Updated: Sep 24
CoVid-19 has changed the world in a dramatic way. In the wake of social distancing, companies have transitioned to working remotely, masks have become the latest fashion accessory, and the contribution of online shopping has seen more growth since the start of pandemic than in the previous 7 years combined.
Building upon our last conversation around Digital Transformation, it is important to note that the landscape of the retail industry has dramatically shifted out of the Brick+Mortar sector and into eCommerce and Social commerce, which currently makes up 18.6% of total commerce, where it has only represented 5%-10% contribution of total commerce over the last decade.
Considering these monumental shifts and increased dependency on the world wide web, there are some new things businesses need to think about when architecting their operations and deciding what technologies will best suit the needs of their business and customers.
The goals here are to optimize the Pre- & Post-purchase experience by addressing both the internal processes you employ, and the resulting customer experience.
Before diving in further, a bit of industry news:
⚠ Acquisition Alert ⚠
Square recently announced their acquisition of the eCommerce operations management software, Stitch Labs. With this acquisition, Square has announced that “Stitch Labs won’t take on any new customers, [and their] products will continue to operate for existing customers until Spring 2021.”
If you are an active Stitch Labs customer, that means now is the time to create a plan for what comes next. Stitch Labs customer or not, if you are considering new technology solutions to streamline your retail eCommerce operation, then read on.
Some software solutions aim to solve many operational needs, while others are more niche and focus on just one/a few key areas. Stitch Labs customers, for example, are accustomed to having many features in one place: Inventory Management, Order Management, Purchasing & Replenishment, Fulfillment, and more.
While an all-in-one solution would be convenient, most software needs don't come neatly packaged in a single bundle. It is not uncommon for a business to use a few, sometimes several, complimentary solutions to get 100% of the way there.
The key is to look for technologies that can:
Simplify and scale your operations and processes
Communicate with related and data-dependent technologies
Where to start?
If you have not done so yet, then part of your pre-evaluation process should include a documented effort to detail your existing operations end-to-end. Here are some things to you get started:
All of the above will help you achieve a clear understanding of your current process, strengths & weaknesses, and business insights: all core components to making more informed decisions. Once you have a solid understanding of these, you can begin to think about how to automate the flow of data where it makes the most sense.
Integration & Automation
There are two ways to sync information from one place to another:
Manual data entry
Integration & Automation
Many processes are going to have a manual component to them, and that is okay. Your goal should be to reduce human errors, provide more visibility into areas where data access is weak, and to delegate human-time to doing more productive things for the business.
TBH - if you’re not able to generate more revenue and increase profitability as a result of a new software, then what’s the point?
Luckily, many of today’s technologies are designed in such a way that they naturally connect with other complimentary technologies. Seek technologies that have native integrations with your required technologies - or at least the ability to be integrated.
Some of the most common ways data can be accessed:
API (Application Programming Interface) – think of this as an access point that allows specific data to be requested.
Webhook – think of this as a user defined, triggered-based action. A webhook will 'listen' for something specific and trigger your automation when that specific thing happens.
FTP (File Transfer Protocol) – if your data is not accessible via API, or Webhook, then you might consider exporting the data to an FTP server. If this is possible, then you still might be able to automate a significant portion of your manual work.
EDI (Electronic Data Interchange) – EDI is an older technology that is still used today by some enterprise companies; it is commonly used for supply chain management and replenishment.
If there is not a native connection, but there is access to your required data, then you need to start thinking about how to connect those disparate endpoints. A good place to start is exploring the services of an IPaaS (Integration Platform as a Service).
An iPaaS provides a business with the ability to sync information where they otherwise would not be able to.
Just like you need a key to unlock a safe, and a translator to decode an unfamiliar language, so too does your technology stack (a.k.a. “Tech Stack”) need permission (keys) to the data, and then it translates that data from various fields in one system to specified fields in another.
When thinking about automation, it is important to prioritize what NEEDS automated. As you can imagine, it is easy to get overwhelmed by the possibilities when it comes to integration and automation. Be methodical; take it one step at a time; set goals; prioritize the automations that that will push your greater company goals forward.
Your operational process begins before a customer enters your site for the first time, or better yet, returns for more. Every step of the process matters, for both your business, and the customers experience. Some things to focus on:
Reporting & Analytics
Inventory/Product Planning (Merchandising)
Purchasing & Replenishing
Reporting & Analytics
You must get comfortable diving into your business data. Knowledge is power, and you cannot successfully run a business without a clear understanding of how to measure your business performance.
Fortunately, many of the tools that help us run businesses today also provide us with insights based on the data that software interacts with. Here are some things to consider:
Determine your core key performance indicators (KPI’s) to monitor
Check out this eCommerce KPI Cheat Sheet, complete with formulas & definitions
Understand why that data is important
What insights can you gather from the information?
What do these data insights mean?
What action(s) should be taken based on your learnings?
Who needs access to these data points?
