Practice English Speaking&Listening with: Jamaican E Commerce Case Study - Increasing Sales and Profitability

Hi!

So, welcome to our e-commerce case study. We at ASK Academy seek to help

as many Jamaican business owners as possible. That's why we made this case

study of a real-life Jamaican business that we helped to sell their products

online and to scale their business.

So we're going to go through the problems

that they faced and the solutions that we implemented so you can have a

real-life walkthrough of our process and our behind the scenes.

So first, we'll go into the status quo of the business.

So, what their revenue is, what problems they have,

why they actually came to us. Then we'll go through the challenges where

we'll actually structure and define the problems that they're having in their business.

Then we will go through the solutions and strategies that we

implemented and then the results as well as the outlook of what should happen

next in the future for this business.

And if you stick till the end we'll actually

show you how you can scale your business too.

So, now we're going to go into the status quo of the business.

This will help you to know how to relate to this case study,

and of course, it possibly will not be a

one-to-one representation but you can pick and choose what is actually

relevant for your business.

So let's refer to the business from now on as Company X.

And company X sells

self-manufactured consumer products.

In terms of their business structure, it is owner operated.

So, the owner is involved in the daily operations of the business.

They've been in business for four years and they make on average a revenue of 1 million

Jamaican dollars per month.

They have two full-time staff members and in terms of

their sales channels:

They rely mainly on third-party retailers such as

Supermarkets, Fontanas, and other stores.

And they also sell through

craft shows and through social media.

In terms of their financial situation when

they came to us they thought they needed funding or capital to be able to finance

their business growth.

And their goal, when they came to us, is:

To grow their market share.

To grow their revenue and to grow their businesses profitability.

All right.

Remember, company X wants to achieve two major goals:

Number One:

To increase their revenue and/or market share.

And number two:

To increase the overall profitability of the business.

And what you can see here, is a summary

of the problem analysis that we did.

Of course, we did a much deeper deep

dive that you can see here but we want to keep it as easy as possible for you

to understand what are the key main or main key factors that prevented

Company X from actually achieving their goals.

So what you can see here is that

we broke it down into the three major sales channels.

And into the two main KPIs

that we focused on after the analysis.

Meaning we focus on the

revenue share and the profit margin of each sales channel and then we have a

quick pro and con of each sales channel.

And then after all we will have a quick

summary to summarize what are the next steps we should do to actually

achieve the goals.

So we're going to talk about the first sales channel:

The third-party retailers.

Meaning: The Supermarket's The pharmacies etc.

We can see that the revenue share makes or

attributes with over eighty or 80%.

Is by far the biggest part of the revenue share of all

the sales channels.

And we can see that it comes with a profit margin of 15%.

So therefore what we can see is that especially at the beginning of

selling a product or starting a business it can makes sense to use that sales

channel because you can use an existing infrastructure to sell your products

through an existing retailer.

And you can use their existing marketing.

But on the other hand:

You kind of pay for that with a low profit-margin,

because we have that middleman

and no direct acces s to your customer.

Because again:

There is that middleman between you and the end consumer

and therefore

in that scenario Company X was kinda highly dependent on this sales channel,

because of the amount of the overall revenue,

the eighty percent, and

of course that low profit-margin.

So when we then have a look at the

second sales channel:

The craft shows, that was kinda positive because

even if they've only had 15% of the overall sales, they came with a

higher profit margin of 30%, because we don't have that

middleman here.

And every time Company X did that kind of craft show, they

had a really high sales volume, a really spike in sales, but because of the

nature of that particular sales channel,

because it was seasonal

after the craft show, the sales went down again and flatlined.

Therefore we had

these spikes of high sales, of high-volume and afterwards: crickets.

Then the third sales channel:

The direct to consumer or the e-commerce channel.

Meaning every time Company X sold something through their social media

presence or through their website.

At the time we started working with them that

only was 5% of their overall sales was direct to the consumer,

but it came with a nice profit margin of 60% in that case.

So, the overall sales channel had a really high

profit margin because you have directly access to the consumer you cut out the

middleman and is easy to scale.

But on the other hand it also comes with

a handful of problems and of downsides.

On the one hand it's always kind of

complicated to capture online payments as a Jamaican business

because of the current banking situation in Jamaica.

And when we talk about new media:

E-Commerce, online, digital in general,

that can, or is often perceived, as a complicated topic

for a lot of business owners,

for a lot of people.

And therefore they hesitate to invest time and money

in the initial set up that is necessary

to actually run an e-commerce sales channel.

So, overall summary:

What where the problems Company X

was facing that prevented them from achieving their goals?

So their high

dependency on third-party retailers with relatively low profit margins

and no direct access to consumers resulted in two things:

First of all, it kinda made it hard to scale.

