The Anatomy of Pick Up Lockers

As online and offline commerce are getting closer to each other and customers schedules are getting more and more crowded, pick up lockers seem to become more useful and popular.

They are versatile, easy to use and something customers need from omnichannel retailers. So let’s dig in and see how they work and who should use them.

What is a Pick Up Locker?

First off – what is a pick up locker? Simply put it is an area of lockers where retailers can drop off merchandise and customers can pick it up. Amazon has been a pioneer in this field, with Amazon Lockers opening up the gates to a new type of fulfillment.

The pick up lockers work by assigning a specific location to packages and sending pick up codes to customers. The customers can than go to their designated pick up location, enter the security code and grab their packages.

After Amazon has built their first experimental pick up lockers, others soon followed.

Some of those that developed their own systems of pick up (and ship) lockers are 3PL companies. For example FedEx and UPS have developed quite advanced pick up and drop off locations. UPS has named theirs “Access Points” and they’re building a network able to sustain growing demand.

FedEx has developed a network of “Ship&Get Self Service Lockers“. With their lockers one can drop off items for shipment or receive packages.

Both are growing really fast and soon others will follow suit. Even startups have ventured in this area with some highlights being Swapbox, an Y Combinator startup and Bufferbox, a company that was recently acquired by Google.

So yes, they are popular but how do they work, especially from a retailer point of view?

How could large retailers implement pick up locker systems?

One very specific use case for the pick-up locker system would be large retail chains. For example Walmart announced last year their Grab & Go lockers following their Site to Store Self Service Lockers experiment.

Apart from the internal fulfillment challenges, retailers need to focus on some key aspects regarding the development and implementation of such pick up locker systems:

1. Security

For obvious reasons there needs to be a secure access to shipped goods. To do so each drop off will have to issue a security code that can be decrypted and accessed with the private code the customer will receive.

The systems will also have to have fall-back security systems such as video surveillance and locking systems in case of hacking attempts (there will be some).

Security code should work online but also have a fall-back local solution that can work in case internet connection is off.

2. Logistics

The pick-up locker system works with other fulfillment operations and will have to input status data directly into TMS (transport management systems) so shipping personnel could be directed to the correct pick up locker area and the specific pick up locker.

As packages differ in size, specific information regarding the type of lockers that are available should be available in real time so packages are stored correctly.

3. Communication

So far most pick up lockers use alphanumeric codes to help users get accustomed to picking up their packages without any hassle. But these codes pose threats in terms of security. While these codes can always be an option and can be easily sent to any device, with smartphones and smartphone apps on the rise, some other solutions may work even better.

One such option would be QR codes embedded in the retailer’s mobile application. The codes can be generated on the fly based on a secured algorithm that neither exposes the code and can also work within the application the customer already uses, thus improving loyalty.

4. Connectivity

With so many developing their own pick-up locker systems, a connectivity protocol should become the norm. With such a protocol FedEx could ship to either Amazon, Walmart or even UPS lockers for example, improving cross-retailer experience and creating economies of scale.

That being said, the development of pick-up locker systems is obviously a bit more complex than these few paragraphs but I wanted to give you a starting point and explore some of the challenges.

Top 8 Online Beauty Shops and the Strategies They Use

The Beauty and Cosmetics category is one of the fastest moving digital commerce areas. It is a highly competitive and innovative market with large brands quickly adopting digital models and challengers innovating their way to the top.

The emergence of the ecommerce sales channel for beauty brands has seen a long wait. The time has come for beauty retailers to align with the customer’s demand and specific requests. For example, a recent AT Kearney study showed 28 percent of online shoppers use the digital media to get informed on products. They carry this information in stores where they are sometimes more knowledgeable than the store assistants, which may pose a real challenge for beauty brands.

The AT Kearney study shows that only 16% of all online shoppers are online enthusiasts. The rest either use the digital media for information or for shopping for products they are already familiar with:

Beauty shoppers split

Online shoppers are more inclined to shop for particular products, such as skin, personal and hair care. Products such as beauty tools and nail care are less likely to be purchased online, unless is a very specific product, one the customer is already familiar with:

In this post we’ll get a glimpse of the eight most important type of beauty brands that engage their users through digital commerce (also). We’ll have a look at a selection of global champions with different backgrounds and different models. From digital pure-plays to established brick and mortar brands, let’s have a look at some of the most interesting approaches to beauty and cosmetics digital retailing:

1. Amazon Beauty

As expected, Amazon leads the way when it comes to online beauty retailing also. Customers are delighted to almost 2 million products, including luxury brands.

Its Beauty category is the go-to place for most of online enthusiastic shoppers, where Amazon is available. And with Amazon’s shipment policies, that’s basically everywhere.

Amazon’s secret weapon lies in its free-shipping policy (for orders above 25$), a great motivator for online shoppers and a better threshold than challengers Sephora and Beauty.com.

Another great asset Amazon will use to gather shoppers around its beauty retailing section is the fact that more customers use Amazon (30%) than Google when doing online product research.

2. Sephora.com

Sephora is generally seen as the actual leader in the digital beauty commerce. Though it lacks Amazon’s ecommerce strength, the company is part of the largest luxury high quality goods (ahem…ahem) group, LVMH, packing a lot of beauty retailing know-how.

The company has developed a great omnichannel model that focuses on mobile as a bridge between online and offline.

One of the best things Sephora.com has implemented in its web store is the content marketing and digital assistance features. I’ve previously covered the subject and praised Sephora’s efforts to offer quality content, as praised are due.

The curated content customers find is a great choice to build loyalty. So is the Community where customers can browse among the knowledge base or post questions and interact with professionals.

As mentioned, one of the greatest assets Sephora has is its focus on digital rich content. Users are treated to:

  1. Sephora TV, the go-to area for video advice, how-to’s and trends
  2. Sephora Glossy – a fashion, beauty and style blog that offers great advice from beauty professionals in a great, visual format.
  3. The Beauty Board – an user generated gallery from customers that upload pictures to showcase how and which products they use.

Some other touches make Sephora a great choice for beauty products customers, not the least of which are the three free samples with each order (a great way to drive future orders) and the mobile apps that make us of barcode scanning to offer price info and customer reviews.

3. Beauty.com

Beauty.com is an online retailer so it has no apparent need or intention to leverage offline or omnichannel sales. It has developed specific filters and features to cater to customers that either know what they want and want the best price or they can quickly decide.

The auto-reorder option seems to be a great first step to a subscription program.

Customers can set an auto-reorder flag for certain products, which can be shipped each 30, 60 or 90 days. Before the order is shipped, customers receive an email notifying them and they can pause, skip or cancel the auto-orders. The customer incentives are savings and free shipping.One of the features that really stands out (they have a pop-up to insure it stands out) is “Auto reorder and save” option. Simply put, the online retailer has noticed the habitual purchase beauty customers take and leveraged it.

Another great feature that lets customers reach the right product is the filtering option which is set not only for product features but also customer concerns and specific needs. In the Make-up section, the eye category, one can find brand and ingredients options, but also filters such as concerns (acne, dryness or oiliness), benefits (curling, hold or smooth) and skin type. Unfortunately, the filters are not usable on the smartphone version of the web store.

Just like its direct online competitor (Sephora.com), Beauty.com offers free samples, free shipping for orders $35 and above, free returns and 5% back through its loyalty program. It also features great content areas, such as its Beauty Blog, with Romy Soleimani, The Latest Trends section reviewing product news and a Beauty Videos section, ranked according to customer reviews. A great no-no on the video section is the fact that videos embedding is restricted to affiliates only, leaving a lot of marketing potential untapped.

Download the rest of the report below:

Demand Sensing is a $1.1 Trillion Opportunity for Retailers

Consumer demand is the one thing that can decide whether a retailer is successful or not. Of course, there is a whole field of marketing studies to determine how we can influence consumers to purchase. But a really important aspect of how good retailers fare in the market is their ability to “sense” demand, not just influence it.

In a recent study, IHL Group claims Overstocks and Out-of-Stocks cost retailers almost $1.1 trillion world-wide. To put it in perspective, that figure is the size of Australia’s GDP.

What that means is that Overstocks and Out-of-stocks, collectively defined as Inventory Distortion, are a problem that cost retailers world-wide 7.5% of their gross revenue.

The most important overstock causes

The figures translate into poor performance, decreased customer satisfaction, decreased sales and increased costs of inventory warehousing and inventory spoilage. Basically there are two really simple outcomes:

  • Either retailers stock up on too much inventory which turns to increased warehousing costs and spoiled products.
  • …Or they don’t and they miss on sales opportunities

Either way, one thing is for sure: Inventory Distortion leads to poor retail performance.

How do you solve Inventory Distortion? (Not exactly) Simple: Demand Sensing

Demand Sensing is a concept and set of technologies that make use of analytical and prediction models to estimate … well … demand. Imagine a retailer that runs a network of 10 stores, one online store and has a mobile app that drives sales also, along side a call center.

Said retailer probably has an inventory management system, an warehouse management system, a sales reporting tool and probably some type of integration with suppliers and manufacturers.

Let’s imagine this retailer selling a type of red shirts that is available in one of the 10 stores and that inventory is not available online. If a customer will visit 3 of the stores in search of that particular red shirt and then search for it online and still not find it, it will probably consider it to be out of stock and the retailer would lose a sale opportunity.

You probably see where the problem lies: even though the product was available, it was not available to the customer and opportunities were lost. The same thing goes for products that are not exposed to the customers, or they are, say, unreachable on the shelf or unfindable on the web store if the search engine is not fit for the job.

The opposite situation, where demand is not correctly estimated and out-of-stocks become a reality, are just as bad as sales opportunities are lost.

