#WednesdayOneThing is a weekly opportunity for Clearbanc employees to share their knowledge of exciting trends in the retail and e-commerce space. Stay tuned to our Facebook page every Wednesday for the newest edition.
In this day and age, the success of a direct-to-consumer (DTC) e-commerce business largely depends on the size of the market and how fast it’s able to scale. With barriers to entry getting lower due to the advancement of technology, it’s now easier for more players to enter the e-commerce space.
To stand out from the crowd, additional funding and guidance can make the biggest difference. You have a few choices when it comes to small business funding, but regardless of how you choose to raise money, the key is to figure out how to make your business attractive as an investment opportunity for anyone investing in your business.
One of the most common ways to raise large rounds of money is via venture capital (VC) funding. To raise VC capital, founders have to dedicated a lot of time and money towards pitch decks and spend money travelling to the major VC hubs to meet with them. Although it can be costly, it can also payoff—big time.
If you own a DTC e-commerce business, subscription service, or any other type of business involving online purchasing, this #WednesdayOneThing can help you position yourself as a VC investment opportunity. Keep reading to learn about one of the most significant factors that our most successful clients focus on when pitching for funds.
The key to being a good potential VC investment opportunity
If you are a DTC e-commerce business and want to grow quickly, you understand the need for external investment funds. Equity dollars through VCs is a popular way of funding for DTCs.
But in order to get these investment opportunities, you have to understand what investors are looking for and how this translates to the structure of your business operations.
When VCs previously assessed potential investment opportunities, they would look for niche industries. The e-commerce space was once considered niche so there a lot of attention was focused on that industry.
But now, the e-commerce space is saturated, so the focus has shifted from niche markets to markets with large and quick growth potential. Today, the main factor these investors look at when considering DTC e-commerce companies is market cap and market share.
How to stand out from the crowd
To meet the criteria of VCs, it’s necessary to understand the changing retail landscape projected for 2020 as it relates to market cap and market share.
With the rise of e-commerce, new businesses are popping up every day, fighting for the attention of digital consumers. To compete, e-commerce retailers have to go beyond the standard website and social media accounts that might have worked a decade ago. The focus for 2020 is on creating customer and brand loyalty, and that all starts with delivering a top notch customer experience.
In a recent survey from the International Council of Shopping Centers , 67% of respondents across all ages stated that an exceptional customer experience would encourage them to buy more. On the opposite end of the spectrum, a survey from Hubspot found that 80% of respondents would stop doing business with a company if they had a poor customer experience.
VCs are quickly starting to see that customer experience is an indicative marker for the potential of a successful e-commerce business, and increased market share. If you’re looking to improve the customer experience of your online business in efforts to increase customer acquisition, repeat purchases, and brand advocacy, here are three ways to find success, as seen by the results of our most prosperous Clearbanc funded founders.
Incorporating these aspects into your customer experience will position you as the most attractive investment opportunity, and easily catch the eyes of VCs.
1. Add human interactions
People don’t buy from businesses, they buy from people. The king of customer experience is still brick and mortar stores, with 70% of people preferring human interaction when shopping and purchasing. E-commerce businesses can learn a lot on how to create a captivating customer experience by analyzing the methods that brick and mortar businesses utilize.
Brick and mortar businesses have the advantage of enabling customers to physically interact with a product before buying it. The in-store experience taps into all the human senses in a way that online retailers can’t. For example, you can smell perfume in a store before purchasing it. Or you can try shoes on to figure out how comfortable they are before deciding to buy.
One way e-commerce businesses can try to level the playing field is to add a sensory aspect to their customer experience with pop-up shops in targeted locations. These temporary instalments give customers an opportunity to interact with your product before purchasing.
Adding that human interaction ultimately creates more meaningful relationships with customers and keeps them coming back to your brand.
2. Make user interactions convenient and easy
A pillar of success for any business rests on convenience. Consumers love the idea of being able to buy a product with a single click, at any time and location that’s convenient for them. They could be hibernating in their home or out suntanning on the beach. At a time where instant gratification is easily accessible, consumers have come to expect this type of experience.
For example, when Amazon launched their Prime 2-day shipping program, it was an instant success. The program has been so impactful that they have shifted the landscape of online retail. Now, consumers expect nothing less than 3-day free shipping from businesses.
To access a greater amount of market share, you need to start thinking of ways that will make the shopping and buying process as smooth and easy as possible for your digital customer.
Subscription services, faster shipping options, and improving the payment process are just a few ideas that many brands can implement.
3. Personalize the customer experience
E-commerce brands have specific advantages over brick and mortar retailers—data collection and behavioral analytics. Every time a consumer goes onto a company’s website and starts browsing, data is captured. First party data is immensely powerful in enabling companies to create personalized online experiences with their brand or product.
For example, Netflix helps to create a convenient viewing experience with their tailored movie recommendations. The company analyses a customer’s previously viewed and browsed content to understand the viewer’s preferences. In the end, viewers have a more enjoyable experience and Netflix gains brand loyalty and increase content consumption.
Netflix has made such a significant impact on the way people consume content that consumers now expect businesses to create tailored experiences for them. Personalization is the future so for any e-commerce business looking to expand its market share, it’s worthwhile to look into creating those personalized customer experiences.
As we approach 2020, any DTC company looking to attract venture capital investment needs to focus on proving how they are and will continue to grow their market share. Many companies have proven that the best strategy for e-commerce brands to attract loyal customers is to create convenient, interactive, and personal experiences. Once investors understand this about your company, their eyes will perk up at the prospect of a new unicorn.
At Clearbanc, we understand how hard it can be to acquire funding to build your business. There are more options to fund your e-commerce brand than ever before; however, not all sources of funding are the right fit for every business. Make sure to find a funding partner that is in line with your vision. And consider multiple types of funding as they can often work in complementary ways. For example, many Clearbanc customers use our funding to get a higher valuation from VC companies and score bigger rounds or to supplement their VC funding. To learn if you’re eligible for Clearbanc funding, apply today!
