Ecommerce and Coronavirus: How Online Stores Can Endure
Our mission here at CM Commerce has always been to help small businesses grow, be better, and achieve their goals. As COVID-19 has spread worldwide in the last few months, it has infiltrated many areas of our lives, as well as our businesses.
We’ve spoken with many entrepreneurs, business owners, and generally wise people to collect ideas and tactics to help small businesses navigate these tough, uncertain times. We’re now sharing these ideas and tactics in this guide to help as many small businesses come out on the other side of this pandemic as we can.
On a personal note, I’m also a founder. My co-founders and I started building WooThemes and WooCommerce back in 2007. And then, of course, we hit the 2008 financial crisis. While I look back and recognize that we were in the right place at the right time, there is also a tremendous amount that we learned in building and selling a digital product while working to weather the storm.
We were very close to running out of runway, like many small businesses are either fearing or already facing. Our focus on financial discipline, cash-in-hand, and building a brand our customers love are all areas that small businesses today can focus on to survive and then thrive.
Cash is king right now.
Let’s start with a simple, universal truth in business: If you run out of money, your business is dead. Thus, it’s also no surprise that one of the most prevalent reasons that small businesses fail is due to cash flow problems.
What most people don’t know is that when we were building CM Commerce (then, CM Commerce), we almost ran out of money. We bottomed out in November 2017 with only about $5k in the bank, and I had to defer my own salary. Many of the tips and ideas I’ve shared below are the things that my team and I had to implement in 2018 to return our business to a healthy (and eventually growing) state. It was not easy, but it made survival possible.
Know your numbers.
Your first task will be to get truly familiar—and even intimate—with your current financial situation and your numbers. You need to know the health of your business today to determine what you need to address or change as you navigate the coming months.
We would recommend paying particular attention to the following numbers:
- Gross profit and gross profit margin: Having a very accurate figure for this that includes a detailed cost of goods sold (COGS) calculation is very advantageous. This number matters, because this is the amount of money that you have available to serve the rest of your business. If you need help calculating your COGS and gross profit margin, these two resources will be helpful: How to Calculate COGS and Why It Matters for Retailers and How to Calculate the Real Cost of Goods Sold.
- Fixed expenses and overheads: These are the costs that are difficult (or impossible) to reduce, and they neither go up nor down based on how much you’re selling.
- Break-even point: This figure is important, as it tells you the minimum amount of revenue you need to break even every month—meaning you’re not losing any money. Getting to your break-even point thus becomes your first goal every month. (Here’s a great article and tutorial on how to calculate your break-even point.)
- Customer acquisition cost (CAC) and average order value (AOV): You’re likely marketing across multiple channels, and it’s important that you understand what the CAC is for each of those channels or campaigns. If you run a paid ads campaign on Facebook, for example, that has a CAC of $50 and your AOV is only $75, then you’re unlikely to be making money on that campaign (since you still have to consider COGS, too). In tougher economic times, you’ll look to eliminate or pause the campaigns that are not profitable in their own right.
- Cash reserve: How much cash do you have in the business today? Or how much cash can you get access to immediately (whether through a personal loan or access to an institutional credit line)?
Now that you have familiarity and understanding of these numbers, there’s two things you should do:
- Increase your monitoring of these numbers and the cadence at which you review. For the foreseeable future, I recommend that you review these numbers on a weekly basis so that you can spot changing trends and address them proactively and quickly.
- Model a few different scenarios, where you anticipate various levels of drops in revenue. I’d recommend looking at scenarios where your revenue drops 10%, 20% and 50%. If that happened, what does it mean for your cash needs? How much cash do you need in the worst case scenario?
Reduce unnecessary expenses.
Basecamp was founded in 1999 and has thus lived through two significant economic downturns—2001 and 2008. Jason Fried, co-founder at Basecamp, speaks about a different perspective of success: Outlasting. He flips the way we think about business and expenses entirely:
“Rather than thinking about how much you need to make to cover your costs, think about how little you need to help you survive as long as you want.”
Right now, you have more control over your expenses than you have over revenue. If you were able to reduce your expenses, you improve your cash position and increase the likelihood that your business can outlast this pandemic.