The solution lies in gathering enough data across all sales channels, compiling this data and using models to predict demand. That easier said than done because …

To make demand sensing a reality, inventory transparency has to be achieved

As you are reading a blog on omnichannel retail, the term was bound to appear somewhere along the line. So here it is. You can’t have Demand Sensing without a connected sales operation and inventory transparency. All inventory sources have to be connected and data should be generally available. So should sales data across channels.

The picture below shows an example of omnichannel supply chain, one where all the operational pieces work together and share data. When such a structure is implemented, demand is easily “sensed” and estimated and thus inventory distortion can decrease.

So now we have the data. Implementing omnichannel retail can lead do a better demand sensing and therefore improve inventory distortion, a small glitch in the global retail system costing “only” $1.1 trillion.

How to Start an Online Store: Part 5 – Ecommerce Marketing, Sales Channels and Testing

Here we are. The fifth and final part of the guide to starting your online store. It’s  been a fun ride for me and I hope it hase been fun and informative for you. Before we dive right in, let’s take a moment and go through a quick recap of the steps we’ve covered so far.

As you remember, Part 1 covered planning and finding the right business model. Part 2 was focused on registering your business, finding and negotiating with suppliersFulfillment operations and making your back office work were the main subject of our third part and last week we’ve covered branding, ecommerce software and content in part 4.

Now … it’s marketing and sales time!

During this section of the guide you’ll discover how to expand your reach through additional sales channels, market your brand and products and finally – how to test the main areas in your online store.

So let’s go ahead and have a look at…

Adding Sales Channels to your Online Store

First of all – what is a sales channel? The answer is quite simple: any method of getting products to the market so customers can purchase them. For example, your online store (the actual web store) is a sales channel. It showcases products, it tells their price and allows customers to purchase these products.

Let’s assume that by now you have already started your online shop. The web store is up and running and customers start showing up. But the web store should not be your only sales channel. Your customers are complex and their habits diverse. One day they’re browsing your store, the next they’re hanging out on Facebook and meanwhile they search product info on their mobile phone. You should be there also.

You could have your products lined up in a Facebook store. You could build a mobile app that engages customers outside your store and collects orders.

It’s not just online, either. Offline engagement shouldn’t be a taboo either. Maybe a brick and mortar showroom for your main products is not cost – effective. But you could set up a pop-up shop occasionally.

There are numerous ways you can add sales channels to increase your market reach and some are really easy to set up. Others are a bit more complicated but in the end it’s mostly about your product, your brand and of course your budget. Let’s see which are the most popular sales channels and how you could benefit from them.

Call center

Out of all the sales channels you may choose, one really complements the online store. The call center can be a simple line you for customers to demand information on products.

(Zappos’ call center is legendary and effective. It’s both a sales and suppor channel.)

 

It can just as well be a full fledged call center with operators answering calls and helping customer choose the right product, handling orders and managing complaints. It can also mean people calling prospects or indecisive potential customers or just plain cold calling sales leads. No matter the choices you will be making, the phone is a great connection to the customer and you should build a smooth phone support operation.

 

Social media

You could ask – isn’t social media more about marketing and communication, connecting and understanding your customer? Yes it is but it can work just as great as a sales channel.

For example – Twitter is testing purchase options (right now with just a few high profile retailers such as Amazon) and ways to drive targeted traffic to stores through offers. Pinterest is also testing options to drive targeted customers to your online store and they do that through their ads. That is great news as Pinterest is more efficient into turning views to sales than any other social network. It works awesome for industries such as travel, home-deco and fashion.

And let’s not forget Facebook. Being the largest social network in the world it is a place you should be digging into. For a while, the network was so popular with retailers that a term was coined to split Facebook commerce from everything else: f-commerce. Recently, the company lead by Mark Zuckerberg has focused more on advertising revenues than helping retailers get close to their customers but it is a great channel to study, nevertheless.

There are some companies that will make selling on Facebook as easy as it gets. And if a Facebook store may look like a great option for your store, this involves apps connecting your store to Facebook.

(Shopify, among others, built options for users to connect their stores to their fan pages and sell directly on Facebook.)

On the previous chapter we’ve discussed the most popular ecommerce software choices. Turns out most of them get some sort of support for a Facebook store by third party apps. Here are some of them:

  1. Shopify for Facebook: Shopify provides useful tools for store owners that want their Facebook fans to browse products and place orders directly on Facebook. These add-ons work as extensions for online stores that retailers can set up easily.
  2. StoreYa is a simple solution for owners of stores running on the usual ecommerce platforms. The company supports Shopify, Magento, Prestashop, WordPress and even marketplaces such as Ebay or Etsy. Although the Facebook Shop is their main product, they also offer other effective marketing apps for store owners.
  3. StorefrontSocial works with new and existing retailers to connect them to Facebook fans and allow for an easy store set-up. Unlike previous options, StorefrontSocial works as a standalone platform where you can either set up a new store or import existing products. It doesn’t allow for an existing platform connection.
  4. Beetailer is yet another option extending your existing store to work on Facebook. It integrates great with platforms such as Magento, Shopify, Prestashop or even Amazon Store. Plus – if you have less then 30 products, you get a free account so you can test and see how it all works.

There you have it – these applications are easy to set up and you can start selling directly on Facebook thus adding a new sales channel. And once you start adding sales channels, you now you have to look into …

 

Mobile Apps

What is the device you think customers use the most throughout the day? It’s the smartphone. Mobile usage has gone through the roof lately and its bound to continue.

(Number of smartphone users in the US (millions). Source)

So you want to be close to your customers. Mobile apps provide a special sales channel, one that’s personal and it makes impulse buying all the more attractive.

How do you add a mobile sales channel?

There’s an app for that. Actually more:

  1. Shopgate makes it possible to turn your store into an app. It connects with Magento, Shopify, Prestashop and other ecommerce platforms to enable store owners to build mobile apps. It works on both iOS and Android operating systems and provides support for both smartphones and tablets.
  2. Shoutem is not built specifically for eCommerce but among others it supports building mobile apps for your Shopify store. The interface is quite simple and doesn’t offer many options but it gets the job done if you happen to be a Shopify user.
  3. MobiCart works with established ecommerce platforms and can help you build your mobile app. They integrate with Prestashop, Magento and others.

Give mobile apps for your store a try. The more smartphones become a part of our daily lives, the more we will use them. Your store can benefit from users that are not strapped to their desktop or notebook. And speaking of that, a great way to interact with customers are the …

 

Pop-up Shops

Pop up shops are temporarily stores, in the real world, where online store owners can showcase their products and interact with their customers. The pop-up shop sales channel has really taken off recently and store owners have started adopting this online-offline connection.

(Adidas pop-up shop. Not exactly low-budget but hey – one can dream, right?)

Setting up a pop-up shop is a personal choice but works great if it’s posted either in a high-traffic area (such as a popular shopping center) or at an industry event. For example you could set up a pop-up shop at a home-deco event if you are a store selling home decorations. It is a great way to interact with customers and get feedback on your merchandise.

Companies such as Storefront help shop owners find retail space temporarily by connecting them with retail space owners. To help online stores they’ve put together an ebook that is free for download. I encourage you to have a look at it as it explains the main steps in setting up (pup-up) shop.

 

Online Marketplaces

Last but definitely not least – the marketplaces. Amazon, Ebay, Etsy, Sears, Buy.Com, NewEgg.com and more. You name them. They provide lots of options to lots of users and chances are your next customers are there shopping right now.

( Ebay – the original online marketplace )

The reason marketplaces are the last on potential sales channels is because I want to emphasize just how important they are. Just like the “old” shopping centers, customers go to marketplaces because diversity means options and options mean they can find what they are looking for.

Diversity drives customers. It drives sales. So you want to be there but plan ahead before you dive in.

As an online store start-up you should be looking for as much exposure as you can get but still try to focus on the right marketplace. Amazon and Ebay are the obvious choice but before you join them you have to ask yourself:

  • are these marketplaces right for me? Not all that’s great is great for you. Just because they have traffic, that doesn’t mean you will get traffic and if you do, you don’t know whether that traffic will turn to sales. The most important aspects you should be looking for are exposure and sales.
  • can my product be found? expect to have competition. If you are among the few selling the product AND your product is popular, than the answer is YES, the product will by found by the customer. If your product is also sold by hundreds of other sellers, there are thin chances you will be the one showcasing the product. Try to make your product look special and attractive through copy, media and of course, price.
  • will my product be bought? If you have indeed managed to get customers to have a look at what you are offering, you must also get them to buy. Most important things are the way you showcase the product to create desire (“A beautiful hand-crafted lamp“), urgency (“A beautiful hand-crafted lamp in LIMITED offer”) and affordability (“just $49.50“).
  • do customers trust me? Marketplaces usually have some sort of peer-review mechanism. Customers can review sellers according to their fairness. Your reviews are your digital reputation. Positive reviews mean more sales, negative reviews can mean NO sales. So try to be as fair, effective and open with your customers.

Handling orders from marketplaces.

Listing your products on all marketplaces can seem like the right choice but it’s usually not. Each marketplace is a sales channel itself. You should be sticking to those that work for you and improve your experience there. Until your business is large enough to allow you to handle orders from more marketplaces, focus on fulfilling orders effective and quickly.

Most marketplaces offer some form of integration with your existing store and you should use those. Product information should be going out of your online store and orders should be synced with your order management system. This way, the order management team can have a single point of entry for orders instead of getting lost in a dozen of order management systems scattered throughout the marketplaces you are using.

The big ones will get bigger

Marketplace orders will continue to be a large part of your business. So large that they will, in the future, dwarf those from your online store. The reason is people tend to gather and shop where they will find diverse products and retailers. Just like in the real world. Online is even more so – marketplaces get even more traffic from search engines, have more money to spend on ads and are better at keeping customers returning.

