the universal formula is traffic! For many e-commerce people, traffic is a love-hate thing! Love is because when you have traffic, it seems that you can solve all problems, whether it is low conversion rate or poor product quality, in the face of surging traffic, it seems not worth mentioning. If there is enough traffic, there is no need to worry about sales, and the KPI of the e-commerce operator can be completed safely. The reason for hatred is that it is becoming increasingly difficult to obtain traffic, and the cost is getting higher and higher. There is a saying that if you open a store on Taobao, you will die if you fake orders, but you will be waiting for death if you don’t! The essence of this is that for a new store, without basic sales, there will be no more traffic coming in, and the store means it’s over.

As a result, the market is full of articles and courses on how to obtain traffic at low cost. In fact, from my point of view, traffic is actually the easiest thing (please put away your bricks first~~~)

Because the sources of traffic are nothing more than two situations, one is paid traffic, the other is free traffic. No matter which platform you are on, traffic is made up of these two situations. As for paid traffic, to put it bluntly, it is buying traffic with money, so as long as you have enough funds, you don’t have to worry about the traffic problem. The only problem is to see who can make the most of the little. Different operators can control different cost expenditures for the same exposure, so as far as paid traffic is concerned, there is no problem of no traffic, it is just a problem of technical skills.

As for free traffic, it is actually quite important, especially for those who want to do e-commerce part-time or small and medium-sized enterprises that do not have sufficient funds.

Let's talk about free traffic. Different platforms will have free traffic sources. It is impossible for all of them to be paid traffic. After all, although the platform can earn more marketing fees from large merchants, it must also allow small and medium-sized enterprises and individuals to survive, otherwise it will be very fatal to the platform. The free traffic of any platform includes search traffic (search traffic is also divided into paid and free, and here we focus on the free part).

We must know that the significance of search engines is to present content to users as soon as possible. The key factors that affect search traffic are: display volume and click-through rate. The relationship between them is:

Impressions

The display volume of your product is determined by the search volume of the keyword and the ranking of the product under this keyword. Any platform is similar, and basically refers to the model of search engines such as Baidu and Google, which is usually called weight.

For newcomers who do not have sufficient funds or work part-time in e-commerce, the best way to obtain more traffic through search engine traffic is to use long-tail keywords. Why? Currently, any e-commerce platform has the same competing products in almost every segment, and as a new store or a new product, your weight can be said to be almost 0. In this case, you have no way to compete with your peers for keywords with high traffic. But long-tail words are different. The characteristic of long-tail words is that they are more focused. When users use long-tail words to search for products, their needs are clearer and the matching accuracy is higher. Therefore, although the overall traffic of long-tail keywords is not very large, it is enough for newcomers.

Click-through rate

Once you have a certain amount of exposure, what you need to consider is the click-through rate. After all, only the amount of display is meaningless for conversion. Among them, the main picture, price and sales volume are the main factors affecting the click-through rate. Here, the price is related to your product selection, and sales volume is related to your price, product, etc. It is not so easy to operate. So the best way is to use the main picture to increase the click-through rate. This is the part that traditional e-commerce values ​​most. For some new e-commerce models, such as live streaming e-commerce, the factors that can affect the click-through rate are not just your product main picture, but also people, goods, and places. This is also the reason why models like live streaming e-commerce attach so much importance to the three-dimensional theory of "people, goods, and place". Because they are indispensable! I won’t go into detail about this issue due to the length of this article.

In this e-commerce formula, traffic is actually the simplest thing. Because as long as you have enough money, you can naturally increase the traffic. Therefore, traffic costs the most money because it accounts for the largest proportion of total output, so many companies are eager to find a way to solve the problem of traffic becoming increasingly expensive. But in fact, the best solution is not external, but internal. That is to shift the goal to solve the problems of product selection and conversion rate. These two are actually the most difficult, because they are hard to solve with money (problems in this world that can be solved with money are actually not difficult problems).

Therefore, for e-commerce operations, the most important thing in this formula should be the average order value. The meaning behind it is product selection, followed by conversion rate. Finally, when your product selection and conversion rate are OK, it will make sense to pursue more traffic.

Finally, let’s talk about the issue of repurchase rate. As for improving the repurchase rate, it is actually divided into two parts. First, you have to do a good job in product selection and conversion rate, and then you can pursue the improvement of repurchase rate. The best solution at present is: private domain system

It is not that you should start building your own private domain system after your repurchase rate goes up. Instead, you should build your own private domain system first and then find ways to increase the repurchase rate through operations. This is a question of sequence, but more of a question of logic.

I won’t go into details about how to build a private domain system and how to increase repurchase rate through private domain operations. Just providing an idea and perspective. After all, this is an article about disassembling the universal formula of e-commerce and re-examining the core factors of e-commerce operations, not a practical article. If you want to know how to build and operate a community, you can take a look at the soft article I pushed before, "Practical Guide to Community Building and Operation". Of course, there are certain differences between private domains and communities. Regarding the private domain system, I will also talk to you when I have time later. Thank you.

So to sum up: the universal formula for e-commerce operators should be like this:

The first priority of e-commerce operations is your product selection, followed by improving your conversion rate, and then starting to build your own private domain system, connecting the three and allowing your marketing to enter a virtuous circle. Finally, you should continue to expand the traffic and attract more users into your pond, so as to make your store bigger and stronger.

At this point you may ask, after talking so much, it seems to be of no use? It says that traffic is not the most important thing, but it does not specifically explain how to solve the problems of product selection and conversion rate. Yes, this is not a practical strategy article. The reason I wrote this article is mainly because I feel that more and more people are paying too much attention to traffic and ignoring the issue of internal strength. For newcomers in e-commerce operations or those who want to work part-time in e-commerce, I think it would be more meaningful to understand these things first. Although there is not more practical content, at least people will not go in the wrong direction right from the start. Moreover, for many small and medium-sized enterprises that do not have sufficient funds, it makes more sense to spend more time optimizing themselves rather than pursuing increasingly expensive traffic.

Author: Pai Ye Operation

Source: Pai Ye Operation