Now that you’re extremely familiar with your numbers, here are some ideas to reduce your expenses.
1. Put on your bootstrapper hat.
Bootstrappers know that they need to maximize the output of every input, because inputs (time / money / attention / energy) are generally their scarcest resource. In other words, eliminate or reduce any expense that isn’t currently contributing to revenue.
As our businesses grow, we all incur a few luxury expenses or indulgences that make our work more fun. But in tough economic times, these are the first expenses to cull. When CM Commerce hit our own cash crunch, we delayed our team off-site retreat (and then downgraded it) to reduce the total cost greatly compared to previous retreats.
2. Consider your people.
Your employees and staff are likely the biggest cost center in your business. And what usually happens in tougher economic times? People get retrenched or laid off.
CM Commerce has always been a life- and family-first company, and we’d implore all businesses to try avoid having to lay off staff. Doing this creates collateral damage and has a broader impact on our societies, because your team members currently rely on you for their (and their family’s) well-being. We understand this is not an easy situation, but here’s a few things to consider:
- Is it possible for everyone on your team (yourself included) to take a temporary pay cut (which could defer to some future point)?
- If your country has good unemployment insurance benefits, could you temporarily lay them off and rehire in the future? (Note: We’re not lawyers and would advise you to get expert legal advice before considering this.)
- Are there other businesses in your community that are currently thriving that need good people? Could you temporarily outsource (and invoice) some of your team members to those businesses? This reduces your expenses and ensures your team is still well-remunerated.
3. Do a full audit of your online subscriptions and apps.
Technology and software have become much more cost-efficient in recent years. But the flipside to this benefit is this: Many of us have $10 or $20 monthly subscriptions we’re paying for, and, even though the software isn’t used much, the hassle of cancelling compared to the low cost means we just keep paying.
But at this current moment, cutting out things that don’t create direct value is crucial.
As you start cancelling apps and services, discover how to identify which subscriptions and apps you can eliminate in this video, and then consider the following:
- Instead of eliminating an app completely, could you negotiate a payment holiday or a temporary discount?
- If you remove an app now, what is the cost of losing the data and time investment to set it up again?
- Do you own the data and does the app drive long-term value? For example, you own your email and SMS list, which makes them great solutions to keep in place.
Manage inventory levels.
When we talk about your cash position and how to improve it, the most liquid asset you have is your inventory. What that means is that when you sell inventory, you get cash in the bank. The converse is also true: When you have high levels of inventory that isn’t selling, you effectively have cash that is inaccessible.
So it makes sense to review your inventory levels and reduce the amount of cash you have tied up in inventory. It’s important, however, that you don’t merely try to cut half of your inventory in one go, because that may harm your business. Here are a few steps to help you know what and how to cut:
1. Prioritize your best products with the highest margins.
The first thing to do here is to identify your best-sellers and fast-movers from the products that don’t sell as often or as well.
Another consideration is the gross profit margin for each product, so you can prioritize the higher-margin products. It’s important to know this, as part of your strategy would be to keep higher levels of inventory for these prioritized products, while drastically reducing levels of other products.
2. Speak to your suppliers.
Speak with your various suppliers and understand the situation of their businesses, too. What you need to learn is what measures they’ve taken to ensure they can keep supplying you with products, and what potential delays could look like.
If for example, the supplier of your best-selling product expects major delays in the future, it would be smart to perhaps increase levels of inventory for that product. As a rule of thumb, the greater your faith in your supplier’s contingency planning, the lower your inventory levels can be for those products.
3. Proactively communicate delivery times to your customers.
Where you expect delivery times might be slightly longer than normal, proactively communicate that to your customers. Manage their expectations and explain why that’s the case. Don’t promise two-day delivery when you know that your supply chain may be interrupted. Your best customers will appreciate your honesty and transparency.
4. Enable pre-ordering.
Most ecommerce platforms can support some kind of pre-ordering mechanism, or allow you to sell inventory even when the current stock level is zero. Enabling these functions means that you can still make the sale today and order new inventory from suppliers in cases where you’ve unexpectedly run out of a product.
More ways to boost cash
We’re including a few other tactics here that may help you to boost the amount of cash available in your business. The bottom line: Businesses that move quickest on these tactics will have a greater advantage.