Connecting sales channels

Each sales channel you will be adding will bring you more exposure and more sales if handled correctly. The sales channels I’ve described so far are the most popular ones right now. But they are not the only ones. As technology evolves, so will commerce. New channels will pop-up and some I haven’t mentioned here will probably increase in importance.

Think about the impact Internet of Things will have. Maybe in the future the greatest sales channel for groceries will be smart appliances. Think of a refrigerator than can place orders for customers when it’s depleted. It sure is going to be an interesting challenge to integrate those in a sales channels mix.

( Omnichannel means connecting all sales channels in a way the customer finds natural )

By adding sales channels you wil turn from an online retailer to an multichannel retailer and if all channels work seamless together you will become an omnichannel retailer. If you want to know what that means – have a look at Macy’s omnichannel strategy. And if that is not enough dive into this omnichannel report I’ve wrote to help retailers integrate their sales channels.

Marketing your Online Store

Marketing is one of those concepts that’s so hard to understand and yet so overused. Most of the times its meaning is so cluttered by useless acronyms and buzzwords that people have trouble understanding what it actually is.

I am not saying that marketing is easy. It’s not. Yet is not the Holy Grail of human knowledge either. It’s just communication. Talking, showing, describing products to the people most likely to buy it.

It’s that simple. The basics need to be simple.

If you are going to survive as an online store owner, you need to keep your marketing basics simple. You have a product. Hopefully a great one. There are people who want to buy that product. Most don’t know they want to buy it from you. You need to show them why they should buy the product you’re selling. You need to show them why they should buy it from you. And then, if everything I’ve shown you so far has been decently implemented, just let them buy it.

Everything else is gimmicks. If you’ve got the basics right, everything else will fall into place.

The market

To get people to buy your product, you need to know who these people are, what they want and how they act. Most likely not everybody will want your product. But if you’ve done your planning right, you pretty much have know a lot about your market.

Targeting demographics

Yup, your customers are “the target”. Why is it called that you ask? Well, because your communication targets them. Until the internet became the norm and we’ve started gathering more data than we can handle on customers, we used to define them through demographics. That means basic info on consumers. Age, sex, marital status, location, education … this kind of data.

( Pictured here: advertising in the 60s. Not pictured here: Google algorythms and tabacco advertising ban )

These targeting methods were made popular when mass marketing was just blooming, in the days of TV, print and outdoor ads made by the likes of Mad Men. When you ran your ad in the magazine or on national TV, you needed to know who’s going to use your product, make sure you understand their psychology and shout from the top of your lungs how cool the product is. Once the ad was approved, there was no going back. Advertising agencies would research, create and test the ad before the campaign was launched because there was no way you could change, tweak or even pull back a campaign in real time.

So demographics were the bread and butter when you would push your message to the market. But the Internet changed that into …

Targeting behaviors

Basically, if you were a mid-class urban wife with no college education in the 60’s there were slim chances you would receive ads trying to sell you repair tools for your car. Even if you were actually a mechanic. The same would hold true if you were a man and would be looking for a sewing machine to fulfill your lifelong passion of becoming a fashion designer.

You would have to find those products yourself. We’ve come a long way and thanks God, we now have the freedom to fix our own cars and sew our pants, no matter the gender

That happened when contextual marketing (the ads you might see when searching on Google), interactive marketing (information instantly delivered when interacting with say an website) or behavioral marketing hit the shelves.

The last one, behavioral marketing, is probably the single most important aspect in online retailing. Technology now personalizes marketing and responds to customer behavior.

For example Amazon’s recommended products (“See what others have purchased”) is a form of behavioral marketing that is based on a complex research on previous customers behavior before they purchased something. Simply put, when people would purchase something, their interaction trail (the products they’ve seen so far) becomes an indication that people taking the same or similar steps would most likely purchase similar products.

The ads you see on Google feature a similar concept. They are shown as to answer your needs. Some ads respond better than others at what you are looking for and thus have a better chance of getting clicked. Google trusts this system so much that they invoice advertising on clicks, rather than how many people have viewed the ad.

So basically we went from effectively targeting people to targeting people’s behavior. Still, demographics and customer profiles are very important and a lot of what you will be doing is to try to guess customer responses based on demographics assumptions. Such assumptions might mean you will favor ladies over men if you are selling women’s clothing (doh!) or rather more complex assumptions such as “Men over 32, employed and married are more likely to buy a family car”.

Indifferently of your assumptions, test them and always quantify your results with …

Analytics software

Here you go … numbers. Charts. Estimates. Hope Miss N., your math teacher, was your favorite back in school, because this is going to be damn complex. Nah, just kidding. Most analytics software is pretty much plug and play and the numbers and charts I mentioned are usually generated on the fly and in such a manner you can easily understand.

You can’t have marketing without analytics and research. Fortunately, it is a lot easier now for a small online store than it was 40 years ago for the largest companies in the world. What is not so fortunate is that it’s easier for everybody so you’ll have to dive deep and understand what your analytics are saying. So will the competition.

Once you have installed Google Analytics or one of these other ecommerce analytics software, you will probably dive in and see what your customers are doing. What you will want to look for is patterns that lead to increased sales. Special products, a certain type of copy, products featuring media versus those that don’t have media. Look for what makes your sales increase.

Targeting, knowing, marketing – the most important ecommerce marketing strategies for your online store

So you know the target, you have the analytics figures, now it’s time for the actual marketing. The web is full of resources to fine tune your online marketing understanding. I will show you which are the most effective ways of marketing so you will have a bird’s eye view on what makes an online store sell.

Search Marketing: SEO

As a startup there are really little things you can do better with smaller budgets than writing quality content and optimizing for search engines. SEO (Search Engine Optimization) is a really large concept and many people earn their living through SEO services. You will probably ask a SEO expert to help you find the perfect balance so your store will show up in search engine results. But before you do that, have a look at the basics. These are the things you will need to keep in check so Google will bring the right customers to your store:

  • content: write great and extensive content. For humans. Describe your product like you would want it described for yourself. Don’t do “keyword spamming” which is the result of cramming keywords in your description so more people would find you. It just doesn’t work that way.
  • code: your webstore is visible on customers’ browsers thanks to programming languages that output information in the way we are accustomed to. Search engines index this information and if you are to have your store indexed properly, you need the right code. If you are not technically savvy, better call someone who knows what they are doing. In the previous part there is a section dedicated to finding technical support when integrating your store.
  • links: get other (relevant) websites to post links to your store. Although not so important now as they were in the past, links are necessarily so search engines can find and index your web store’s content.

Email marketing

Ask your customers to leave you their email address so you can update them on news and offers. This is a great way to get people right back on your store.

But don’t annoy them and don’t do spam! Everybody hates unsolicited email. Make sure your customers give you their permission to send them emails. You can use apps such as Mailchimp or CampaignMonitor to save customers’ emails and then send them newsletters.

Social media marketing

Where would you go if you were to market a product? The answer is fairly simple: where people gather and interact. Social media outlets such as Facebook, Twitter or Pinterest are now used by billions of people. That’s where your online store should be.

Just like interacting with friends, some things work better than others. Here are some tips on how to use social media to interact with potential and existing customers:

  1. listen first, talk later: social media is a great place to gather insights on your market, your products and even your brand. Some of those insights may not be friendly but you should pay attention to them nevertheless.
  2. focus on building strong bonds rather than gathering masses: it’s just like with your friends. It doesn’t matter if you have 10 or 10 000 friends. What matters is how strong your connection with said friends are. It’s better to have few, engaged fans rather than many fans that do not relate to your brand or product.
  3. find the influencers: some people wield more influence than others in their social circle. And they somehow do it naturally. You should get close to these people, develop relationships with them, show them your products and share content they might find interesting.
  4. provide value, not sales pitches: yes, your products are great but don’t bore people with constant product sales. Provide content. If you sell hats, show fans their history, tell them about the manufacturing precess, showcase famous hats. Make it interesting and valuable.
  5. be patient and constant: don’t tweet 40 times one day and than stop for a month because no one followed or retweeted you. Social media success takes time, patience and constant effort.

If your social media strategy is not going the way you’d want it to, there are always the ads. Most social networks provide ways for you to get closer to your potential customers, faster. Most people call them ads  . Facebook, Twitter and Pinterest – they all provide advertiser with the possibility of engaging fans through ads.

And speaking of ads, one of the most effective way of advertising your store and products is …

Paid earch

Remember those Google ads I’ve mentioned earlier? That is Google AdWords, a very effective form of advertising that places ads on search results, ads that are directly related to your search.

For example, if you were to search for “cars”, you will be shown the natural search results AND special search ads. These ads are fueled by advertisers that pay each time someone clicks one of their ads.

You can be one of those advertisers. By carefully analyzing traffic and allocating search ad budget, you can determine with high accuracy the number of clicks you need to convert visitors to buyers. Because search ads are contextual, this means you can optimize your ads in such a way that only those interested in purchasing your product might click it.

However, paid search campaigns are usually better managed by professionals. Even though you might spend a little extra for someone to handle your ads, just leave it to the professional.

And one more thing: Google is not the only one providing the option for paid search ads. Bing does it and Amazon does it, so there’s room to play there.

Performance marketing

Performance – well that sounds nice. What is it?

Performance marketing is a broad term that means advertisers pay a fee depending on how well an action is performed. This action can mean showing an ad a certain number of times or making that ad transform into a special action. The standard actions you might want to encourage are:

  • clicking
  • downloading a certain file (say a product catalog )
  • showing interest in a product (the user becomes a lead)
  • buying a product

And because marketing people happen to love acronyms, you might find the info above coded in three-letter words:

  • CPM means Cost Per Mille (that’s Latin for thousand) – one thousands being the standard minimal block of ad views you can purchase to show an ad.
  • CPA means Cost Per Action – the generic code for any action you might define with those selling the ad space. It is used for sales and therefore sometimes referred to as Cost per Acquisition.
  • CPC means Cost Per Click – the cost you will be paying whenever someone clicks on your ads
  • CPL means Cost Per Lead – the cost paid whenever a visitor shows interest in your product

Performance marketing is sometimes used interchangeably with affiliate marketing. That is  more of a misconception, as affiliate marketing, though popular, is a subset of performance marketing. It works as a shared revenue deal, where the retailer shares a portion of the revenue with the publisher (the one displaying the ad), whenever advertising turns into purchases.

