Welcome to our new blog series, where we interview experts in the e-commerce field. We will pick their brains to uncover the best-kept secrets and tips about how to work within this industry.
At Clerk, we are always inspired by e-commerce experts and know there is a vast amount of untapped knowledge that deserves to be shared with a larger audience.
In the first of its kind, we’ve decided to start close to the heart with our very own CEO, Mikkel Novod.
Let’s get into it.
Mikkel’s top 3 e-commerce tips
Tip 1: Understand your product inventory and its turnover rate to improve your cash flow.
To thrive in the e-commerce landscape, understanding your product inventory and its turnover is crucial. Mikkel advises that e-commerce entrepreneurs should keep a close eye on their stock levels and monitor how quickly products are selling.
By doing so, you can identify which products are popular and plan your inventory accordingly. Additionally, analyzing turnover can help you streamline your supply chain and optimize your purchasing decisions.
For example, you may notice that certain products have a higher turnover rate during specific seasons or holidays. Armed with this information, you can proactively plan your inventory and marketing strategies to capitalize on these trends and maximize sales potential.
At Clerk, we’ve seen customers significantly boost their revenue and customer satisfaction by having a clear focus on having a “timely” inventory with key products in stock at all times. Having to wait for products to come back in stock frankly increases customer frustration and disinterest.
Another crucial area Mikkel emphasizes is the importance of tracking customer demand. Using sales data and customer feedback can help you identify trends and preferences and make informed decisions regarding product assortment. Understanding your product inventory and its turnover goes beyond simply knowing what products are selling well: it involves analyzing the data to identify patterns and trends.
For instance, if you notice that a particular product, let’s say a t-shirt, is consistently receiving positive reviews and high demand, you may consider expanding your inventory for that item or even exploring related products that complement it.
Understanding your inventory turnover also allows you to have a streamlined cash flow that significantly impacts your business. For example, let’s say you have $10 million in inventory, with a turnover period of 60 days (i.e., turning over your inventory around six times per year).
If you are able to decrease the turnover period to 30 days (i.e., turning over your inventory around 12 times per year) by having the right products in stock at the right time (both in terms of the products themselves, as well as the amount of these products), you will be able to free up $5 million in cash as you will only need $5 million in stock to service the same revenue.
And, with $5 million in hand, you can reinvest this optimized cash flow position into other areas of your business to ultimately make you compete more effectively with the same financial resources.
In short, understanding and optimizing your inventory is key to having a healthy cash flow (especially if you have low margins) and will give you a competitive edge as you will have a more efficient business model compared to your peers, helping you stay ahead of the competition while increasing revenue and customer satisfaction.
Tip 2: Understand your product mix to elevate your profit margins
No one likes “empty” revenue. Building a successful e-commerce business goes well beyond just having a wide range of products.
For Mikkel’s second tip, he notes that understanding your product mix is essential for maximizing revenue and profits.
Mikkel highlights the importance of categorizing your products effectively. By segmenting your offerings into meaningful categories, you make it easier for customers to navigate your store and find what they're looking for - for you to ultimately optimize both your top and bottom line.
When you have properly segmented your webshop, it becomes much easier to search for the right products. Having a good and efficient search function on your webshop is incredibly important for customers to initially find what they are looking for. Hereafter, it’s crucial that customers are inspired to continue to shop and add additional products to their basket.
As an example, upon integrating Clerk's advanced search, recommendation, and segmentation features, our customers have reported (on average) a 35% improvement in customer conversion rates. This spike can be attributed to the more intuitive, streamlined search process, allowing customers to find and purchase their desired items more efficiently.
Finally, with regards to Clerk, our Merchandising is a feature included in all our products and is vital to helping you maximize these sales. This feature enables you to promote specific products based on your unique business goals.
Not only that, but Mikkel stresses you need to know your revenue drivers and profit drivers. By analyzing your product mix regularly, you can measure the performance of each product, identify top sellers, underperforming items, and any gaps in your assortment. This valuable insight enables you to refine your product strategy and focus on what resonates with your target audience.
What does this mean?
Think of an electronics store. A television would be a revenue driver. This item could bring in many customers, but the profit from this item is marginal at best. This profit sometimes doesn’t even cover the cost of freight or warehouse storage, let alone the other prices associated.
This is where profit drivers come in.
These are products related to the revenue drivers but have a much larger profit margin, such as a TV cable or remote control. It’s vital that these products be sold with the revenue drivers to up your sales. Thus, if a customer has placed a revenue driver in their basket, show profit driver items alongside it!
Ensure your website is structured so that customers can see profit drivers every time they see a revenue-driving product. Using a tool like Clerk’s recommendations sliders is perfect for this, as they can be placed throughout the customer journey.
Our customers have seen a 20% increase in sales of newly introduced products or previously less-visible items thanks to Clerk’s smart product categorization and recommendation engine. By effectively promoting complementary products, Clerk can help shops maximize their sales potential across their entire inventory.
By understanding which products are driving the most revenue and which ones are not performing as well, you can make informed decisions about inventory management, pricing strategies, and product development.
For instance, if you notice that a particular product has consistently low sales despite being heavily promoted, you may want to reassess its positioning or consider discontinuing it altogether.
Tip 3: Understand your customers’ journey to deliver the best possible shopping experience
One of the crucial drivers of success in e-commerce is understanding your customers' journey. As Mikkel explains, knowing your customers' preferences, pain points, and behavior patterns can help you provide a seamless and personalized shopping experience.
Mikkel recommends implementing advanced analytics tools to gain deep insights into your customers' journey. By tracking their interactions with your website, from their first visit to the final purchase, you can identify areas for improvement and optimize the user experience.
ClerkCore, which is an integral aspect of the Clerk products, allows you to always stay on top of trends due to the speed of our algorithm and its dynamic approach to data.
Understanding the customer journey can also help you develop targeted marketing campaigns, retargeting strategies, and loyalty programs to engage and retain customers: using Clerk’s Audience tool is perfect for optimizing and guiding you in these key areas.
So how can you do so? As an e-commerce owner, you must understand how your customers interact with your webstore and set up your store accordingly.
E-commerce websites should function just like real-life stores. For this example, let’s take a supermarket.
Your website’s front page should act like the front of the supermarket, featuring new products and trending items. This page needs to grab the customer’s attention because they will leave if they don’t find your store interesting within the first 10 seconds.
The product collection pages function like aisles, and just like a supermarket aisle, there should be an appropriate number of products to keep people interested and scrolling. Too little is alarming, but too many is overwhelming.
The cart page functions like the shelves at the counter, stocked with those final impulse purchase products to increase basket size.
And there you have it, three tips from our CEO Mikkel, all ensuring you make the most of your webstore.
Stay tuned for the next article in our e-commerce tips series! And, a big thank you to Mikkel for being the first interviewee in our series.
How can Clerk supercharge your e-commerce business?
Clerk offers a range of powerful AI-driven e-commerce tools designed to optimize your online store's performance. From personalized product recommendations and smart search capabilities to automated email marketing and analytics insights, Clerk empowers e-commerce entrepreneurs with the tools they need to succeed.
By leveraging our cutting-edge technology and expertise, you can enhance your customers' shopping experience, increase conversion rates, and ultimately drive more sales.
Feel free to book a free online consultation with one of our experts, who will be more than happy to give you further insights into the possibilities our advanced tools can bring to your webshop.