1. Become an affiliate.
Not all brands and industries are as impacted as others, so if there are brands that aren’t direct competitors, are related to your brand, and have inventory, then explore if partnerships are possible. If you have an audience and a partner has product, you can monetize in the short-term (and possibly long-term).
Here’s a video detailing four strategies to grow your brand with smart partnerships.
2. Get your receivables paid.
If you have any kind of debtors or receivables in your business, try and get them paid ASAP before those businesses experience a cash crunch.
3. (Re)Negotiate payment terms with your creditors or suppliers.
Try to negotiate better payment terms with any of your creditors or suppliers. If you’re cash on delivery at the moment, try to move to 30-day terms. Or, if you’re on 30-days already, try moving to 45 or 60.
Anything that helps you delay cash out of the business is a win here.
4. Speak to your landlord.
If you have a lease for a storefront or office, speak to your landlord immediately and try to negotiate a payment holiday for your lease payments. The way to pitch this to the landlord is that if they can help you survive for the next couple of months, you’ll be able to continue paying your lease in the long-term. If they don’t, and your business fails, they’ll have to replace you (which is very hard in an economic downturn).
5. If you have any debt, call your financier today.
Similar to your landlord, speak to your financier or bank about a repayment holiday, or at least moving to paying only interest for a couple of months (instead of having to pay back capital, too).
6. Move your money around.
If you have an existing line of credit with a bank, know that they could revoke that (completely or partially) if they start feeling the financial crunch. Draw down on that credit line and keep the cash in a different bank account (with another financial institution), which ensures that you have access to that cash.
Your bank may still call back that line of credit, but when the money is not with them, it is much harder for them to do so unilaterally.
How to put yourself out there
Your business—and thus your marketing, communication, and customer interaction—does not need to come to a complete standstill. And while it’s true that the business environment has changed and continues to change, this simply means it’s critical how you put yourself, your business, and your brand out there.
As a starting point, I’d love to borrow a term from my home, South Africa. The Zulu term is “ubuntu,” and it can roughly translate to “I am, because we are.” Nelson Mandela explained this well:
“In Africa there is a concept known as ubuntu—the profound sense that we are human only through the humanity of others; that if we are to accomplish anything in this world it will in equal measure be due to the work and achievement of others.”Nelson Mandela
This is a reminder that we’re all in this together. There is a global community of millions of small business owners that are all facing the exact same issue. And, beyond that, as world citizens, we also face the same uncertainty and consequences of battling a pandemic.
So as you put yourself and your business out there, remember ubuntu, and the empathy that comes with that mindset. When we all unite to do that, we are the rising tide that lifts all boats and, increasing the success rate of all our businesses.
The best way to achieve greater levels of empathy is to change your communication from sales-driven to people-driven.
That means toning down communication or campaigns that are too salesy, pushy, or overly aggressive in your brand marketing. We also highly encourage businesses to not leverage the situation in which we all find ourselves at risk of profiteering. The biggest risk here is coming across as insensitive, which might irreparably harm your business.
We loved this example from HardGraft, a luxury lifestyle accessories brand. This email is entirely customer-centric and also balances the brand’s need to continue to sell.
I already love HardGraft products, so it’s unlikely that the COVID-19 pandemic—or any scenario out of their control—will make me love their products less. But receiving this email made me love the brand and the people behind it, making me more likely to purchase again in the future and advocate for the brand today (as I’m doing in this post).
Within our greater Marigold family, Campaign Monitor, Emma, and other brands have implemented a similar approach by giving the option to pause all marketing emails for 30 days in their recent newsletters. As we thought about our audience, we thought some people may want to keep working and keep business as usual, while there are many that have heavier things on their mind. So we gave them a personalized choice, instead of making a sweeping decision for everyone.
And our hunch was right on—subscribers reached out to show their gratefulness for this message. Here are a few messages we received:
Not sure where to start? Here are a few ways to make your communication more people-driven:
- Pick someone in your business (this can be the founder, owner, or anyone else) to be the dominant voice of your brand for the coming weeks. Write all your communications—especially your emails—from that person, using their unique voice and tone. (PS: A lot more email recommendations are further below.)
