How to Overcome the Biggest Barrier to Online Sales Growth
Breaking through ‘The Wall’ – accelerating through increasing resistance to growth
Perhaps the most significant issue familiar to growing retailers is ‘The Wall’: a dreaded, yet common challenge that makes continued growth increasingly harder to attain. This situation is familiar for many brands and sellers as they increase sales. It seems that the more you try to accelerate growth with expanded portfolios, channels, and regions, the more time is needed for each successful order.
Diminishing returns are in full effect here: companies in this position aspire to grow globally, but are fundamentally constrained by their time-consuming manual processes.
This barrier to growth is often regarded as a fact – a part of the landscape that has always been, and always will be. However, ‘The Wall’ can be overcome, as we’ll explore in a moment. But first, let’s see how this ‘unavoidable’ problem arises to begin with.
How manual methods strangle growth potential
When ecommerce sales start to accelerate, it can seem that all that’s needed to continue expanding is putting more SKUs on more channels. While this is partially true, a growing number of SKUs, sales channels, and distribution methods all need active management. The burden that accompanies growing order numbers also increases volumes of customer service queries and returns requests. Each new channel has its own idiosyncrasies too when it comes to product content, data structuring, customer expectations, and service standards. With each new product listing or sake, a palpable drag starts to suck time and revenue from the business.
Even when new staff are added to ‘take the strain’, the management burden of this can be significant. It takes time until staff have become knowledgeable and confident enough to avoid common errors and fix problems themselves without supervision.
For ecommerce businesses stuck in this situation, scaling-up is particularly hard, even though it could help solve the problem. Capital investment seems risky at this stage; new technology, premises, or staffing could easily fail to deliver results – unless all processes are made as efficient as possible beforehand.
How do sellers overcome this barrier – to jump ahead to a point where capital investment for larger facilities, more staff, or outsourcing fulfillment operations can deliver immediate returns?
Reducing complexity: The example of fashion
Let’s look at a ‘typical’ example: Fashion. It’s a tough business, but it can be very lucrative. Online fashion retailers must manage a high customer service burden, and experience a high returns rate compared to many other sectors. Stock complexity is also a huge challenge, with many SKUs, multiple variations in size/style, and a limited shelf-life.
Meanwhile, customers demand online shopping experiences that are smooth, information-rich, and enjoyable. Brands must ensure the consistency of the brand experience across all sales channels to maintain brand trust and customer loyalty.
Managing all of this with manual tools becomes increasingly untenable.
Overcoming the constraints of manual methods is the clear answer, but completely abandoning them without a reliable alternative already in place is an immediate risk that paralyzes decision-makers and prevents any possible progress. It’s a bit like a busy restaurant that really needs a totally new kitchen: its old one is falling apart and can’t keep up with the growing customer base, but they also can’t pause long enough to install a new one or figure out how to use it.
For sellers in this position, future success seems tantalizingly just outside their grasp – they can see what they need to do, but just can’t quite reach it. If a retailer can simply ‘jump’ to the next stage by reducing the complexity of their operation, they can fulfill the commercial potential that awaits them. But is that even possible?
Let’s skip to the end: 5 steps to get you there
Don’t worry. There is a way out of this situation, and it comes in just five parts. These consist of:
- Reduce reliance on manual tasks: automate and consolidate
- Use tools that optimize and rationalize the assortment.
- Use tools that help attain the best possible price.
- Diversify fulfillment capabilities.
- Expand sales worldwide with more marketplaces and logistics partners.
1: Reduce reliance on manual tasks – automate and consolidate
The importance of this step cannot be understated. It paves the way for future success by ensuring that as the sales grow, the burden of fulfillment and customer service is proportionally less.
While most businesses use a central hub or backend for all their ecommerce operations, much of it still relies on manual tools at some point. Many sellers still have gaps in their ‘consolidated’ system, and these gaps require manual methods or individual apps that are a weak link.
To move forwards, everything needs to be consolidated and integrated into a single app or dashboard. Only then can processes become automated. Integrations must be capable, robust, and reliable, and a single app or dashboard must give the seller access to all the automation tools they need. On top of that, it must have an easy to learn, user-friendly interface.
Your single dashboard should ideally enable these tasks to be automated and/or consolidated across all channels:
- Dynamically adjusted inventory
- Order management
- Price management (incl. automatic repricing tools)
- Product information management
- Customer service
- Automated order updates/tracking
- Automated integration with logistics/couriers
2: Use tools that optimize and rationalize the product selection
Think of this next step as fine-tuning your ecommerce engine: looking at your total assortment, how it’s distributed, and ensuring that it makes sense. Products and content must be tailored for each channel; having the right descriptions and images (for each platform) increases sales and reduces returns rates.