Affiliate marketing is ran through affiliate marketing services, that cover three very important aspects: they connect advertisers to publishers, they make sure all sales are registered and attributed to the right publisher and they handle transactions between advertisers and publishers.

If you decide to go along the affiliate marketing path, here are the most important affiliate networks that can help you sell your products:

  1. CJ Affiliate (formerly Conversion Junction) is the global leader in pay for performance programs. It is the home to many publishers that can help you run your ads.
  2. Rakuten Linkshare is the big contender to CJ Affiliate and a fast growing one.
  3. ShareASale is a great affiliate marketing resource for retailers. Slightly smaller as it may be, it is still very effective.
  4. ClickBank works great for entrepreneurs and content creators. It is effective and easy to use.
  5. Avangate is an young yet fast growing performance marketing company that’s focused on software and digital products.

Comparison Shopping Engines

A great way to get your product out there is place it in comparison shopping engines. These applications gather information from more online stores and show potential customers what is the best way to shop in terms of pricing.

It basically works for those that are price competitive so before you join such a program, make sure your prices are aligned with the market.

(Shopzilla is one of the most popular comparison shopping engines)

Most comparison shopping engines are CPC based and you will pay anytime people click your products, arriving at your web store. The top four most popular are Google ShoppingShopzillaShopping.com and Pricegrabber. Getting listed can draw targeted traffic and can mean a very scalable way of converting traffic to sales.

Other marketing options

So there you have it – these are the most effective ways you can market your new online store. But don’t stop here, don’t settle. Marketing in the digital world is usually a matter of imagination. Be curious and try new things that might be fit for your online store.

For example you can attract relevant bloggers to mention your store and review the products. You can put out press releases and talk to the media. You can  run contests and sweepstakes to increase reach and turn fans into loyal customers. Once you have the basics up and running, you will be ready to add more and more marketing options to your online store.

Testing and optimizing

Remember: your work is never done. If you want to keep your customers happy and sales growing, you need to constantly optimize and tweak your store. To do so you can run tests that determine what works and what does not. When testing you will be looking for either errors, bottlenecks or usability issues. Do so through:

  1. Functional testing: test your store’s functions. The navigation, user account, user login and others. Each needs to be thoroughly tested and improved
  2. Process testing: we are talking business processes here. These are things like managing orders, fulfillment, shipping or warehouse management. If your company process don’t run smooth, customers get their orders delayed, mixed or canceled.
  3. SEO testing: as I’ve mentioned previously, search engines will always be a very important factor in driving traffic to your online store. Check to see how you stand against competitors and against previous positioning.
  4. Mystery shopping: put yourself in the customer’s shoes and see how’s everything going. Place an order and see how operators behave, how long does it take for the order to arrive and more. You might find some interesting things there.
  5. Hot areas testing: some parts of your shop are more important than others. You can improve conversion rate through a careful  inspection and recurrent A/B testing of what you could call “hot areas”:
    • Homepage
    • Product page
    • Checkout cart
    • Payments
    • Forms requiring customer input
    • Mobile interfaces

Customer journey maps

A great way to see how customers interact with your company is drawing customer journey maps. These “maps” show your existing sales channels and how customers interact with them. Customers may find you on social media, browse products on the web store and place orders through the phone. This is a customer journey map.

When these journey maps get too complex you have to constantly test and look for signs of problems of sources of frustrations for your customers. It may be a poorly designed checkout cart or the voice of your phone operators. By understanding your target customers and their journey maps you can have a guide to testing what works and what doesn’t on your store.

( A blank example of potential sales channels. By connecting the channels you can draw journey maps )

Testing means improving and you should strive to make your store better and better. Little improvements and constant focus on making the customer experience better turns your store into a success. So keep testing :).

And that’s it!

We’ve got this far. Wow! Testing is the last section in our guide to starting an online store. It’s been a great ride and I hope these posts will help you build the store of your dreams. If you’ve managed to get this far I believe you are ready to start your own store. Give yourself a pat on the back for having the patience to get through all this data. It’s not easy, I know, but it is a lot easier than just starting a store and then figuring it all out along the way.

I am more than happy if I’ve managed to help you on your path to becoming an ecommerce entrepreneur. If this guide was useful to you, please refer it to someone else who may be in the need for know-how.

You’ve taken a large step ahead to running your own business and online store. You may be anxious and a bit scared but rest assured. So was Jeff Bezos when he started Amazon. Knowledge, hard work, innovation and persistence will get you far. Have a safe trip in reaching out for your dream!

 

How to Start an Online Store – Part 3: Fulfillment

<< See Part 2 of “How To Start an Online Store“: How to register your business, finding the right suppliers, integrating them in the supply chain and setting the right product prices.

So you’ve got this far. Starting an Online Store is a lot easier when you’ve got the right info and this is the place where you can find it. It takes a lot of drive do get through Part 1 and Part 2 of this guide, so good for you!

During this part of the guide, you’ll get a better understanding of what fulfillment means and how to build a company that can effectively manage orders and ship the right products to the customer.

Good, good … fulfillment. Yeah! But wait …

What is ecommerce fulfillment?

Good question! Although the term fulfillment is used quite a lot, not everyone has a clear grasp on the whole idea. I mean – why fulfillment? Well, it’s actually a pretty simple concept. Order fulfillment is anything that has to do with fulfilling your promise to the customer. That promise is you’re going to ship the products they’ve purchased, those products are going to be in good condition and they will arrive as soon as possible.

Fulfillment also covers the reverse process (also called reverse logistics). That means getting merchandise back from the customer. That type of operations happen:

  • in case of a package return
  • when the customer refused the package
  • the shipping company was not able to get deliver the goods

So basically when your ecommerce business is fulfilling an order, it is actually making good on its promise to deliver merchandise in the best way possible. Although the concept is not that really hard to grasp, making it happen is a little bit harder.

In order to make sure your fulfillment operations you’ll have to look for the answer to four very important questions:

  1. am I moving the goods in the most effective way? This is a question you will always have to be answering to. The answer is usually no. If you have answered yes too many times – you are not really trying that hard. The truth is ecommerce operations are evolving very, very fast and there is probably always something you can do better.
  2. am I always shipping the right products? You have to understand that sometimes you will not be shipping the right products. Yup – that’s a fact. It may happen when you’re using a drop-shipping service or when your team is overwhelmed with the number of orders (say during the holidays). You have to minimize these type of mistakes and always strive to correct your mistakes.
  3. is my team working in sync or are there any communication or operational bottlenecks? Your ecommerce business will not always run smooth. The most common reasons are either the team is not communicating properly or the IT systems are not fully connected (say your order management and inventory management tools are not synced). You have to stay alert and solve these type of issues as soon as possible.
  4. is my fulfillment scalable? You won’t need to ask yourself this question in the first days but eventually you will have to check if your operations are ready to scale if you’re successful. To do so – try wondering what will happen if all of a sudden you were to receive each day ten times as much orders as you’re expecting right now. How about if your sales were to increase one hundred or one thousand times? Would you be ready? How would you manage this change?

The 4+1 steps in ecommerce fulfillment

Fulfillment is probably the most complex and tedious part of ecommerce. It is also the one thing that is the least talked about in terms of ecommerce. It’s not flashy and it’s not cool. It’s complex, involves a lot of tweaking and a lot of work to getting it right. While most ecommerce guides will point out to the importance of picking the right shade of orange for the “Buy now” button, few will speak of how important fulfillment is.

Just to get a glimpse of how important fulfillment is – think of your car. While having the right color and the right type of leather is important, the car won’t start without an engine. Fulfillment is the engine that keeps ecommerce going.

There are just five basic steps in fulfilling ecommerce orders. Four of them are mandatory and one is optional. Hopefully you will cover this last step as few times as possible. These five very important steps are:

  1. Receiving the orders
  2. Receiving the products
  3. Processing the order
  4. Shipping the ordered products
  5. (hopefully not needed) Handling order returns

Overview of the Fulfillment Process (including returns)

1. Receiving the orders

Customers will place the orders through one of your sales channels. It may be your online store, on the phone or through a mobile application or a pop-up store.

There is a great variety of order management software out there and later on on this guide will get through some of them. It matters less what you will be choosing later on. What matters from a fulfillment standpoint is what the order info should contain. Here is the minimal information you will be needing:

  1. who is handling this order (who will be managing the order and who will actually be picking and packing the products)
  2. the customer info – usually name, address, whether the customer is a person or a company, whether the customer has already purchased from your store before
  3. special discounts or shipping conditions – this may happen when the customer has used a voucher or a special promotion and is entitled to a smaller shipping fee, a gift or a bonus product.
  4. order info – total cost, estimated shipping cost, whether the order is prepaid or paid on delivery, and where you will be shipping the products from (either internally from your warehouse or from a drop shipper)

Most of the time, you will be receiving more info from your order management tool but these are the essential blocks of information to keep in mind.

2. Receiving the products

Before moving on to the actual order fulfillment bullet points I have to make a point. You don’t HAVE to fulfill the orders yourself. Some companies outsource their fulfillment to other companies. My advice is you should keep most of your fulfillment operations within your company. You won’t be able to ship products across the globe but you can pick, pack and carefully wrap orders for your customers.

When medium and large online stores are fighting each other over consumer mind share, we only see the marketing and superficial aspect of this battles. But the fact is, underneath all this visible struggles, the real battles are won in the warehouse. Your real chance for success stands in picking, packing and shipping the right products, within the timeframe you’ve promised.