- Be personable, tell stories, and share quirks. We’re still social beings, and, with many people practicing some form of social distancing right now, these little moments of connection will mean a lot (for your customers and your brand).
- Aim to spark conversations and try to have those in the most one-on-one way you can. The well-known venture capitalist, Paul Graham, famously said, “Do things that don’t scale.” Having interesting, meaningful conversations with your audience is the best thing you can do right now.
- Your actions will always speak louder than your words. If there’s any way you can help other small businesses like yourselves, do that and tell—not humblebrag—your customers about it. It’s all of our responsibility to help small businesses survive. Or, if you have excess of anything, whether time, money, inventory, expertise, or special skills, see if you can share that in support of other businesses.
Be transparent and vulnerable.
This is a great opportunity to be more transparent and vulnerable than you may have been before. As an example, it’s okay to ask for help or support, explaining the situation and context for your and your business.
If you can’t ship customer orders as quickly as you used to because your manufacturer has been delayed, then be proactively honest about that. It’s better to manage your customers’ expectations accordingly. Here’s a great example from Maison Miru in doing exactly that:
Similarly, it’s okay to be honest about any serious financial trouble in which you may find yourself right now and using that to connect to your customers or audience for support. The key here is to be authentic and truthful—and not to abuse this trust. It only takes a single miss-step here for your customers to feel abused, resulting in them ignoring further requests for help.
Transform your email marketing.
One big positive in times like these is the value of your email marketing and the fact that you own your mailing list. Time and time again, email marketing proves to be one of the most cost-efficient marketing activities that businesses can undertake.
When we founded Woo, Google Ads was less sophisticated and Facebook Ads were just announced, so we had to rely on two things: our blog (content marketing) and mailing list. And we made it through the last recession by creating relevant content and getting it in front of our subscribers.
Even today, those that rely on ad platforms are constantly at the whim of changing algorithms and prices. Email is the channel to consistently reach your audience.
While CM Commerce itself is more than 6 years old, we’ve compiled some of the best advice for you to transform your email marketing and pulled in a few favorites from our family of brands within the Marigold, including Campaign Monitor, Emma, Liveclicker, Sailthru, Delivra, and Vuture. In 2019 alone, all of our brands sent more than 131 billion emails. So, with that combined knowledge, here’s some timely advice.
Start with an audit.
The very first thing you should do is a full review and audit of your existing email marketing automations. We know that automating things is generally also accompanied by a “set-and-forget” mindset, which means that, as we address the other never-ending to-do’s in our businesses, we don’t necessarily look at the things we set up weeks or months ago.
In reviewing your emails, update and adjust your voice, tone, and selling according to the current climate (make sure you’ve read the chapter above: “How to put yourself out there”). It’s more imperative today than ever before that you meet your audience where they are at.
Here’s a practical guide to updating your emails:
- Know that these are temporary changes only. Give yourself an easy way to revert to your existing, successful tactics and campaigns when the time is right and we’re beyond the worst parts of COVID-19.
- Instead of making changes directly to existing emails, workflows, or templates, we recommend that you duplicate existing emails and make changes to the duplicates. You could rename them with the date added on so you know which is the original.
- You can then deactivate the workflows that are active today and replace them with the duplicated and revised workflows instead.
- Beyond the fact that you can easily revert back to the originals, you’re also giving yourself a good benchmark and comparison of how your email marketing campaigns perform during this time (compared to the past and future).
Reassure your customers.
As the COVID-19 outbreak has shown, it’s crucial to communicate to your customers what actions you’re taking and how those things may affect them. Here’s an example of such an email from CM Commerce customer Sugarhill. They craft this email perfectly: It’s personal, authentic, and covers the most important information that customers may need.
These assurances should, however, go beyond pandemics or temporary, extraordinary events. Giving your customers assurances that you have their best interests in mind will increase the likelihood that they’ll still purchase from you.
When communicating this to customers, here’s a list of things you may want to address (depending on the macro-environment and specific concerns you need to address):
- What measures you’ve implemented to safeguard your business.
- Any measures you’ve taken to improve sanitation at your office, warehouse, or factory.
