Are You Growing at 30%?

Two latest posts of Quarterly Sales for Online Retailers, thanks to a news source favorite of mine…Internet Retailer:

Williams-Sonoma web sales rise 24% in Q2
http://www.internetretailer.com/dailyNews.asp?id=19847

Gap e-commerce revenue grows 27.1%
http://www.internetretailer.com/dailyNews.asp?id=19849

During my visit in June this year to Internet Retailer conference in Chicago, I was surprised at how many people are getting it! Mostly this is due to the fact that on average businesses are growing 30% online. Yet, it is important to note that this percentage is a qualifier.

This means that if you aren’t achieving at least 30% growth online, then you are definitely doing something wrong. And, if you are achieving well over this….a better question to ask is what is wrong with your baseline to begin with? I know I’m ranting here a bit on a tangent….but it surprising to me how many of these small/med companies that are doubling their online sales for the past 2-4 years, believe this trend will go on indefinitely without making significant investment and laying down strategic business development goals. For example, here is a common scenario I’ve seen of small/med online retailers:

Online Sales

2002 Year One – $500,000 Sales
2003 Year Two - $1 Million Sales
2004 Year Three - $2 Million Sales
2005 Year Four – $4 Million Sales
2006 Year Five – Projecting $8 Million Sales
2007 Year Six – Anticipate Trend Continuing to $16 Million Sales

Yet, when I ask retailers in this situation:

1) How are you achieving this growth? I get “blank stares”

2) What do you need to change to support this growth? I usually get, “do more of the same and maybe invest in a software system such as endeca or scene 7 or ….hey do you know of a good OMS or CRM solution?”

Furthermore, usually the situation is this on the ground level:

1) They’ve got one or two extremely smart person(s) who are great patch workers and have been working well below their deserved compensation. Usually this is a buyer and tech person …..or someone with access to a tech person.

2) They see scale as something they can purchase through buying the “right” software solution.

3) They see the need to hire more “man power”, but not “mind power”. Usually, they will start to segment skilled responsibilities (an online marketing manager, a content manager, a customer service lead, etc), but won’t see the need for strategic managers to plan for business growth and cross integration.

It’s very important that retailers in this situation realize that online sales growth is not exponential. No business growth is. They should:

1. Quickly recognize the “over-work” that current employees are doing and elevate their compensation and reward them for continuing a long-term commitment. It is likely these employees see the exponential expectations; they see no scaling mechanisms and are ready to run.
2. Start hypothesizing why is your business growing. Where is the traffic coming from? Are these the customers we want and who are the customers we need to go after.