It may seem hard to handle fulfillment operations and it sure is. But because it is hard, you have to master it before the competition does. Walmart and Amazon, two of the largest retailers in the world, are also two of the best supply chains in the world. It’s not that these companies have developed spectacular fulfillment operations because of their huge sales but the other way around.

Glad we’ve got that out of the way. Now – what’s the best way you can receive products in your inventory?

It all starts with an order to your supplier. It is usually called a “Purchase Order” as you are placing an order to purchase products. We will assume that you have already set up an agreement with your suppliers and they will ship the products. You will probably pay as you place your order, when the order arrives or at a given time after the order has arrived, if you have agreed as such with your supplier.

Once the products have arrived at your warehouse you will need to:

  1. verify their integrity – check whether the goods are damaged and if so return those that are damaged
  2. count the number of products – check if the supplier has indeed shipped the correct number of products
  3. check if the product cost is the one agreed upon – if you have agreed to either pay on delivery or at a given deadline you will probably receive an invoice with individual costs split. Check to see whether these costs are those you have agreed upon when placing the order
  4. add the product SKU’s to your inventory management – Standard Keeping Unit or simply SKU is what retailers use to define unique types of products that can be sold. They are used to track goods movement through inventory. The SKU is not to be confused with the product model no, although this can be included. The SKU code is formed using product characteristics (such as manufacturer, size, color etc.) and it is usually used as a barcode so it can be tracked easily using bar code readers.
  5. add bar codes corespondent to the SKU’s you’ve just issued for the products. You can do this using special bar code printers and special stickers that will be attached to the product package.
  6. once the product is received and marked it will be sent to your storage unit (or warehouse) where it will be placed in a way that it can later be easily picked and packed.

( Basic check list when receiving products from the supplier )

Placing the products in the inventory is a very important part in receiving the products. The better you keep track of where the products are, the less time and effort you will need when picking and packing the products.

When placing the products in storage you need to keep in mind some very important aspects:

  1. not all products are equal: products should be placed according to how popular you expect them to be. Some products will be sold faster and they need to be easier to reach. Either closer to the packing unit or lower on the shelves so they can be easily picked.
  2. however, all products have to have their position in stock clearly assigned and saved. Each SKU should have a clear position in the warehouse. You will probably develop your own warehouse numbering system but you will probably have to add things such as aisles, sections, levels and positions to keep product identification easy and scalable.

Hopefully at this point you have managed to get the products in your inventory, they are correctly marked and stored and you are ready to pick said products for the orders you are going to be shipping.

3. Processing the orders

Once you have the products in the inventory and orders are coming in, it’s time to process these orders.

Order processing is split between four main areas:

  1. picking
  2. packing
  3. quality control
  4. movement to appropriate shipping station

 

Picking products from the inventory

Picking is probably the most time consuming part of order processing. It also gets a lot more complicated as your business grows and it may be prone to errors. Having more products in your inventory will increase the complexity of picking the right products in the fastest way possible.

If you’ve managed to place the products in the right spots (as stated in the step above – receiving products) your chances of correctly processing orders increase big time. The reason is it will be easier for picking staff to move fast through the aisles and pick the right products.

How does product picking work?

To have a streamlined picking process that works just as well with 10 orders per day or 1000 orders per day you have to decrease the chances for errors. To do so, your picking staff will cycle through these steps:

  1. Receive a pick list – the pick list is a … well … list of items to be picked from the inventory. It may vary depending on how you run your fulfillment operations and what kind of software you are using but it usually contains:
    1. Product location (section A, aisle 3, level 3 etc.)
    2. Product code (usually the SKU)
    3. Quantity to be picked
    4. Product description and image (for quicker identification)
    5. Barcode (usually used to confirm product picking directly into the inventory management system)
    6. Product bin
  2. Create the optimum route to pick products: usually picking staff will collect more orders to improve efficiency and gather all the products in one trip. This route is usually generated by the inventory management software based upon the warehouse layout.
  3. Pick products and place them either in separate bins based on ordered items or a general items to be sorted later at quality control or packing stations.
  4. Bring products to the Packing Station, where they will be sorted, placed into the right packages, and so on.

( A basic example for a picking list )

Packing ecommerce orders

Packing is the next step in the fulfillment operation. Once the products have been picked from the corresponding aisle, shelf or bin, they are sent to the packing station where they will be split into orders and prepared for shipping.

The packing operation is usually split into these further steps:

  1. Choosing the right package – depending on the products shipped, they will be placed into special packages, according to specific needs. For example a wine bottle will be shipped in a different package than say, a dress or a cardigan.
  2. Scanning and marking the package – after the products are placed into the right package, products are usually marked with specific documents, usually used by the shipping company so their transport progres can be tracked. They are also scanned so the inventory management software will register said products as getting ready for shipment.
  3. Adding invoices, product slips or other documents and / or marketing prints – this step includes placing needed orders information or documents (warranty certificate or invoice), as well as marketing materials that should reach the customer (say a discount voucher or a bonus product).
  4. Preparing the package for quality control and shipping

 

Quality control

Once the products are placed in the right package, a quality control station will check for any errors that may happen.

Quality control personnel will usually check for one of the following errors that may appear:

  1. Wrong products: products may sometimes get mixed or the wrong information has been sent somewhere along the order management process. The most important aspect is that quality control will make sure the customer gets what he or she ordered.
  2. Wrong address / customer: sometimes orders get mixed and orders are sent to the wrong customers.
  3. Wrong payment information: there is a multitude of payment options and you do not want to ask your customer to pay something that was already paid for.
  4. Shipping options: maybe the customer opted for a quick delivery option. Quality control needs to make sure the product gets to the customer in the specified time frame. Another shipping mistake happens when online stores work with multiple shipping partners (say one for internal shipping and one for overseas shipping). It is important for the order to be routed to the right shipping partner to avoid delays or extra costs.
  5. Specific order information: quality control also needs to check for specific demands such as gift wrapping or a specific timeframe to be shipped at.

 

4. Shipping orders

Once the products have been picked, packed and quality control made sure there were no errors in the order management process, the package is ready for shipping.

Online stores usually partner with one or more shipping companies to deliver the goods. The shipping station will check the package weight and direct it to the right shipping partner.

Most shipping companies will provide you with a general framework on how to handle packing and preparing for shipping. Here are the most popular ones:

 

When these companies (and others) will charge you for their shipping services they will take into account some (or all) of the following variables:

  • package weight and size
  • departing country and arrival country
  • departing city and arrival city
  • shipping insurance
  • tracking services (now most of these companies offer this service bundled with others)

 

Once the orders are picked by the shipping company, the order status is constantly updated so customers and the online store knows where the packages are at the moment.

When the products are delivered the status is updated and the order is confirmed. After this point the product is in the customer’s ownership and any reverse process wil be treated as a return.

 

5. Handling ecommerce returns

Oh, returns – can’t live with them, can’t live without them. Just kidding. A clear and friendly return policy is what sets the likes of Zappos.com apart from the competition. They will let you return the products you’ve purchased within 365 days, free of charge and as their return centers will check the products you will be credited within 7 days with the money you’ve spent.

Great, right?

Ecommerce customers love a great return policy and you need to be ready to handle one. The logistics involved in such a return process are usually dubbed reverse logistics. This means you will reverse the steps mentioned above.

Basically you will unship the products, unpack, unpick and un-order everything.

If you offer free shipping, you will have to handle the shipping costs from the customer to your return center (for small and medium companies, the return centers are the same as the fulfillment facilities).

Now, the big problem when getting information on handling returns is that most of the resources out there are either

  • irrelevant (usually stating how important return policies are or how to market your return policy) or
  • boring (usually a bunch of text mixed by logistics experts that have no need to explain how reverse logistics work)

What will follow will hopefully be a bit more relevant and a bit less boring. The big idea you have to keep in mind is returns are the reverse process of everything you have read so far.

You will have to tailor the following concepts to your specific company structure, accounting, IT systems and processes.

That being said there are three main areas you need to focus:

1. Getting the products from the customer and into your fulfillment center.

There are usually three main options to do this:

  • using your shipping partner: most shipping companies offer return services. What they will do is go to the customer, pick up the package and send it back to you. Either you or the customer have to pay for these services. Companies offering free returns also include a special options for customers to use within a certain timeframe, in order to ship products back. This is usually a special voucher the shipping company will then use to charge you instead of the customer.
  • using your own network of brick and mortar stores: if you also have a network of stores (either classic or pop-up stores) you can direct the customers to these stores to save on shipping costs

2. Getting the products back into inventory

Once the products are back at the fulfillment center you will have to get them back into inventory. The process is similar to what you would do if you were to receive goods from your supplier. The main differences are:

  • in terms of accounting this operation will be treated differently
  • products need to be checked for damage or missing items
  • instead of paying your supplier, you will either credit the customer

3. Returning payments to the customers

Once the products have been checked and returned to the inventory, you will need to issue a refund to the customer and inform said customer of these changes.

And … that’s it.

It may seem complicated right now but keep in mind that thousands of online store owners are doing all these things. Now that you’ve got the basics, you will be able to deal with most of the operation challenges you will face. If there is anything else you need to know – just ask in the comments sections bellow.

This concludes this part of this guide. This is probably the hardest and the most important part of making your store run smooth. It involves many operations, usually lots of people and it needs to be built in such a way that it will easily scale when your company is growing at double digits.

Next week we will focus on branding, designing and choosing an ecommerce platform for your online store. See you soon!

How to Start an Online Store: Part 2 – Business and Suppliers

Last week we’ve covered the basics of starting your online store. We’ve talked about choosing your market and your particular niche, We’ve covered the main questions you need to figure out before you start building your actual store. Finally we went through the main business models and scanned some of the most innovative and interesting implementations in B2C (business to consumer) ecommerce.