Your data is critical when it comes to making decisions in other areas of the business, like:
Your merchandiser - or whoever oversees purchasing & inventory management - has a many responsibilities that are important to the business:
Analyze and interpret past sales performance to forecast future performance
Determine how much inventory the business can afford to buy - Open-to-Buy (OTB)
Determine what products to sell and how much inventory to purchase
Determine where to allocate that inventory (between stores, DC's, warehouses, etc)
Determine product pricing, promotions, and markdowns
The primary objective of the merchandising function is to create an assortment desired by your target consumers, and to invest dollars wisely in inventory that will generate the most profit per SKU.
In fashion, home décor, beauty, and many other industries, this includes determining what market trends matter, and making decisions on how to spend the inventory dollars you have.
Once you have a live assortment, you need to maintain an appropriate level of stock for that assortment. This brings us to:
Purchasing & Replenishing
A successful merchandising strategy will master the delicate balance between having the right inventory to drive consumer traffic, purchasing enough of that inventory to satisfy consumer demand (no unexpected sell-outs), but not too much that you are left with unwanted or unsellable inventory. For many retailers, there are two main product categories to consider:
SeasonLESS inventory (basics, carried year-round)
Your level of investment - a.k.a. how many inventory units you purchase - and how often you replenish them will differ dramatically between these two categories.
Seasonal inventory includes products like winter coats, ski equipment, swimwear, shorts, fad trends, and holiday-specific items.
These generally have a short window of opportunity in which to sell. These unit buys must be tight, and thoughtfully forecasted. Some of these items may never be replenished at all.
SeasonLESS inventory includes products like denim, intimates, cotton t-shirts, electronics, skincare, cosmetics, and more that can be used and sold all year-round.
These are usually your core items, usually core colors as well; they drive the most significant number of unit sales for your business. These are the products that you tend to re-order every month, quarter.
PRO TIP: SeasonLESS items are the products that will benefit the most from automation. By setting presentation minimums for your best-sellers, automatic PO's can go to your manufacturer or distributor, automatically replenishing your inventory, without lifting a finger.✨
We chatted with Inventory Management champions from Skubana, and they stressed that understanding how to manage your stock levels, reorder points, and replenishment schedules ensure your business maintains a competitive advantage. Determine what is a good inventory turnover ratio for your product category and see how you stack up.
By setting minimum levels on your retail operations platform you can avoid overselling fees, missed sales, and penalties from marketplaces. On the flip-side, you will gain more customers, make more sales, and build stronger relationships with your vendors because you won't be rushing them to send you a shipment.
If you are in the business of selling a physical product, then you must ensure you are using best practices when it comes to your Merchandising Strategy. Mastering your assortment planning leads to a stronger bottom-line, fewer markdowns, happier customers, and a less headaches!
Having the right technology is certainly a very big part of running an efficient, scalable business. However, the key is knowing how to use those tools to interpret and leverage the data they provide you with.
If you have questions about merchandise planning and sales data analysis, consider connecting with Taylor Daniel (via LinkedIn or email), co-founder of FOMO agency, and seasoned merchandiser and buyer with experience from global household names like Levi’s, Gap Inc., and Genesco.
Of course, the customer journey does not simply end once an order has been placed; in many ways it is just beginning, and where brand loyalty is built. The post-purchase experience is critical to your brand's long-term success. Some things to consider here are:
Inventory management is a critical component of any eCommerce operation. Without a doubt, inventory is one of the most common pain points we encounter working with retail businesses. A problem with inventory is a problem with revenue, and revenue is the heartbeat of the business.
In a recent post, we went on a mission to find the “Top 8 Solutions for Inventory Management,” and found several viable options. Having options is a good thing, but it can be overwhelming.
If you are considering a solution to integrate with multiple other systems or sales channels, then you need to ask yourself which system will be the source-of-truth for your inventory data? You NEED a single place that you can point to and say, ‘I trust this data above all else’, and make confident decisions based on that information.
While this point is being made in the context of inventory, this is also true for just about any other source of data that comes in from multiple locations.
One benefit of assigning this ‘master’ responsibility to a single system is that you will have no choice but to make sure the rest of your systems react accordingly. That doesn't mean this can't change in the future, but for right now you need one system that you can depend on, through quality integrations, when multiple systems depend on each other.
If you are looking for your next inventory management system (IMS), then ask yourself the following:
Who is responsible for inventory management internally?
What sales channels pull from the same inventory?
Where is your inventory physically located?
Can the IMS sync with my sales channels natively?
Does the IMS provide API access?
What other teams or employees rely on the IMS to effectively perform their jobs?
If you are replacing an already existing inventory management setup, then you are probably hoping for a pain-free implementation and/or migration.
In conversations with the Skubana team, we asked:
"What are the biggest challenges in migrating from one inventory management system to another?"
They called out that one of the biggest challenges can be implementation time. The number of active SKUs and monthly order volumes impact onboarding times.
It is best to start planning the switch well before peak-season. Some solutions, like Skubana, have quicker onboarding times ranging from 1-3 months, while some legacy software can take over a year. Other challenges include limited connectivity to your existing tech stack.
PRO TIP: Choose a software that has an App Store or integration library to ensure seamless connectivity to your tools and sales channels.
If time and connectivity are deciding factors for your project - and they should be - then you need to bring this to the immediate attention of the solutions you are evaluating, so they can realistically estimate if your requirements are possible.