- Whether you’ve been able to organize contactless delivery with your fulfillment partner.
- If you and your team are working from home, explain how that influences your ability to run the business.
- Any updates or considerations that may affect delivery times. A good example here would be to relay how you’re working with your suppliers (as we mentioned in the “Manage inventory levels” section) to ensure a consistent supply of products.
- And finally, show your face. Show the people behind the scenes and behind your brand that will continue to serve your customers.
Focus on conversations.
One of the best things you can do with your emails right now is to be more personal than you have ever been. The key is to be lighthearted and positive without being insensitive. You want to be the silver lining in your subscribers’ inboxes whenever you send them an email.
When crafting your emails, here are a few tips to keep in mind to make it more personal:
- Consider toning down the design of your emails to something that looks more like a personal letter. It doesn’t have to be plain text, but something less-in-your-face will go a long way. (Here’s a an example from a CM Commerce customer.)
- Share your journey and what you’re doing to keep your business alive and your health in check. Focus on telling and sharing stories.
- Try engaging individual subscribers with one-on-one conversations. Find those connections, share a few emails back and forth, and build better relationships with as many of your subscribers as you can.
- You can even use these one-on-one conversations as the best way to possibly sell. Being closer to them means you’re likely to better understand their needs and make greater product recommendations.
Be smart about campaigns.
As we’ve mentioned a couple of times in this guide, sales-heavy campaigns are unlikely to deliver the same results at the moment as they would’ve in the past. Flash sales, deep-discounts, and promotions just don’t feel as good at a time when your customers are probably experiencing real scarcity and urgency for necessary goods/
We do, however, have a few suggestions for email campaigns that could work well.
1. Gift cards or vouchers
Run a campaign where you ask your audience to support your business by buying a gift card or voucher that they can redeem at when they feel comfortable ordering again.
Many customers may have concerns about buying and receiving goods at the current moment, so this campaign eases some of that fear. Or maybe they’re being more conservative with their expenditures, which means they may purchase a smaller gift card now and use it towards a bigger purchase in future. The benefit of this campaign is that you’re effectively pre-selling some of your products, which means getting cash into your business in the short term.
Here’s an example (shared by Shopify expert Kurt Elster) of how Mario Tricoci implemented this campaign. What makes this even better is how they enabled customers to tip technicians directly at their store (remembering that many workers rely on tips).
2. Charitable donations
Instead of running a discount-based sale (e.g. 20% off all products), instead sell your products at full price, but donate 20% of the proceeds to a charity helping others affected by COVID-19.
The financial impact here for you is the same, because you’re still sacrificing 20% of the revenue. But by donating this to a worthy cause, you’re not only promoting your own agenda, you’re also contributing to a greater good. This philanthropic act should appeal to your audience during these times and will thus be an incentive for them to make a purchase with you now.
3. Pop-ups, lead magnets, and welcome series emails
We know that one of the most prevalent tactics that many ecommerce brands use is a pop-up to offer website visitors a discount for their first purchase when they sign up for their mailing list. The question here is: discount or no discount?
One way to approach this is to still offer and include a discount, but to tweak the messaging to be considerate of the current market sentiment. The way that Supply messaged their offer might resonate:
As their co-founder, Patrick Coddou, notes in a tweet, this is an experiment they’re running. What I like about this is that there’s a relatable part of this (markets are down, so we are decreasing our prices, too) and that this is a site- or catalogue-wide discount.
The other approach to take here is to go without a discount, which is the softer, non-salesy approach. You would still use your popups, but instead of offering a discount, offer another resource instead. Something like entertaining or helpful content unique to you or your brand.
Get even better with segmentation.
Using great segmentation in your email marketing is one of the best ways to better personalize your emails, which means finding your customers where they are right now. Making decisions based on your customers’ past behaviors and adjusting your email marketing to trigger and adapt accordingly will improve your ROI from email marketing.
Here are a few things that you can try to increase the engagement and conversions of your automated workflows:
- Rely more heavily on your repeat customers that have a higher total spend or lifetime value with you when appealing for support. These customers have shown a certain level of affinity for your business and brand, which means they’re more likely to continue doing so.