Now that we’ve covered the basics, let’s turn your idea into a real store. This part of the “Starting an Online Store” guide will show you how to register your business and how to build the operational basics for your store. At the end of part two of this guide you’ll know how to find the right ecommerce suppliers, integrate your business with said suppliers and set the prices for your products.

How do I register my online store as a business in the US?

Note: This part of the guide is intended to work as a guide mainly for readers in the US. That’s why some of the acronyms and type of companies you’ll find in here are going to be aimed at those of you registering your business in the US. If you are registering your business elsewhere please leave a comment as to where you intend to register your business and I will try to get back to you with more info.

That being set, most of the information you’ll be reading here is in essence applicable in other countries or regions. Even though business structures may have different names and have slightly different usage in different parts of the world, their purpose remains pretty much the same, as globalization tends to level the playing field.

So let’s get started with why you would want to register your store as a business?

Sure, planning and building your business is a great way to spend your time and effort. But you also need to work as a legal entity.

There are basically two ways you can register your business:

  • as an un-incorporated business (solely owned or owned by a partnership) or …
  • an incorporated business.

You can start as a Sole Proprietorship (the most popular type of business for ecommerce entrepreneurs) and move to other forms of businesses as your chances of success increase.

If you are the sole owner of an online business, the Sole Proprietorship (also known as DBA – “Doing Business As“) is the easiest form to register and manage your business. It actually works as an alias for the individual doing the business. Because of this, the owner is personally liable for the company. That means that all debt is imputable to the owner. However, as Sole Proprietorships are usually low-liability businesses, a lot of startups work under this type of legal entity.

The second big option in starting an un-incorporated business is the General Partnership. In Partnerships, more individuals get together to start some kind of business. Just like the Sole Proprietorship, Partnerships are easy to set up and manage and because partners share equal control on the company, the liability and profits are also shared.

Incorporating your company

Like I’ve mentioned above, the second category of companies falls under the “corporate” model. When you’re incorporating your company you don’t become a corporate behomoth and you don’t automatically get billions in revenue, as you’d expect. It just means you’re operating under a different set of rules. Plus you get to do a lot more paperwork and pay some extra taxes.

Pros of incorporating the business

The most important reasons to incorporate your company as an entrepreneur are liability protection and documenting deals with partners.

By far liability protection is the most important reason to incorporate your company. Under a corporate structure, your business is treated as a separate legal entity. If things go awry in your business (and sometimes they do) the company is liable for paying all debtors, not you. That, of course, if you have been operating your business in a legal manner.

Basically, registering as a corporation will keep your assets (house, car, golf clubs) protected from any issue that might arise operating the business.

The second important reason to incorporate your company is documenting a business deal with partners. Whether you are raising money from investors or selling shares in your company, you need a corporate structure to do this.

Cons of incorporating the business

You may hear other reasons why you should incorporate your company, things such as tax benefits, business credit and transferable ownership. But don’t rush to register your corporation just yet. Most entrepreneurs are doing just great running un-incorporated business in the beginning. Tax benefits are usually tangible when your company is already successful enough. So if you are just a startup, you can probably forget about tax benefits.

Building business credit means companies are evaluated independently from their owners but that doesn’t necessarily have to be a good thing. If you are a startup with no cash in the bank, no sales and no clear plan, that fresh business credit won’t be of help much.

Finally, saying an incorporated company is a lot easier to transfer to other individuals or companies leaves out a very important aspect. Before transfering your company (hopefully selling it for lots of cash) you need to build this company. So again – this won’t help you that much either.

But the biggest disadvantage small businesses that incorporate have to face is paperwork. Lots of paperwork. You will have to fill in state reports, organize annual meeting and deal with involved bureaucracy.

Then there’s the fees. You’ll be paying fees for legal council, tax filling and others. Professional help is not cheap. Plus you get the minimum franchise taxes and others. These amount to thousands of dollars in fees, which is a bit much for small business owners.

So incorporating a company is no easy feat. Or better said – it’s not easy to manage an incorporated company if you are a small business owner.

But if you do find yourself in need of incorporating the business, here are the most important type of corporations you can choose:

LLC – Limited Liability Company

You have probably heard one thing or two about LLC (Limited Liability Company). It’s the most popular form of business among small and medium businesses, including online store owners. It combines what is called pass-through taxationfor its members with the limited liability corporations provide.

Although not technically a corporation, it is a great choice for those that want to join a limited liability partnership. It basically works as partnership or sole proprietorship in terms of taxation. This means the owners (called members) pay taxes on the LLC’s profit directly. The company doesn’t fill taxes separately, which makes things a lot easier to manage.

This types of businesses are actually pretty young as a commercial concept. The LLC structure was first formed in 1977 and now it’s accepted in all US states and a throughout most of the world.

At the heart of LLC stands the “Operating Agreement“, a document signed by all members, setting the rules under which the company will be managed. It covers things such as profits sharing, company management, adding or removing members and more.

The LLC is the most popular choice in the world right now for forming partnership, usually chosen by groups of up to 5 members.

Although starting and managing a LLC is less complicated than a corporation, it is still more complicated than starting and managing a sole proprietorship or a partnership. You will probably have to hire a legal counselor to help you with the set up and operating the company.

The Regular Corporation (C-Corporation)

The Regular Corporation is … well … the corporation. A company organized as a corporation is a separate legal entity from its owners (called shareholders). The company can thus protect owners from liability issues or company debt.

The corporation provides advantages such as:

  • easier capital inflow (through stock sales),
  • ownership can easily be transferred through stock transfer
  • being a separate entity it can and will act independently from its owners. This means it can sue and get sued, it can own property and it will be taxed independently from its owners
  • tax advantages can be substantial (a lot more business expenses can be deducted)

Once the corporation is set up, it will pay taxes separately from its owners. This can lead to double taxation as companies are taxed on profits and once those profits are distributed, shareholders will also have to pay income taxes. The double taxation problem is solved by incorporating as a S Corporation (see below).

Corporations are not necessarily ran by its owners. The shareholders own company stock. This gives them the ability to elect Directors, organized under a board of directors. Once this board of directors is set up, they appoint Officers (CEO – Chief Executive Office, CFO – Chief Financial Officer etc.), which are the people that actually run the company on a daily baisis. Of course, if you own 100% of stock, you can appoint yourself as the one and only director, be the officer and run the company.

On the other hand, if your company will be owned by more individuals, the Board of Directors and the Officers will run the company. Both the Board of Directors and The Officers have to abide to an internal company document called “Corporate Bylaws“. This document sets the rules on operating the company and can be extended or modified as the company evolves.

The Corporation is a lot more formal than the LLC and of course, the Partnership or the Sole Proprietorship. The records have to be carefully maintained, there is a mandatory yearly Directors and Shareholders meeting and every decision has to be documented and reported.

Although the corporation is harder to form and maintain, it is the oldest and most reputable form of business organization.

Registering as a S-Corporation

When registering as a corporation, you should take into account the S-Corporation. By filling in the appropriate tax election form to the Internal Revenue Service, the company will be taxed as a Sole Proprietorship or a Partnership.

The main advantage for you and your partners is that income and profit is passed through to the shareholders, thus solving the double taxation problem mentioned above.

Even though you’ve solved the double taxation issue – you’re still stuck with the paperwork and specific regulation, which can be a burden for online retail startups.

To wrap things up, here is a rundown of the main types of incorporated business structure you can choose, each with its own pros and cons:

Once you have decided on whether you’re registering your business as a sole proprietorship or incorporating it you can check the specific regulations for your state here and start the registration process.

Integrating suppliers with my online store

You’ve figured out your market, planned on how you’ll build and run your store and what your business model is. You’ve registered your business and you are ready to go. Or are you?

Well hold on there, you still need to have those products you’re selling. That means you need to source your merchandise from suppliers.

Generally speaking, suppliers are those businesses or individuals that are willing to supply you with products priced below end consumer value. Still a bit unclear? Well say you will be selling plain t-shirts. You know you can buy those t-shirts for $20 at the closest store. If you do buy t-shirts in that store, you will be buying them at end consumer value. You are the end consumer. Because you cannot price them at a higher level you are basically stuck with them – hence the “end” in end consumer.

What you need to do is go find yourself some suppliers that are willing to sell you those t-shirts for less than $20. Why would they do that, you say?

Remember the whole B2B business model? Some companies just work this way. They manufacture the products or sell them in bulk and let other companies sell directly to the end consumer.

( The basic operations needed to run your store )

When dealing with suppliers you have to be ready to make a commitment before they agree to do business with you. This commitment can come in many forms but usually it’s one of the following:

  1. buy products in bulk: say you are willing to buy 50 of those plain t-shirts. You can negotiate your purchase price down to $15. Willing to buy another 50? Maybe the price can go even lower, to $10 and so on. The thing you have to remember here is that although bulk buying can be a potentially great deal in terms of price discounts, you also have to sell those products. If you get stuck with $500 worth of t-shirts that you are not able to sell, you have just wasted your money. It doesn’t matter how much you saved purchasing said products. What matters is making a profit and making your customers happy.
  2. commit to a target: maybe you are not willing to buy 50 plain t-shirts, because you don’t know what your potential customers are willing to buy. You are, however, confident they are willing to buy something. So you commit to a monthly, quarterly or yearly sales target. The supplier will than give you a startup discount for purchased products. This discount can increase as you sell more and more merchandise. You can list the products on your online store, stock as little inventory as possible and ship and restock when orders arrive.

 

Once you’ve made a deal with one or more suppliers you will be selling your products right on your store. When the orders start pouring in (or maybe just trickle in the beginning) you have to make sure customers receive the products they’ve paid for. This part is called “fulfillment” as in fulfilling your promise to send the product to the customer in exchange for the payment you have received.