Some SKUs will always perform better on certain marketplaces, and others will not sell at all.
Sellers need to use tools that can rapidly identify poor-performing items – and help them take (recommended) action with a click or a tap.
3: Use tools that help attain the best possible price
Pricing is an art; one that balances actual costs against market expectation, expected sell-through rates, your market position, and brand identity.
With advanced pricing and repricing tools, sellers can ensure that their products are always priced competitively, while maintaining a healthy margin.
Pricing tools work both ways. When the market is not as competitive, you can ensure you’re always getting the best possible price with automatic repricing that matches demand.
4: Diversify fulfillment capabilities
With your product and order management system running at maximum efficiency, you’re now able to diversify fulfillment. This can give you a ‘free hand’ to take on more capacity in-house when it matters.
Diversified fulfillment means that merchants use a range of different fulfillment options to increase their fulfillment capacity/capability, using fulfillment partners.
Working with new partners can seem daunting, especially for those currently working with more manual tools and methods. However, platforms like Flxpoint and ChannelEngine are good examples of ways that technology is being used to connect the many ‘moving parts’ of distributed ecommerce, while making it easy to manage.
Four ways to diversify your fulfillment:
Hybrid fulfillment leverages a combination of own fulfillment, and third-party logistics (3PL) such as Fulfillment By Amazon (FBA). This can help iron-out issues with stock availability when sales are occurring rapidly but unevenly across venues. Imagine that an item is selling at top price on Amazon, but the Amazon warehouse (or other 3PL) runs out of stock. With hybrid fulfillment, your central hub will keep allowing sales from Amazon, but instead the orders are sent to your own warehouse where stock is plentiful.
If you’re selling items across North America, it can be advantageous to have local nodes scattered across the country. Each region can be served more quickly with regional inventory. Reaching millions of customers in Europe, Australia/New Zealand, and Asia is easier if items are shipped from a local warehouse by a local expert. Most sellers start with regional fulfillment using logistics partners, as it is a low-threshold way to dip your toe in a new market.
Some items might be too large or heavy to keep in all your warehouses. In this case, some items in the assortment will be shipped from a specific location. Alternatively, a drop-ship model can be used, but this relies on good relationships (and data exchanges) with the supplier.
Third-party fulfillment (3PL)
In addition to Fulfillment By Amazon (FBA), there are numerous third-parties that can handle different stages of the logistics process. These can also include freight-forwarding services, as well as fulfillment services.
5: Expanding sales domestically and overseas (yes – overseas!)
At this stage, you can start rapidly expanding sales. The increase in orders will no longer exponentially overload your resources, now you’re using a single dashboard, powerful tools and automations, and partnerships that bridge the capability gap.
Adding more marketplaces is easily done. With your consolidated system, all the orders are handled with a single process. So, in just a few clicks you can start selling the same inventory via any marketplace (or fulfillment provider).
As discussed earlier, each marketplace and channel has its own idiosyncrasies regarding buyer preferences and rules about content and data fields. This means your central hub must be able to handle this by mapping content effectively. With this capability you can easily ensure that your products are correctly distributed across all channels with the necessary content and information to secure optimum sales.
And what opportunities await you beyond the horizon? Many US businesses are wary of trading overseas due to uncertainty and perceived obstacles. The critical piece of the puzzle, however, will always be logistics. Logistics partners can help with every gap. 3PL providers abroad can serve your new customers around the world with local warehousing and delivery. In many cases, they can assist with legal compliance and import duties too.
After using 3PL to expand sales domestically, branching out overseas will not be much different.
Connecting your brand to exponential sales growth
Ecommerce is becoming more deeply interconnected. This connectedness presents an incredible opportunity for sellers. Many retailers and brands are already leveraging integrations and connected data flows to forge strategic partnerships, gaining a greater market share by reaching further into global marketplaces and new reservoirs of customers.
Each new connection or partnership is a fresh opportunity for sellers to achieve incredible sales growth and a greater reach than they could achieve on their own. Partner power can help sellers overcome their current constraints and grow more than would be possible on their own.
However, it’s vitally important you choose partners carefully. Seek out companies that give you the greatest number of options and the widest network. Ecommerce is becoming connected and distributed.
When you use partners that recognize the opportunity and help you attain it, you put yourself in the perfect position to grow and increase profit.
This is a guest blog from Steven Rottman, Manager of Strategic Partnerships, North America at ChannelEngine. Steven helps identify new partnership opportunities that offer strategic value to brands and retailers, who access these new channels and niche services as part of an integrated ecommerce ecosystem. You can follow ChannelEngine on Instagram and LinkedIn for more content related to ecommerce, marketplaces, and the many integrated services that make it run smoothly.
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