- Segment your browse abandonment campaigns to have separate workflows for products with a high and low gross margin. For the higher margin products, you can consider adding a discount, or increasing the discount already available. To do this, you need to know your numbers, and make sure that these sales are still cash-flow positive for you.
- For your cart abandonment campaigns, consider segmenting based on which products have been left in the cart. When you have products that are well-reviewed and have a high rating, you could possibly reduce the discount offer in those campaigns (thus increasing your gross margin on those sales). You should also definitely be including social proof in these emails, because that becomes a great incentive for prospective customers to take action. CM Commerce customers that have implemented social proof in their cart abandonment emails have experienced bumps of between 5%-15% in their recovery rates.
More time than money?
As the last part of this guide, we wanted to put a call to action out there if your business is actually doing okay right now. Perhaps you’re in an industry or have a line of products that’s healthy and will remain so. Or maybe sales are already slower, but you have good cash reserves and a contingency plan, so you’re confident that you can ride this wave out.
Then the question is: What should you do with your time?
1. Strengthen your business.
A good goal to set yourself today is to come out of this pandemic with a stronger business. Your strength might not necessarily be financial, but are there other ways you can fortify?
Remember that your finances can always recover. Even if you had to increase debt or decrease cash reserves, you can always rebuild that. So put yourself in the best possible position to rebuild after this pandemic and when the economic markets are more favorable again.
Start with the parts of your business that you often neglect, and address the things you’ve procrastinated on for a while. Improve your systems, clean out the proverbial digital closet, or automate a process that you know has been sub-optimal and inefficient for your team.
2. Get to know your team.
Your team members and employees are likely going through a tough time, and might be more anxious and stressed. Perhaps they have an elderly parent they’re concerned for, or a child that is immunocompromised.
Use this slower season as an opportunity to really get to know every individual on your team and learn about the things that are challenging for them today. This kind of empathetic connection will strengthen your relationships, which should mean greater collaboration and team morale in future.
But beyond the business value of this, it’s valuable to connect together as human beings in a challenging time. When we relate and connect, we also keep our own emotional and mental well-being in check.
If there’s a way for you to leverage your business during this time to support your team, this could be one of the best investments you can make.
3. Could you help other businesses?
Do you perhaps know other businesses that could use some help? Maybe there are other businesses in your community to whom you can reach out and offer your help, time, or expertise?
Or maybe you can just encourage your team, friends, family, and even customers to support local, small businesses as much as possible during this time.
A rising tide lifts all boats, and uniting around a common enemy is the best way that we can decrease the negative economic impact of this pandemic.
Even if you don’t believe in karma, all of us have experienced the warm fuzzies that accompany that moment where you know you’ve helped someone in need.
During challenging and uncertain times like these, leaders have an added responsibility to make good decisions and guide those around them. As a business owner, entrepreneur, and leader, it might feel like you have the weight of the world on your shoulders right now.
Not only are you probably wearing multiple hats in your business already, where you need to juggle a variety of critical tasks, but you might also be the one that’s responsible—financially or emotionally—for the well-being of your family or others close to you.
This is hard. And there is no way that I can mitigate that sentiment.
What remains important here is that you practice great self-care and make sure that you stay healthy and positive. That likely means trying to get some exercise (healthy body, healthy mind) and ensuring that you make time for connection with significant people in your life (even if it’s just a daily FaceTime call).
Also know that not everything is in your control. Even if you perfectly implemented everything I’ve shared in this guide, things you don’t control may still negatively affect your business.
Now is a time to focus on doing your best and prioritize the things that you can control. By reducing your anxiety and stress about the things that you can’t control, you’ll be in a better emotional state, enabling you to be pragmatic in how you lead your business, team, and families through this time.
About the author
Adii Pienaar is the VP of Comerce Product Strategy at Campaign Monitor. Having launched WooCommerce in 2007, CM Commerce in 2014, and PublicBeta, an online learning community for entrepreneurs, in 2014, Adii has vast experience in ecommerce, email, and bootstrapping entrepreneurship.
Having worked with hundreds of thousands of businesses, Adii has seen the impact of ecommerce on a much broader scale, bringing a very specific perspective to marketing: one that is to be profitable first-and-foremost.