Mythbusters Ecommerce Edition: Debunking the Misconceptions of Running an Ecommerce Site
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Running a successful ecommerce website isn’t easy, but it’s made harder by a few myths — some of which are deeply ingrained in our human psyches. I’d like to dispel a couple of myths I see holding ecommerce businesses back from achieving the growth they want.
Read on — you might discover you’ve been standing in the way of your own growth.
Recently, a CIO who had just launched after a challenging migration told me that if he so much as mentioned another ecommerce platform to his executive leadership team they would fire him on the spot. His words were powerful and his sentiment was 100% authentic. I understood and respected it.
Two weeks later, he called me to discuss replatforming because the pain of the new platform had become unbearable. During the migration they had seen red flags with the technology, but they kept hoping if they just kept investing in it, they would be able to make it work. They were throwing good money after bad to try and make it work. This went on for months.
Clearly, they never achieved a workable solution.
This is a classic example of the fallacy of sunk costs. Sunk costs are defined as a cost that has already been incurred and cannot be recovered. In other words, a sunk cost is a sum paid in the past that is no longer relevant to decisions about the future. The rational decision maker will not consider these costs in their decisions, but only the factors that influence the future outcomes.
Psychological Science: “That effect becomes a fallacy if it’s pushing you to do things that are making you unhappy or worse off.”
Let’s say you spend $250,000 to build a new website, but it’s horribly broken, costing you revenue and creating a bad experience for your customers. The thought of those sunk costs may prevent you from evaluating new platforms that might be a better fit. If it would only cost $100,000 to move to a new platform with a lower total ecommerce cost of ownership and improved revenues and profits over the next three years, the benefits would exceed the cost to migrate to the new platform. The previous $250,000 investment is irrelevant. Only the ongoing cost to maintain the two platforms and the expected return on investment should be considered in the calculations for the “should I stay or should I go” decision.
Humans are notoriously horrible at letting go of sunk costs in decision making. We want to feel like we are good decision makers. We don’t want to feel wasteful, so it’s hard to let go of the old expense. The more recent the expense, the more powerful its pull on our psyche. We ascribe the “value” of something as the price paid, which is never true. It’s a simple heuristic we’ve learned and follow subconsciously.
I love Farnam Street for making complex topics super accessible, so I’m going to steal their questions to help those who may have fallen victim to this fallacy.
Check for Sunk-Cost Fallacy, Endowment Effect:
Are the recommenders overly attached to a history of past decisions?
How would you consider the issue if you were a new CEO?
If you’ve recently migrated to a new ecommerce platform and you don’t see issues resolving themselves in the near future, be mindful you aren’t falling prey to the sunk cost fallacy. It doesn’t matter how much you’ve spent, it matters how much it’s going to cost you moving forward to not have the right platform and the right customer experience to grow your business.
Are you about to go into code freeze? Sounds like a great time to look at new technology, partners, and projects.
I was recently talking to my team who were concerned that the ecommerce companies with whom they’d been communicating would fall into a dark hole of extreme busyness during the holidays and would have no time to evaluate new ecommerce projects or platforms.
Sounds logical, right?
Yes, ecommerce teams, merchandising teams, marketing teams, and fulfillment operations are all hustling like accountants in April, but the technology teams did all their work leading up to the holidays. They had to put scalability, security, and contingency plans in place, and test them 22 times to ensure everything would run smoothly when it matters most. But now that Black Friday and Cyber Monday are almost here, they aren’t allowed to touch anything.
Welcome to code freeze (aptly named for the wintry holiday season it accompanies in ecommerce).
I’ve seen a surprising number of projects get kicked off during the holiday code freeze precisely because the technology side of the house is hands-off. They can’t touch the site with the exception of making sure all systems are go. The whole point of code freeze is that introducing change is introducing risk and if the holidays are your busy season, you can’t afford downtime or glitches in user experience negatively impacting your performance during peak selling season.
Often the business side of the house and the technology side have different priorities and different decision criteria for what they think would be an ideal solution. For larger scale mid-market and enterprise ecommerce businesses, the technology team is responsible for much more of the criteria because integrations into existing back-office infrastructure, API performance, ease of management, scalability, and security all become more important factors in the partner selection. Considering that many of those require lengthy explorations with highly-technical experts on both the merchant and platform teams, it makes sense to utilize the code freeze period during the holidays to evaluate, test, and even build out new sandbox environments that can be pushed to production after the holidays wrap up.
Skullcandy is a great example of this on BigCommerce. They made their selection just before the holidays were in full swing so that the ecommerce and marketing teams could be involved in the decision process. Once the decision was made, the technology team, alongside their agency partner ZaneRay, got busy developing the site in early December. They published the first live BigCommerce site in mid-February of the following year. Again, they were able to utilize the same resources that would normally be developing on their ecommerce site during the holidays because they weren’t making many changes to the site to ensure the greatest stability.
Is your business strategy or decision making being affected by one or both of these myths?
If this article makes you take a hard look at your expensive-to-implement ecommerce platform that’s giving you nothing but headaches or realize your code freeze doesn’t have to be an innovation freeze, then I’m happy I could help.
Brian Parks has two decades of experience helping technology companies grow revenues including diverse responsibilities managing Direct and Channel Sales, Partnerships, Marketing, Talent, Account Management & Implementations, and Product Management & Development. Brian has a bachelors degree in Philosophy and Religion from Baylor University and is a mentor to entrepreneurs at Austin’s Capital Factory.