E-Commerce-Strategies

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Overview – E-Commerce Strategies for Brand Manufacturers

E-Commerce is no longer a channel decision but an architecture decision. Anyone who does not manage marketplace, D2C, third-party eRetailer and social commerce as an integrated system loses margin to complexity, brand control to platforms and reaction speed to competitors. A viable E-Commerce strategy has thus become a steering task at the level of company management.

The strategic problem: from a fragmented commerce landscape to integrated steering

The fundamental decision on entering digital sales has been concluded in most companies. The relevant task today lies in the orchestration of marketplace strategy, direct-to-consumer (D2C), third-party eRetailers, ERP software and procurement platforms, as well as E-Business interfaces, into a consistent multi-channel architecture (Figure 1: E-Business distribution channels).

The channels differ in margin structure, target-group access and data sovereignty, yet stand in mutual dependence. Isolated channel decisions therefore lead systematically to channel cannibalisation, price erosion and channel conflicts with bricks-and-mortar retail.

In parallel, the yardstick has shifted from revenue growth to channel-related profitability. Without transparent channel P&L steering, unprofitable channels are cross-subsidised out of profitable ones, without this effect becoming visible in the overall result.

Added to this are technology decisions on headless architectures, MACH-based commerce platforms, product information management and order management. These decisions determine competitiveness over a period of five to ten years; later corrections are technically possible but cause considerable costs and tie up management capacity.

Complexity rises further with the extension into B2B E-Commerce. Procurement platforms, digital buyer profiles and platform-bound sales models have developed there into self-contained strategic fields of action. An E-Commerce organisation that is not led architecturally therefore loses margin, brand control and reaction speed structurally.

Figure 1: E-Business distribution channels

The FOSTEC & Company perspective

FOSTEC & Company views E-Commerce strategy as an architecture discipline at the level of company management. Seven substantive positions shape the methodological approach.

The architecture question

At the core lies the allocation of channels to target groups, products and price levels. Only this allocation prevents channel cannibalisation, price erosion and channel conflicts with bricks-and-mortar retail. FOSTEC & Company provides a documented commerce architecture model that allocates each channel to a target-group, assortment and price logic, thereby creating the commercial steering basis of the business.

Profitability before growth

The yardstick in E-Commerce has shifted from revenue growth to channel-related profitability. Without transparent channel P&L steering, unprofitable channels are cross-subsidised out of profitable ones; this effect regularly remains invisible in the overall result and delays necessary decisions. FOSTEC & Company provides a channel-related P&L structure with contribution-margin logic down to platform and assortment level, as well as a prioritised list of concrete rebalancing levers that makes cross-subsidies visible and steerable.

Commerce technology as a strategic decision

The decision between monolithic and headless architecture, the selection of a MACH-based platform and the configuration of PIM, DAM and order management shape competitiveness over five to ten years. A later correction is possible but causes considerable costs and ties up management capacity. FOSTEC & Company provides an assessed technology roadmap with a concrete platform and architecture recommendation, a quantified business case and a migration logic that is decidable at the level of company management and does not remain the sole responsibility of the IT or E-Commerce function.

AI-native commerce

Artificial intelligence changes personalisation, product search, dynamic pricing and customer service in their basic mechanics. The strategic lever lies not in the breadth of technology deployment but in the prioritisation of a few use cases with a robust value contribution. FOSTEC & Company provides a prioritised AI use-case map with a quantified value contribution per use case, as well as an implementation roadmap that takes into account the organisation’s achievable pace and avoids implementation standstill caused by oversized ambition.

Internationalisation

Internationalisation in E-Commerce is not the replication of an existing business model but a self-contained growth decision. It requires a structured market assessment, a deliberate determination of the entry mode and a consistent localisation across language, payment methods, logistics and terms. FOSTEC & Company provides a quantified market prioritisation with a recommendation of the entry mode per target market and a localisation plan along all relevant dimensions, so that costly market-entry and withdrawal decisions are avoided.

Make-or-Buy-decisions

Strategically differentiating capabilities such as brand management, customer relationship and steering logic are to be built up internally. Operational services such as fulfilment, performance campaigns or content production can be bought in as a service. FOSTEC & Company provides a documented make-or-buy matrix with a clear allocation of each commerce function to internal responsibility or external service, as well as a derived target organisation that creates neither critical dependencies nor oversized in-house capacities in operational functions.

