How to Build a Great E-Commerce Company

As an investor, I see dozens of e-commerce companies each week. These four qualities separate the great ones from the flops.

It’s not enough just to sell stuff.

As a venture capitalist, I see or hear about dozens of new e-commerce companies every week. And in every market there are hundreds, if not thousands, of e-commerce companies with brands more established than the ones that are pitching me. Some of these big companies, such as Best Buy, Zara and Ann Taylor, have bricks-and-mortar locations to help drive traffic. They also have the balance sheets to spend money understanding their customers and to drive large marketing expenditures and brand loyalty. Others, like Amazon and Orbitz, exist only online. But they have developed extremely efficient operations, powerful analytics engines and incentive-based programs to drive customer purchases.

All of which makes it tougher than ever for e-commerce startups to cut through the clutter. The key is to find ways to engage your target audience in a meaningful and relevant manner – one your competitors can’t match. The old mantra of competitive pricing, convenience and reliability (think Diapers.com, now owned by Amazon) is not enough.

To really engage your target audience, you need a deep, multi-channel, multi-modal approach.

As an investor, I look for companies that leverage these four pillars of success:

1. E-commerce in the traditional sense. This is your ability to operate efficiently across all aspects of e-commerce, from operations (sourcing, inventory management, product quality, customer service etc.) to platform experience (user interface, user experience, scalability etc.) and related performance metrics. This may sound like the nuts and bolts of running an e-commerce business, and in some ways it is. But beyond mere mechanics, I’m looking for a virtualized approach to every business function.

2. Content. You need to offer rich and engaging content as part of your e-commerce operation. A classic early example would be the online reviews at a site such as Amazon. Those reviews help customers decide what to purchase and push them off of the fence when they’re hesitant to buy anything at all. Successful online retailers evolve into publishers of original content that helps shape opinion and motivates people to buy.

And motivating people to buy is only the first step. Ideally, the content you offer will serve as a broader industry influence on how, when and why people shop. This also differentiates your company. Instead of being simply a provider of goods or services, you can evolve into the more fundamental and trusted role of advisor.

3. Community. Ultimately, you need to be able to transform your loyal base of customers into "affiliates" or brand promoters. In today’s highly personal, socially networked world, leveraging your customer and fan base to generate sales through a number of mechanisms and programs is a must. Virality doesn’t just happen on its own.

4. Personalization. This is your ability to respond to individual consumer requests or interests, ensuring that the products and services offered are highly personalized and relevant. Here, data is the limiting factor. Every single audience interaction provides you with the opportunity to collect data that helps you discover how your product, platform, and brand connects with potential customers.

Over the next several months, we’ll explore these four pillars in-depth and discuss how e-commerce startups can develop strategies to win customers, drive sales growth and foster meaningful, long-lasting relationships with buyers and partners. That’s the roadmap to becoming a successful consumer brand.

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