Fulfillment means any task done inside or outside the company that assures the right products are shipped to the customer. Usually this means:

  1. order management: checking order information (customer info, address, number of products etc) and forwarding order details to the right fulfillment center to be completed. If you are a startup this may mean you will be checking the customer details, maybe confirming the order and then planning on where to get the products from.
  2. pick and pack: this is the usual term for picking products from the warehouse shelf and packing them to make sure they are ready for shipment
  3. shipping the products: once products are picked, packed and ready to go, they have to actually leave your warehouse. When this happens you will either bring them yourself to your customer’s address (highly unlikely) or commission a company specialized in shipping (such as FedEx or UPS) to do so.

 

We will talk a lot more about fulfillment later on in this guide but for now I just wanted to give you an overview on the usual processes in handling orders and shipping products to the end consumer.

Fulfillment can be done either within your company, by the supplier or as a mix between the two. Let’s have a look at these scenarios:

  1. fulfill orders within the company: this is the way most medium to large companies fulfill their orders. They build inventory for most of the products they’re selling (especially popular items), stock them in warehouses and when orders arrive, employees in the warehouses fulfill these orders. This process implies a rather large inventory and it can be an ineffective way to handle orders for startups. That’s why most ecommerce startups require another form of collaboration with suppliers:
  2. fulfillment is externalized as suppliers “dropship” orders:  this means you can just showcase products on your store and orders are shipped by your supply partner. Rather than stock on products, you can just forward orders to your product supplier and that company will take care of the shipment. The individual product is then shipped to the end consumer and you are invoiced for said product. You profit from the difference between the retail price (the price you posted on your website) and the price you’re paying to the supplier.

 

Usually, most online retailers (such as yourself) choose a combination between the two and maybe some other processes.

( The example below is illustrated in the figure above. Combining basic operatiosn with supplier drop-shipping. )

For example, let’s say you partnered with two suppliers (see figure above). Supplier A will provide you with plain t-shirts. Supplier B brings in sneakers. After you start your store you receive two orders. Customer X is asking for 2 plain t-shirts. Customer Y is asking for a plain t-shirt and a pair of sneakers.

You will have to treat these orders differently. Order number one, the one where customer X paid for 2 plain t-shirts is forwarded to Supplier A and he will dropship these items and then invoice you for the products.

Order number two is a bit more complicated. You will have to ask supplier A to send you one plain t-shirt (if you don’t already have it on your inventory) and Supplier B will send you a pair of sneakers. You will be invoiced on those products and once you have them in your warehouse you can pack and ship them to the customer.

You can also choose to work with external fulfillment services, such as Fulfillment by Amazon. These services relieve you of the burden of picking, packing and shipping your orders. For a cost.

By building and interlinking separate operations such as those mentioned above, you are actually building what is called a supply chain. The supply chain means any interlinked process that enables you to move products from the manufacturers or wholesalers to the consumer.

The supply chain is not a static structure. It can and it will change as your online store evolves. As you add new suppliers to your supply chain, your ability to distribute products to consumers will increase and so will your revenue. But speaking of adding suppliers to the supply chain …

How do I find Ecommerce Suppliers for my Store?

Yeah, how DO you find suppliers for the online store? Now that you’ve got a sense of why you need suppliers, how to negotiate and deal with them, let’s have a look at how to actually find them. When you’re looking for merchandise suppliers you’ll see that you have two big options when choosing, each with its pros and cons. These two options are domestic suppliers and overseas suppliers.

Assuming you are in the US, using domestic suppliers will be a very viable option but you should also consider the second. Overseas suppliers can be a great addition to your supply chain. They can be used when in need of additional product options or lower prices. Let’s have a look at the pros and cons of using these two types of suppliers.

Domestic Suppliers

Pros:

  • (usually) higher manufacturing standards
  • improved shipping time
  • intellectual property protection (might be really important if you design your own products)
  • no cultural or communication barriers
  • no import taxes
  • safer business relationship
  • easier to check references for reputable manufacturers or wholesalers
  • lower minimum level ordered quantities

Cons:

  • higher prices
  • less products to choose from (not few, just less)

( Directories providing links to domestic US suppliers )

Overseas suppliers

The most important thing you need to remember when dealing with overseas suppliers is that you have to be very, very careful. If you are inexperienced, you should ask for professional advice on how to get the best deals and protect yourself from fraud. Also – if you do find yourself in need of doing business with overseas suppliers, choose to contact those that provide a local sales office or agent or order using established marketplaces that provide escrow payment options.

Pros:

  • (usually) lower prices
  • ability to deliver unique items to your customers
  • a wide array of suppliers you can choose from
  • established online marketplaces provide an one-stop shop for retailers

Cons:

  • you will have to deal with customs, local taxes and special conditions when importing
  • low or zero ability to dropship to your customers
  • must buy larger quantities to actually get said lower prices
  • inability to change or customize orders
  • inability to reorder popular items – usually stocks ran out and without a preexistent order, the supplier will probably not sell the goods you’ve purchased last time.
  • cultural and communication problems
  • longer shipping time
  • harder to check for supplier references

( The most reliable services that connect you to B2B suppliers overseas )

Although the services mentioned above are a great way to find the right suppliers, you can also do your own digging and search for independent manufacturers or wholesalers.

There is no standard way of doing this but some tips may help you get closer to your ideal suppliers:

  1. Contact the manufacturer directly: saw some product you’d like to have? Probably your customers would also. Have a look at the label and contact the manufacturer. They must at least have a name and using that, you can use Google to find out more about them.
  2. Speaking of Google: try going deeper in your search results. B2B traders and manufacturers are not really great at marketing (that is the retailer’s job) so their websites scream “so 90’s” and they are not really optimized for search engines. That’s why you should click further than you’re usually used to in order to find a hidden gem.
  3. Trade fairs: yeah, people still do that. Especially in the B2B trading world. You can find a list that might interest you here and here.

 

So hopefully you now know a thing or two about finding suppliers and you’re going to get the best deal possible. Great! What’s next? Oh, yeah, prices:

How do I set the Price for My Online Store’s Products?

When it comes to pricing, you have two rather simple concepts to always keep in mind:

  1. Cost of goods sold (COGS): this is the cost you have paid for the goods plus any costs associated to getting the goods in your inventory and ready for sale. This includes, but is not limited to: shipping, handling or customs taxes.
  2. Operating expenses: this is the total cost associated with running your business. This includes rent, utilities, wages, marketing costs and others.

Basically, the prices of sold products have to cover the sum of these expenses. The bottom line is always the same: Profit = Revenue – Costs.

Your company will report a gross revenue by selling products. Profits come when you are selling enough merchandise, at the right price, to cover your costs.

Of course, it’s a bit more complicated than this but you get the picture. You have to price your sold products where you can be profitable. However, prices need to stay competitive to the market. This means that there’s a balance you have to keep. Prices should be big enough to keep you in business but small enough to be competitive with other online retailers.

Pricing strategies

1. Markup on cost means you add a certain percentage to he cost associated with the product. It is usually a standard percentage somewhere between 15% and 40%, enough to keep you profitable and your prices competitive.

The formula works like this:

Item cost + (Item cost x Markup Percentage) = Price

Say for example we are selling plain t-shirts, with a cost of $20. We’ve set the markup at 30%. The the price would be:

$20 (Item cost) + ($20 x 30%) = $26

2. Manufacturer suggested retail price (MSRP) is another way small businesses can set their prices in such a way that they are profitable but not too expensive. MSRP is the price the manufacturer recommends to resellers so they don’t start price wars that can benefit no one. This type of price setting leaves out a lot of options for the online store owner and should not be a general rule in the long run.

Above are just two of the simpler ways prices can be set to attract the consumers. We will get into a lot more details in the “Marketing your store” part of this guide so stay tuned.

For now, this concludes part two of the “How to Start an Online Store” Complete Guide. Part three will focus on building your fulfillment operation (picking, packing, shipping and returns) and how to build a brand identity and the actual store front. See you soon!

See part 3 of “How to start an online store”: Fulfillment >>

Featured image source: https://www.flickr.com/photos/27017674@N06/8915361750

The Top 5 Solution Vendors in Omnichannel Retail

Achieving clarity in Omnichannel Retail is no easy task. Retailers, especially large ones, need to get all departments, all sales channels, suppliers and fulfillment operations on the same page.

And that’s just the first step. Then comes the IT integration where legacy systems are connected to a central management tool that handles at least inventory transparency, CRM and order management across channels.

Omnichannel Retail is not mainstream right now. It is still in its infancy. Sure, some are more advanced than others and some companies are building the future faster than others. But the truth is omnichannel is a need to be fulfilled for most retailers.

And here come the knights in shiny digital armor to rescue the day. The following 5 vendors have built omnichannel retail capabilities ready to be plugged into existing retail ecosystems. They are now the go-to elite for large retailers in need of upgrading their IT infrastructure.

5. Shopatron

Shopatron was founded in September 2000 by Ed Stevens and Sean Collier. Since then, it has evolved into an integrated SaaS platform that connects offline and online orders management, making it easier for customers to purchase from retailers.

shopatron

The company offers specific omnichannel solutions, most important being:

  1. in-store pick-up
  2. ship from store
  3. inventory lookup
  4. vendor dropship

Shopatron targets midsize retailers and its main benefit is the advanced order routing. The platform combines online and offline sales and claims inventory visibility across channels.