Performance steering

A viable commerce architecture requires consolidated performance steering across all channels. Unified commerce dashboards, channel-specific KPI sets and robust attribution models make the value contributions of individual channels transparent. FOSTEC & Company provides a consolidated KPI framework with channel-specific KPI logic, a coordinated attribution model and a dashboard concept on the basis of which investment, adjustment and reduction decisions are made data-based rather than resting on experiential values.

Our approach - Building an E-Commerce strategy

Once the architecture of the E-Business distribution channels is in place, channel-specific strategy work begins along the six pillars from Figure 1. FOSTEC & Company develops for each relevant channel a channel-specific strategy based on the respective algorithms, margin drivers and competitive dynamics, which are depicted in model form in the following figures. The relevance and prioritisation of the individual pillars depends on product, target group and target market. The holistic consideration of all six pillars identifies blind spots and culminates in a quantified, integrated business plan.

Online marketplace strategy

Potential analysis: determination of the market potential on the basis of data-driven market intelligence with actual transaction data
Business model: strategic decision between Vendor, marketplace and hybrid model taking into account margin, control and data availability
Marketing mix: definition of the visibility-relevant levers along the 5 Ps with a focus on content, conversion and algorithmic ranking factors
Terms and contracts: strategically prepared negotiation of prices and contractual conditions with selected marketplaces
Organisation: design of a dedicated marketplace organisation with clear responsibilities and interfaces to existing functions
Governance: definition of the steering logic with KPI framework, review cycles and integrated business plan
Business plan: structured condensation of the analysis results into an integrated business plan with a clear separation of B2B and B2C logics, taking into account all costs and benefits

Figure 2: Online marketplace strategy using the example of Amazon

CLV-centred steering: third-party eRetailer strategy

Third-party eRetailer selection and assessment: objective assessment of potential eRetailers using a scoring model: business model and strategy, scalability, digital visibility, E-Commerce maturity, target-group focus and USP relative to competitors
Pricing strategy and monitoring: development of a dedicated pricing strategy including continuous price monitoring of the eRetailers to avoid price erosion and brand damage under weakly negotiated terms
Potential analysis (top line): estimation of the revenue potential of selected eRetailers per focus country on the basis of revenue, assortment and category relevance
KAM team structure: build-up of an experienced key account management team with digital expertise, one KAM per country responsible for a defined set of eRetailers
Development of cooperative online marketing: definition of cooperative online-marketing programmes (SEA, SEO, remarketing, media planning) including content provision and KPI reporting to measure marketing efficiency
Data distribution: establishment of a data-distribution concept with eRetailers for the exchange of customer data, socio-demographic profiles and forecasts, including contractual securing of data-access rights
Business plan (bottom line): creation of a business plan with comprehensive consideration of all costs and benefits including logistics, order cycles, chargebacks, returns and drop-shipment options

Figure 3: Core elements of a third-party eRetailer strategy

ERP-Software strategy

ERP software selection and business model: scoring of relevant make, buy and acquisition options (in-house development, licence, purchase) against target customer, use case and technology fit, plus determination of the one-sided or two-sided revenue model
Function definition (scope): determination of MVP and function roadmap along the core processes of the target customers (e.g. procurement, planning, documentation), including multi-vendor functions in a two-sided model
Integration into the existing E-Commerce landscape: interlinking of ordering, master-data and logistics processes via standardised interfaces, in order to secure a media-break-free transition between platform and existing E-Commerce infrastructure
User acquisition and onboarding: rapid scaling of the user and supplier base through activation of existing customers and low-threshold onboarding, in order to achieve network effects and platform relevance
Monetisation and data activation: introduction of the defined revenue models (e.g. transaction fee, commission, subscription) and leveraging of generated platform data for cross-selling, steering and customer retention
Gatekeeper and platform expansion: function expansion and controlled opening to third parties to establish an own gatekeeper position, cross-subsidised as a marketing investment for long-term customer retention
Business plan: comparison of investments, operating costs and revenue potential including break-even, financing model and assessment of market, technology and adoption risks

Figure 4: Core elements of an ERP software strategy

B2B procurement platform strategy

Platform selection and assessment: objective assessment of potential platforms using criteria such as benefit, entry barriers, partner influence, function coverage (operational vs. strategic procurement) as well as reach and cost relation
Pricing strategy and monitoring: development of a dedicated pricing strategy with ongoing price monitoring, since the large competitor base and the high price sensitivity in procurement require continuous adjustment
Potential analysis (top line): estimation of the revenue potential per platform on the basis of the selection criteria, including conducting an RFP to validate function scope, terms and provider performance
Build-up of KAM team: build-up of an experienced KAM team with digital expertise and integrated IT support, in order to ensure catalogue integration, interface connection and a smooth transition into platform operation
Continuous monitoring: ongoing monitoring of processes, new platform functions and content quality, plus evaluation of dashboard analytics and management information to detect purchasing trends
Business plan: complete comparison of all costs (listing, transaction, integration effort) and potential revenue streams per platform for a well-founded make-or-cooperate decision

