Platt Perspective on Business and Technology

Online store, online market space – part 10: audits and reality checks

Posted in startups, strategy and planning by Timothy Platt on June 29, 2010

I have been adding to this series on building an online store for just over a month now (see Startups and Early Stage businesses, postings 20 through 28) and have reached a logical point for stopping and taking stock of what is being done, what is working as-is, and what needs to be replaced or adjusted. This posting picks up on the issue of reviews and audits, and on setting up a system for ongoing analysis of marketplace position and business performance.

Any ongoing business enterprise should do this and on a regular, ongoing basis. I add that when I write here of audits I do include auditing the books and the business’ finances but I also include a 360 degree review of the business as a whole, in identifying emerging problems and opportunities.

• Who is picking up on your marketing outreach and coming to your web site, and from which of your marketing campaigns?
• Where are they going on the site when they get there and if they click away from your site where do they do this from? Are there any patterns or trends in this?
• Are they opening up online shopping carts and initiating sales transactions with you, and if so for what?
• Are they completing these transactions to completed sales, and if not where are they falling away and abandoning those shopping carts and what is in them that does not get purchased?
• What are they removing from the shopping cart, deciding not to buy when they do make a purchase?

Patterns and trends are very important, and both for what is selling and for what is not. And for the what is not side to that, it is important to understand as fully as possible if this be because you are offering goods and services that the marketplace does not value, at least at your price point or if this is a failing of your marketing, your web site per se or of your online ecommerce solution with the shopping cart capability you offer.

Trader Joe’s is primarily a bricks and mortar grocery store oriented operation, but one of their best practices merits mention here for any online store too. They track the sales performance of every type of item, every single stock keeping unit (SKU) they have in stock and they are continuously removing from their inventory a set percentage of items that show as lowest for sales performance. Each of these removed items is then replaced with a new item that their marketplace research and their review of their own customer’s purchasing patterns would suggest might be a viable addition to their inventory, and at least for the current season. This means they are continually refreshing their inventory patterns and both to reduce the coverage of items falling out of favor, and to add in new items that may be gaining in marketplace value.

And yes, auditing generally refers to reviewing and validating your books and your financials that they represent and that has to fit into this too. Bottom line, keeping your inventory selection updated and keeping your business processes and priorities updated should all connect to your top and bottom lines.

A principle measure of your operational efficiency is in how effectively you can keep your business set up and functioning and on how close to optimized you can bring it – with market share the ultimate measure of effective optimization. A principle measure of your strategic efficiency is in how well you can predict shifts in the marketplace and prepare for them so as to keep that effective inventory balance and level, and so that you can capture and retain that solid market share. Audits, performance reviews and reality checks provide the raw data that makes this possible so they are key to your long term success.

The next posting in this series is going to look into making your online store a marketplace asset that can break out of the crowd of your competition as a market leader.

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