Pros:

  • great fit for midsize companies
  • regular updates without setup costs (the platform runs as SaaS)
  • good fit for larger retailers that look for a quick roll-out for the solutions listed above
  • can connect multiple sales channels and direct orders to the right fulfillment point
  • works with both retailers and brand manufacturers
  • reduced costs and quick roll out

Cons:

  • the company is not known for its transparency in terms of product road map
  • smallest entry on this list, making it a target for future acquisitions
  • no clear option of on-premise setup

4. NetSuite

NetSuite was already rocking a great SaaS ERP product and a fully flavored ecommerce solution when it acquired OrderMotion in 2013. Now the company can provide inventory management across channels, a single customer view, business intelligence data and omnichannel order management.

netsuite

The company, among the first to bet on SaaS platforms, is now one of the fastest growing companies in the field, closing 2013 with $414 million in revenue. The revenue is up 34%, which is a big win for the company initially backed by Larry Ellison.

NetSuite started as NetLedger, envisioned as an online accounting tool, that later turned to an wider array of company management tools.

The past two years have been very active for NetSuite in terms of omnichannel related acquisitions. In 2013 it acquired Retail Anywhere, a POS solutions company. In 2014 it acquired both Venda, an ecommerce SaaS company, and eBizNet Solutions, a company focused on WMS (warehouse management system) solutions.

Netsuite has decided omnichannel is a perfect mix when it connects companies focused o separate blocks in the retail chain.

Pros:

  • extensive know how of retail operations management
  • integrated SaaS solutions
  • great record of acquisitions
  • single view of customer
  • cross channel inventory view and order management
  • extensive list of customers
  • great uptime

Cons:

  • NetSuite is “broadly focused”: its solutions work with healthcare, finance, manufacturing and many, many others. That leaves little room for actual retail innovation
  • the recent acquisition will probably work together but many steps have to be taken until full integration is achieved
  • implementations aren’t always all that seamless
  • complex pricing and licensing structure

3. eBay Enterprise

PayPal is not the only jewel in eBay’s pocket as it seems. eBay Enterprise (formerly known as GSI Commerce) is one of the fastest growing and biggest companies providing technology and consultancy for omnichannel retail.

ebay-enterprise

eBay Enterprise interfaces and tools
eBay Enterprise interfaces and tools

The company delivers four big solutions to its customer base:

  • commerce technologies
  • retail order management
  • operations
  • marketing solutions

Unlike the other companies on the list, eBay Enterprise goes beyond software integration and into marketing and operations. In terms of retail solutions, eBay Enterprise provides support for commerce integration across channels. The company integrates the main sales touch points, with the help of its omnichannel tools:

  1. web
  2. smartphones and tablets
  3. store associates
  4. interactive kiosks
  5. customer service

The omnichannel operations tools cover a lot of ground and can be used in fulfillment operations, customer care and store based fulfillment.

Pros:

  • provides great tools for online retail, offline retail, fulfillment as well as cross-channel operations
  • best-of-breed order management solutions
  • strong fulfillment and customer care solutions
  • multiple sales interfaces to channels
  • wide array of large retailers and vast experience
  • flexible pricing structure, based on sales commission

Cons:

  • eBay Enterprise is pretty picky when it comes to customers. So unless you’re not a large retailer, chances are you won’t be working with their tools

2. IBM

ibm-commerce

IBM stands for a lot of things and among them it had to be omnichannel retail also. The tech giant offers technology to retailers in need of:

  • content management,
  • supply chain management,
  • order management,
  • inventory management,
  • business intelligence,
  • CRM and
  • interactive kiosks.

Its Websphere Commerce solution connects both online and offline sales through its different versions. It handles cross-channels inventory visibility, distributed order management and scales as you would expect from IBM.

At the core of IBM’s order management and inventory tools you’ll find components IBM acquired in 2010, when it purchased Sterling commerce. The transaction cost IBM $1.4 billion but brought in 18.000 global customers.

The Websphere commerce is a great fit for large companies and powers some very well known brands, but it is somewhat a not so great fit or  midsize retailers.

Pros

  • scalable solution
  • works across channels
  • integrates all retail chain components
  • great omnichannel inventory and order management
  • large user base

Cons

  • expensive setup
  • complex setup process
  • outdated interface controls and architecture
  • hard to implement by midsize retailers

1. Hybris

Hybris, now a part of SAP, is probably the best fit for omnichannel retailing. Hybris is a dynamic company focused on growth and delivers constantly on market needs.

hybris

The omnichannel solution is scalable and built on a modern and flexible architecture, that allows interaction with all interfaces. Its order management solution, inventory and commerce application are built to work together seamless and easily connect with other systems.

Hybris’ solutions work both B2B and B2C and can handle inputs from multiple inventory sources and outputs on multiple sales channels. Moreover, the solution features a central content management system that enables retailers to push content across a multitude of interfaces.

As of 2013, Hybris is a part of SAP, making it a global powerhouse connected to the world’s most popular (well, at least used) ERP.

Pros

  • scalable solution
  • feature packed
  • fully integrated solutions
  • works B2B and B2C
  • modern architecture
  • supports multiple interfaces
  • works online, offline and on multiple other channels
  • flexible enough to work with open source technologies

Cons

  • training may be expensive
  • professionals able to implement and train are hard to find, due to an increase of platform demand
  • customization and setup can be time and resource consuming

So that’s it – these are the best of breed. Of course, there are more out there that deliver great products and I could name Intershop, Demandware or even Oracle. They, however are less inclined to omnichannel or have a really new found love for omnichannel retail. The vendors mentioned above are leading the pack in omnichannel retail implementation, especially for large customers.

The 6 Key Factors in Implementing Omnichannel Fulfillment

Ecommerce is growing at double digits and people are spending more and more online. US Customers, for example, have spent $322 billion online in 2013 and figures add up to even more this year.

So why not bet everything on ecommerce? Why change direction again and include those “old” brick and mortar stores, and warehouses and such? Why build omnichannel retail facilities?

Short answer: because the customer is not a robot. The customer does not have to shop online. It will shop online when it feels better.

Only 2% of retailers believe their companies are highly competent in managing omnichannel retail. Source.
Only 2% of retailers believe their companies are highly competent in managing omnichannel retail. Source.

Ecommerce is indeed a revolution in the way we do business and indeed it has changed the retail landscape but consumers still exist in the physical world. Consumers do spend time online but they also walk by store fronts, they like to touch the products they buy and they like to see how fashion items, for example, look like in real life.

That means that real life stores will continue to exist. But so will online stores, sales call centers, interactive kiosks and marketplace outlets.

Retailers need to figure out how to connect all these channels. This new wave of customer centric retail is called omnichannel retail. The term means that no matter the sales channel, everything behind the scenes is connected. The inventory is universally available to all stores. The customer info is available on all channels also, so he or she can be instantly recognized and offers personalized. Product info is also available cross channels but most important – Fulfillment can be managed on all possible points so as to serve the customer in the timeliest and most effective manner.

Managing Omnichannel Fulfillment

One of the biggest challenges in omnichannel retail is fulfilling orders cross channels. Today, retailers that deal with both online and offline sales have to split fulfillment in two separate areas, each with specific operations.

Customer service is the top priority in omnichannel fulfillment. Surce.
Customer service is the top priority in omnichannel fulfillment. Source.

The first is offline fulfillment, namely what happens in brick and mortar stores. Offline sales have been optimized to run on a pretty specific supply chain, not very flexible. It starts with the manufacturer, continues with forwarding merchandise to the wholesale buyer and then products end up stored in the retailer’s warehouses and stores.

Because ecommerce came as an addition to existing sales channels, it was added to the existing supply chain as a type of extra store, with its own specific operations.

However things got complicated when the web store had to split into the mobile store, the interactive kiosk, the marketplace outlet and others. Then customers wanted to buy online and pick up offline. But they didn’t stop here: they wanted to order in the store and receive home, ask for inventory info in the offline store and more. Pretty soon they started demanding it so now omnichannel retail is a question of customer service.

Retailers realized that what the retail world is facing is both a huge challenge in terms of customer demands and a huge opportunity. Those companies shifting their business strategies to fit the new, empowered consumer, will be the leaders of tomorrow.

Macy's has developed great omnichannel retail policies.
Macy’s has developed great omnichannel retail policies.

But to do that, retailers need to develop new order management software hubs. These order management hubs need to connect all fulfillment options to all sales channels. That means that all stores, all warehouses, all suppliers, all drop shippers need to be connected and managed by an order management tool that filters orders from all stores, both online and offline, interactive kiosks, call centers, mobile apps and others.

Some companies are handling omnichannel orders just great. Others need to improve their policies and most of all their IT infrastructure. To do that they have to figure out what factors need to be taken into account when fulfilling orders. Here are the top 6 most important:

Most important factors in omnichannel fulfillment

1. Proximity to customer – this obvious indicator will track which is the closest fulfillment outlet that can ship orders to customers.

2. Inventory levels across all fulfillment outlets – that includes inventory levels in the warehouses, stores, goods in consignment, drop shippers or even supplier and manufacturers. Yes, sometimes it can be more effective to ship directly from the manufacturer or the supplier than it would if the goods were shipped from the store or the warehouse.

3. Order split costs – orders that have more than one product per customer sometimes need to be split to multiple locations that have the products in stock. Products can be shipped individually or shipped to a single fulfillment facility (store or warehouse) and then shipped to the customer. Ideally, orders are fulfilled from the same point but sometimes that is not possible. In this case, the order management software should recommend the most efficient route products should take to the customer.

4. Information on customer history – fulfillment has to factor in the customer previous purchases and behavior. Retailers have loyalty programs that offer better costs and features to more loyal customer. A speedy fulfillment, complimentary gifts or just a thank you note may be outputs from the customer history.

5. Fulfillment capacity per location – estimating the maximum fulfillment load for each location can help prevent overload situations where store associates have too much orders to fulfill and can’t manage their day-to-day tasks. It can also prevent overloading several warehouses and leave others with zero workload, just because a specific area has placed more orders.

6. Seasonal fluctuations – stores get really crowded on holidays and store associates are way better answering customer questions than they are packing orders. Seasonal fluctuations need to be taken into account when implementing omnichannel retail.