And second of all: It resulted in a low overall profitability

of the business.

All right.

So now that you know the problems

Company X was facing,

now let's talk about the solution that we actually implemented

to reach the main goal.

Which was to:

Increase revenue and market share.

And of course, the overall profitability of the business.

And to get there, we agreed

to focus on one thing,

and that is to grow the revenue share

of the e-commerce sales channel.

Because as you just saw,

that by far has the highest profit margin.

But on the other hand the lowest revenue share,

therefore there's the most growth potential.

So what we did,

we basically implemented four simple steps

or four different categories that I'm going to explain really quick right now

and then we're going to dive into each step.

So first of all, what we did to

actually get awareness and

to get people to know the brand and the product

was that we run social media ads on Facebook and Instagram

to drive people to the new online shop

where we then showcased the product and offered

the people to place their order.

And then, in the next step, we focused on the payment part.

Meaning how to capture the payments up front before we then in the final

step actually produce and deliver the product

and everything around the fulfillment.

So let's talk about the details,

why actually did we choose to

run social media ads?

So first and foremost:

Of course, we get the most

reach with that media channel,

because let's face the truth:

Everybody is basically on social media.

No matter if it's Facebook, Instagram, YouTube, LinkedIn,

you name it.

But almost every business can find their ideal customer

on social media nowadays.

And therefore that gives you also great

opportunity to scale the business long term because here you basically can

reach every market worldwide.

And because we don't had that big of a

marketing budget, therefore we could not afford to waste

a lot of money with traditional media.

The targeting

capabilities of Facebook and Instagram really helped us here

because we could really focus only on the people only on the customers that

are highly likely to buy the product.

And that also gave us

the option and the capability to actually track the results of the

marketing campaigns.

Because we could immediately see,

all right what was the

return on the marketing campaign

on the budget that we actually spent on these ads.

And therefore overall it was a very or it is a very cost effective way

to get the attention, to get awareness to the product and that's why in the first

step we selected or we choose social media ads in the first step of that

new marketing and sales process.

And then in the second step we drove them to

an online shop that we set up basically from scratch so that people

first and foremost can see the product and can get information about the

product and then in the second step of course place their order.

And of course the big advantage here and with an online presence is that you

basically can sell 24/7 all the time you don't have to rely on opening hours of a

physical storefront.

And of course we or Company X had the ambition from a long-term strategy

perspective to scale also into the international market therefore if you

have the ambition to sell internationally it definitely definitely

needs an online shop or a website to actually be scalable and enable people

from overseas to get the information about the product and actually place the order.

So that was one part so to actually enable people to a place order

online, but the second super important part here was more from an operational

perspective meaning it helped us to automate a lot of the processes that

were done manually.

Meaning bookkeeping, inventory, stock. All the nice

things that every business likes to do on a daily basis and of course yeah

things like shipping labels gonna be printed automatically, the receipts

are automatically sent to the customers and things of that nature.

So a lot of this

stuff that is done by an accountant or that is done manually right now could

be automated when we used an online shop.

And as a platform we used Shopify in that case.

Then next step, third step:

After someone actually or after the

customer actually placed their order,

now we come to the important part:

How does Company X actually capture the payments?

Because what we often see is that a lot of Jamaican businesses

really struggle with getting paid.

So capturing the payments was an

super important part we needed to focus on to actually optimize the

complete sales process.

So what we did to get a better cash flow was that we focus

really on capture the payments before we actually start the production or

start with the fulfillment to get that better cash flow.

And we definitely

had more you basically have different options to capture the

payments for example the most important part or the part that we always

recommend is to capture the payments online.

Meaning enable the customers to

directly pay with their credit cards or maybe with PayPal.

Or as a second option,

to wire the money in the bank account

because we know especially when it

comes to banks in the Jamaican market it can be kind of tricky to

enable online payments.

But that was the important part when it actually

comes to capturing the payments that you capture them upfront before you start

production and if possible to capture them online.

And that was what we were

able to implement in Company X case here.

And then in the last step, we talked about,

we focused about the actual fulfillment of the product.

So meaning, we got the order, we captured the payment, and now as the

last step we actually start talking about the supply chain management.

Meaning we need to make sure that when all these new orders coming in we

actually have the capacity and everything in place to handle all the

new orders and actually produce enough of the product

and ship it to the customer.

Therefore and we focused on the supply chain management,

we made sure that there is enough production capacity in the business

to fulfill all the incoming orders.

That the infrastructure of the

logistics part is set up,

meaning that the product can actually be shipped

or delivered to the customer directly.

And at the end of the day the most

important part here is that you build your own customer base.