Figure 5: Core elements of a strategy for procurement platforms

E-Business interfaces

Interface landscape and power analysis: recording of relevant standards (master-data, shopping-cart, document exchange) and target systems, plus a precise assessment of who holds market power in the gatekeeper structure and how stable it is
Access, cooperation and partner steering: decision on the degree of opening and cooperation per partner, implemented through dedicated KAM with a consistent line, in order to prevent platform takeover by third parties
Interface architecture and standardisation: build-up of a scalable, live-data-capable architecture for master-data, shopping-cart and document exchange, designed to be established as a negotiated industry standard
Automated assortment presence: real-time provision of product, price and availability data to third-party systems, in order to maximise reach and order volume without additional set-up or onboarding effort
Reach and new-customer lever: activation of functions such as onboarding via third-party software for new-customer acquisition; direct access monetisation (fees, terms) is only realistic from a dominant gatekeeper position
Business plan: comparison of development, operating and maintenance costs against generated order volume and revenue potential, including assessment of dependency and gatekeeper risks

Figure 6: Core elements of a strategy for E-Business interfaces

Direct Sales- und Affiliates-Strategie

Channel and target-group definition: definition of relevant customer segments and the assortment that can be marketed online, geared towards cross-/up-selling potential and full sovereignty over pricing, visibility and customer data
Shop and infrastructure readiness: establishment of a high-performance shop environment with fully digital, instant onboarding as well as a scalable staffing, technology and logistics base as a basic prerequisite for successful direct-sales handling
Traffic generation and affiliate programme: prioritisation of SEA, SEO and affiliate partners (product portals, price comparisons, advertorials, discount portals) as well as setting up a commission-based affiliate programme for new-customer acquisition via third-party reach
Conversion tracking and performance steering: measurement of traffic, conversion rate and ROI per channel and affiliate partner, in order to continuously align marketing budget and commission models to the most efficient sources
New-customer acquisition and customer lifetime value: conversion of acquired visitors into registered new customers, plus targeted cross- and up-selling offers to increase order frequency and lifetime value per customer segment
Business plan: comparison of build-up, marketing and commission costs against direct revenue, new-customer value and margins, including assessment of cannibalisation and channel-conflict risks

Figure 7: Core elements of a direct sales and affiliate strategy

Differentiation factor

The methodological approach of FOSTEC & Company differs from customary market consulting offerings in three dimensions.

First, through neutrality in the recommendation: execution services are deliberately not offered, so the strategic consulting remains free of implementation interests.

Second, through the integrated consideration of all six commerce pillars including B2B, which is rarely covered with this consistency.

Third, through the methodological link between commerce strategy and Transaction Advisory, whereby E-Commerce architectures also become operationalisable as quantified value drivers in due-diligence and value-creation contexts.

Results and impact

Clients receive an architecturally led commerce strategy that replaces isolated channel decisions with an integrated steering logic. Marketplace, D2C, eRetailer, procurement platforms and affiliates are captured in their mutual dependence and prioritised along margin, brand control and data sovereignty. Channel-related P&L steering creates transparency about actual value contributions and makes cross-subsidies visible before they take structural effect. Technological, organisational and commercial decisions are made on a consistent basis that takes five- to ten-year impact horizons into account. The result is a commerce architecture that is measurably more robust in profitability, brand control and reaction speed than a sales landscape grown channel by channel.

E-Commerce strategy is the architectural anchor of the Commerce & Growth Strategy Services of FOSTEC & Company and connects with the following competence fields and clusters:

Let us assess in an initial conversation which commerce architecture is viable for your company – data-based, pragmatic and with a clear recommendation for action.

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Your contact for further questions on our E-Commerce Strategies:

Markus Fost, MBA, is an expert in e-commerce, online business models and digital transformation, with broad experience in the fields of strategy, organisation, corporate finance and operational restructuring.

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Markus Fost

Managing Partner

markus.fost@fostec.com

Phone: +49 (0) 711 995857-10

Mobile: +49 (0) 170 8057143

Fax: +49 (0) 711 995857-99