Furthermore, with these technical projects, you should also anticipate a checklist from the solution-provider of action-items &/or deliverables that you’ll be responsible for throughout the project to ensure its timely and successful completion.
Closely tied to the Inventory Management system is:
You will notice a common theme as we go through each of these critical categories, and that’s the need for harmonious synchronization between these not-so-mutually-exclusive systems. Order management systems naturally depend on the Inventory Management system to be effective.
Not only that, but experts at Skubana also note that order management is CRUICIAL, especially given big changes to consumer behavior as a result of the pandemic. More customers are shopping online than ever before. It’s important that you have a presence everywhere they shop.
De-risk your sales channels by creating consistent customer experiences everywhere you sell. Don't be afraid of marketplaces or exploring new sales channels. Amazon's FBA ban earlier this year showed us that putting all your eggs in one basket is a recipe for disaster.
If you are running a multi-channel retail operation, then the Skubana team couldn’t be more right. Standardize the consumer experience across each of your sales channels. Some things to consider:
Who is responsible for processing new orders?
How are returns and refunds handled?
What system should your team use to manage orders?
What happens if an item is not in stock for an order that has already been placed?
How are you keeping your customers informed throughout the various parts of their journey?
Part of managing orders also means making sure that your customer receives their new order; we’re talking about:
When it comes to fulfilling a new order either your team handles this internally, or you are leveraging the services of a 3rd Party Logistics (3PL) provider. Regardless, there are a few things you should be thinking about if you plan to automate your fulfillment operations.
What different technologies does your solution need to integrate with?
What measures are taken to ensure inventory is updated when orders are fulfilled?
How are your customer notified when their order status changes?
Is your customer able to track their order through your website?
There are many moving parts here, but the core idea is to create a process that allows your business to handle demand, while also providing the customer with a fast, positive, seamless end-to-end experience.
If your setup is going to depend on multiple systems - and most of the time it does - then check out our post on “Automation – more than a BUZZWORD.”
As we mentioned above, those systems will either have a ready-made connection with each other, or they won’t. If not, then you will need to either find something new, or find a way to sync the information you need from that system with the system that needs it. Fortunately, this is usually possible with an IPaaS.
Preparing for a Software Evaluation
Before diving into your favorite search engine or review site, you need to come up with an internal plan for what comes next. As rap icon Ice Cube rightly puts it, you need to “chickity-check yo self before you wreck yo self.”
Taking a good, hard look at your existing operations and comparing that to what your ideal state would be is a great exercise. This will better prepare you to develop a working list of NEEDS vs WANTS. This working list will help you determine your MVP (Minimum Viable Product). Defining your MVP is critical to keeping your evaluation process in focus. You can think of the MVP as the all-encompassing features you CANNOT live without...your NEED-to-haves.
We recommend getting internal alignment on the following before proceeding with your evaluation:
Roles and Responsibilities
NEEDS vs WANTS (MVP)
What is working well?
What is not working well, or missing?
Timeline & Budget
Learn more about preparing for the evaluation process with these “7 things to consider when evaluating a new software.”
We asked Skubana how retailers can come to the table more prepared for these evaluations, and they said choosing the right operations system requires a holistic understanding of your e-commerce business. It’s important to know: (1) where you sell, (2) how you fulfill orders, (3) how you manage returns, and (4) what your accounting processes are. Think about where you might expand next and choose a system that can scale alongside you.
They also stressed the importance of being ready to articulate your existing tech stack. Ensure the new platform can connect with your existing tools and operations. Otherwise, you will spend a lot of time and money re-working workflows and building custom integration connectors.
Understand how many warehouses you have, your 3PLs, drop shippers, and vendors. You want to make sure that they can integrate with your new system. A retail operations system is usually the best source of truth for your operations, so ensure you have all these details prepped before your first meeting.
As Skubana rightly calls out, you need to approach any software evaluation not only with an eye for how to solve your problem now, but also an eye for how you plan to handle this in the future. Sometimes, you will be able to commit to a system that can scale with your business. Other times, you may have to settle for something temporary in order to justify investing in a more advanced tool later. Regardless, there is likely a solution out there for you.
Here at FOMO agency, we focus on two major areas of retail and eCommerce:
We help business create a more effective, and profitable assortment using data and trends to inform strategic business decisions.
Currently focused on Shopify, we help businesses simplify their operations by connecting their various systems together and syncing them where it makes sense.
We love chatting about this stuff, drop us a note, ask us anything, we’ll be happy to help in any way we can!
Happy selling, friends 👊
About the Author:
Dustin D. Thede has spent over a decade in retail with a foundation on the front lines as a sales leader and has been helping retail businesses adopt new software and pursue custom development projects since 2016.
Today, Dustin focuses his efforts on helping small-to-medium businesses (SMB’s) make more informed business decisions in the age of Digital Transformation.
“There is a lot of opportunity online and in stores for retailers. The ability to develop creative, data-driven strategies is key to success in an ever-evolving retail world. A plan today is a vision for tomorrow.”
Dustin D. Thede
President | FOMO agency™