Because now you have the name,

the address and the contact information of the customer and

compared to the channel before,

the third party sales channel where you sell

through maybe a supermarket or things of that nature.

And now you get all the

customer data, all the customer information and actually build your own

brand and build your own customer base.

So let's recap really quick what we did

to actually increase the revenue share of the e-commerce sales channel and to

increase the overall profitability of the business.

We set up social media marketing campaigns.

We run ads on Facebook and Instagram to actually drive people

or to make people aware of the product,

to make people aware of the brand,

to drive people then to an online shop that we set up to showcase

the product and to enable people to place their order 24/7 and

basically from everywhere in the world.

Then we focused on how to capture

the payments.

To capture the payments online and upfront before we actually

start the production and the fulfillment process.

And just one important thing,

all this of course took ... was not done in a day...

all the implementing or to plan and implement the whole process

took around six months.

Just to give you a little idea

how much time you actually need to plan

when you want to set up and implement

a marketing campaign or a sales process

like that.

So now we're going to go through the actual results that Company X got.

So the first thing is that they now have a scalable and automated sales and

marketing process.

So remember in the previous stage where we went through the

marketing and sales process and made it an automated ecommerce process by

firstly having social media ads so that the target market could actually be

aware that the company one exists, and the products that they offer.

Then they would be able to go to the online shop.

And as the customer goes to the online

shop, they're able to actually choose between a variety of products that

Company X offers.

And then they're able to actually order it online,

then pay for it online and then receive their product delivered.

And so that as a result,

allows for scalability rather in these processes.

And then also in terms

of all the mundane tasks that were automated.

Such as bookkeeping, inventory

management, receipts, shipping labels...

All of these things that people had to do

before the staff members had to do.

And it took a lot of time and a lot of money

to invest in this section of these mundane tasks.

Now they are automated and

therefore the staff could actually focus on other aspects of the business.

And then in terms of the payments being captured o nline now, and being captured

upfront, this allowed for a better cash flow for the business.

And therefore as

well in terms of the initial ad spend for the social media ads that was invested,

we got an 807% return on adspend.

All right.

So now let's dive a

little bit into the numbers.

What does ROAS actually mean and how do all

these results actually reflect in hard numbers, in hard business results?

So what you can see here is on the one hand

a comparison: the e-commerce sales channel and on the other hand the

third-party retailers.

To give you a comparison of these two main channels.

So when we talk about "Return On AdSpend" or about ROAS,

what we mean by that is,

in that example we take Company X,

for every $100 that we spend on ads,

that we spent on ads on Facebook and Instagram in that case,

we made $800 back

in revenue, in sales, in products sold.

So we kind of simplify the

numbers a little bit here, to make it easier to understand.

So again, of every $100 spent on an advertising campaign

we made $800 in revenue back.

And then remember we have that 60% profit margin

because we don't have a middleman.

And that means we have a profit of

$480 at the end of the day for every $100 spent in ads.

So we can say we have 480% ROI meaning return on

investment and the investment in that case would be the $100 in the marketing,

in the ad campaign.

And now when we compare that to the third-party retailer,

of course it's kind of apple to orange comparison here because we can't

really track the return on adspend.

Because we don't really have the tracking measures.

But assuming we would run a campaign on Facebook, Instagram, TV

whatever it would be to make people aware of the brand and the product and

then hope that they go into a supermarket, pharmacy, or into a store and

buy it there.

Assuming we would have the same return on adspend, the same

performance of the campaigns, even if we can't track it, then we have the

difference now in the profit margin.

Because we have that middleman the

supermarket between Company X and the end consumer and therefore we only have

the 15% profit margin which results in that case $120 in profit.

Meaning when we set that in relation to the $100

that we invested initially in that ad campaign then we have an return

on investment of 120% in that case and if we

compare that to each other we see that the e-commerce channel outperforms the

third-party retailers by far.

Just if we have a look at the numbers, the ecommerce

profit is like three times higher than the profit

from everything that Company X sold

through supermarkets pharmacies you name it.

So now we're going to go into the outlook of Company X.

So the first thing is that they now have a scalable

and profitable sales channel in

this ecommerce sales process.

This allows them to have more capital to actually

invest in their business growth.

Exactly, and that means now they have actually

everything in place.

Meaning, on the one hand, the infrastructure,

meaning the sales channel.

And on the other hand the capital, to actually grow their market share,

which was one of the initial goals.

And of course with the website with the

online shop they also now have the option to,

if they want,

start selling internationally.

And at the end of the day, maybe the most important part is

that they now are able to build their own customer base and actually have

direct access to the consumer.

Built their own brand and not for someone else

and are actually able to grow their business long term

from a strategic perspective.