A bit of context: what we do is a bit of strategy and a bit of development. I would say, 50% of the time we are providing strategic solutions to merchants, whether Magento or not. And then we also have our core complex Magento development.
A question that often arises with either new or existing clients, is what is the technology that should be implemented that would drive profit. This is the question we usually start with, and in this presentation, I would like to focus on how we arrived at the following conclusion:
We theorized that ScandiPWA implementation is the most promising profit strategy for this case. A few things to mention before we proceed:
• The source data that we used for the entire presentation is from GA, Search Console, internal accounting, and some BI tools.
• We did take an additional step of cleaning and normalizing the data. Part of the motivation behind this is to respect the client’s privacy. But also it is to make sure that the data is maintained to present an accurate picture of the logic and rationale that led us to the mentioned conclusion.
As mentioned above, our focus is on providing the strategy. If the proposed strategy is valid, we implement the technology as well.
For this case, the client that came in — they had migrated to Magento 2. We did not perform the migration itself, and there were some problems with the implementation. Magento standards were not followed, and there were some deep foundation issues with this project, making it ultimately unstable. At that point, the conversation was framed around the technological solution that was required.
The heart of the problem
When we came in, we saw that there had been a loss in the prior revenue year. There were a number of factors that contributed to that.
• Increase in the cost of goods (the products were manufactured and imported internationally).
• As paid ads were such a driver, the increased advertising costs were eroding the profit base.
• Increased competition in the niche market.
• Challenges imposed by brick and mortar retailers who had enforced MAP policies. This became a limiting factor for the client’s discounting abilities that had been historically available.
Effectively, we found that the client was struggling to generate any type of sustainable profit levels.
When we joined the project, our strategic evaluation was pretty basic: let’s just fix Magento first. The sore was on V. 2.2, and we were able to make a roadmap and implement some parts of that. This included some rally basic tactics that any qualified Magento partner would suggest:
• Code audit
• Hardware migration
• Basic review of technical SEO
• A quick check of the PPC to see if there were any low-hanging fruit/issues that had to be immediately addressed
By the end of this — ¾ of the year into this — we maintained 1.1% profitability. While we managed to get the company out of the red and into the black, we did it at a rate that really wasn’t in line with the goals of the organization. Speaking bluntly, at 1% profit, the issue became whether or not to pursue it long-term. The concern was that the
• Advertising costs would increase
• The cost of goods would increase
• The manufacturers would have a strategic vision of brick and mortar sales, making it really difficult for online retailers to compete.
At 1% profit, it is difficult to scale: it just didn’t leave any capital to invest in the future growth. Additionally, should there be another shift, the concern was obvious — how long can you operate in the red for?
When we tried to discuss some goal setting, the request that came down was 8% net profit while maintaining top-line revenue. The client was less concerned with growth, and to be honest, they would have accepted a drop in the top line in order to maintain the 8% profitability goal. At that time this goal did not seem realistic, but we had already done the minimal evaluation, we had finally got the handle on the codebase, we had some data that we pulled in, and we wound up at the next stage of this: the analysis.
Before we could make any recommendations we had to take a look at the data and organize what we had. We had spent 6–8 months on the project, we had integrated the data source into some basic BI tools. We thought we had a handle on it. So we began exploring what the opportunities and possibilities were. The exercise that we went across was as follows.
We looked at what were the fundamental strategies that we could come up with, such as
• Performance improvements
• Additional usability testing
• Some opportunities in merchandising We went through demand strategies
• Paid advertising optimization
• Content-based SEO
• CRM integration and marketing automation
• Expanding products lines
Once we realized that the mere basic strategies would not get us to our 8% goal, we explored some of the more extreme solutions, such as
• Acquisition of competitors in order to gain their traffic as well as their qualified internal labor resources
• Physically relocating the business operations to a lower-cost area
• Changing the business vertical & expanding into other product lines
All of the above presented different challenges, as well as required a large amount of capital. This made it unreasonable, given the financial picture over a previous couple of years.
At this point, we began really diving into the data. And while we were moving through and examining the various KPIs, the first that stood out as an opportunity was the fact that the mobile traffic share was 66%, yet it only accounted only for a fraction of the revenue: 28%. At the same time, the mobile conversion rate was abysmal at 0.26%.
By contrast, 27% of desktop users accounted for close to 70% of the top-line revenue.
Thus we saw that the mobile clearly presented a good opportunity.
Interestingly enough, while observing the Search Console data, we noticed that about three months into the project, we had unintentionally made a fix that contributed to improving the CTR, Impressions and other performance metrics. The truth is that we had done nothing major on the SEO side beyond some technical fixes — no major campaigns, content rewriting etc. Other observations included a drop in paid traffic, an increase in organic traffic, and an increase in revenue over this period.
But the key factor was that the advertising spend was a problem. When we looked at the paid advertising spend as a percentage of revenue, it was double digits. That part was not sustainable. So we had shot for a goal of getting it into single digits. If we could shift that over, that would enable some of the basic profitability.
What we began to see was that the organic traffic was rapidly increasing, and our paid traffic revenue was going in the direction that we wanted. The reason behind this was largely due to us inadvertently making some corrections that brought a positive result.
During this time we followed Google’s approach to Core Web Vitals as far as ranking signals. We had known about this for a year and had been tracking it in various ways. We knew it didn’t take effect until May, so we weren’t too concerned, even though the information was a little lacking.
But in the period that we were making a decision on the strategy for this organization and its eCommerce platform, Google had made it clear that not only mobile but the Core Web Vitals would be a major factor of moving forward.
So, at this point we saw our opportunities as organic traffic and mobile conversions. This was what made us assume that we would be able to hit the profitability targets. Note that I have excluded all the other data for the purpose of this presentation. However, we had explored several other channels, and this one became the most likely to succeed.
It was validated two-fold:
• The direction that we knew the industry was going.
• The 6-month historical data we had at our disposal.
The key tactic became the implementation of ScandiPWA.
I won’t go into the background of PWA, as this was covered in other presentations — including the benefits of selecting ScandiPWA. I will share, however, that we have gone through the same evaluation process that others have. Other solutions we had considered back in 2017–2018 included the Magento PWA.
However, all things considered, ScandiPWA seemed at the time to be a correct approach. There was another reason that we liked it as well was the community behind ScandiPWA. This assured that, if our relationship with the discussed client was to end, there would be other qualified partners who could pick up the work and leave off.
We have a solid handle on the data in this project, and our accuracy has been relatively high. In terms of calculating the profit, in the last quarter, we were only 0.01% off. So when we ran the numbers and did that large evaluation, we expected our data models to hold up.
And what we expect to see is approximately an 18% increase in top-line and profitability growth to 8.7%. This translates into a 10.3% aggregate shift compared to how it was previously.
To conclude, we expect to see some feedback on the numbers in no less than two quarters.