The last three years have been a period of fundamental transformation in how online retailers operate.  The basis for this change has been the explosion of specialized, low-cost, web-based applications that power most online retailers.  These ‘apps’ leverage technology to solve critical issues that have traditionally inhibited retail startups from more effectively competing with larger players with more people and resources.

The concept of “there’s an app for that” enables growing retailers to build lean, efficient, and robust organizations driven by easy to use solutions specializing in one primary business function.  The specialization aspect of this B2B application boom comes in stark contrast to the late-90s / early-aughts IT “revolution” that can be epitomized by centralized, clunky and expensive IT systems that large organizations spent years implementing and hundreds of thousands of dollars building out (i.e. the dread that most people associate with the term, 'ERP').

Today the picture is very different - online retailers have hundreds of applications to choose from that provide them with the freedom and flexibility to deploy the right application for each of the 8 primary business functions.  The lynchpin of this strategy is the Google Apps Marketplace that enables all businesses to discover, evaluate, and deploy applications in a brilliantly simple way.  To give you an idea of what this looks like in practice, here is a typical e-commerce retailer's app ecosystem based on this model:

 

The theory behind the app ecosystem makes a lot of logical sense - retailers can choose the right application that best fits their company, stage, needs, and budget.  This concept was great in the beginning, as small businesses were ramping up with one or two applications and generating significant productivity gains from a specialized app solving a specific problem for a growing retailer (i.e. Zendesk to manage customer support tickets).  However, as this app-focused operations strategy continues to develop in practice, the process of maintaining five to eight different applications becomes a source of considerable strain on a growing online retailer's operations.

To give you an idea of how multiple apps can strain a retailer, this graphic illustrates how all these different applications are employed for a typical web-store transaction:

disjointed data

The app-ecosystem was designed to provide flexibility to e-commerce startups.  However, in practice multiple applications create a fairly disjointed and inefficient experience.  The lack of a central vehicle to unify data and workflows prevents a retailer from being as effective as they need to be in this hyper-competitive economy - Here’s why:

Running an e-commerce store requires a central command system to make everything work together efficiently and make running the business work better for the entire team.

In the disjointed app-ecosystem that powers most modern e-commerce operations - there are considerable limitations to working with data that lives in disparate systems:

  • Multiple Product Data Stores:  Simple product information needs to be created in five different systems: the shopping cart, accounting system, order management system, warehouse management system, and analytics application - kind of crazy, right?
  • Information Duplication:  It is not uncommon for an online retailer to have to take the orders from their shopping cart, manually enter them into the accounting system to record the transaction, and then manually enter them again into their order management system to push the orders to the warehouse for fulfillment.
  • Disparate Data Stores: These apps enable retailers to have access to unprecedented insights into what's really going on in the organization.  However, the current practice of deploying multiple apps for each business function means that data and insights are isolated in each particular app, which inhibits data from easily flowing from one app to another and creating actionable intelligence.
  • Inaccurate Information:  Different systems are responsible for tracking the logistically complex nature of a typical e-commerce transaction - meaning that the lack of central command system makes employing information housed in different applications a hassle.  For example, shipping costs will be updated in the accounting system (i.e. Quickbooks), but not necessarily pushed to the Magento shopping cart or Google Analytics sales and profitability reports.  Profitability reports from the shopping cart will be fundamentally different from the authoritative, accurate records in the accounting system - and, as most of you online retailers are well aware, there really is not a easy way to pass information from one system to the other in a consistent, reliable way.

Building a data-informed organization becomes a cascading challenge for solely app ecosystem companies without a central command for information to intelligently flow seamlessly from one business function to another.

These major barriers essentially drives the need for an e-commerce central command system to keep your business running at its best.

Online retailers need a centralized command system to make managing all of these applications a coherent process:

  • Logical Product Information Management:  Managing product information becomes significantly easier by having a central command system that pushes prices, descriptions, and new products to all of your sales channels and vehicles - meaning you never sell something twice or have to enter information in two places. Everything stays in sync from one channel to another and intelligently interacts with all the different aspects of your business.  Business is hard enough without all this extra work, hassle, and stress - a central command lets you focus on what really drives the business forward.
  • Total Customer Insight:  By having transactions, order processing, and marketing in one system - you get a complete view of your relationship with your customer.  This process enables you to build deeper insights into the customer's behavior and qualify the retailer's total relationship to more effectively communicate with and deliver the right product to your customer - making them happier campers!
  • Financial Insight: All transactions between customers and suppliers are immediately updated into your accounts as it is the same system, so you have real time access to your reports, profitability, and customer insights. This allows you to react at lightening speed to the challenges that erupt daily and provides you with the freedom to stop being mired in the processof work and spend your time building a great business.

It looks like, after a flurry of new niche apps in the marketplace, there is a now a major driver for retailers to consolidate their core systems into one central platform instead of dealing with several, disparate systems.  Centralizing your systems empowers retailers to be more agile in conquering larger competitors with more resources - you are smaller, smarter, more nimble, and need the power of a system to propel you forward.

Learn about how Brightpearl can fully integrate your business and be your central command:

brightpearl central command

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Comments

The challenge with multiple systems is trying to maintain a single version of the truth - multiple systems each containing a slightly different revenue or order volume and you need to work out which is right! Larger businesses spend a fortune on integrating to achieve this. Smaller businesses don't have that luxury and starting with as few systems as possible has to make sense.

Matt Carroll's picture

Cheers Charlie - you TOTALLY get it!  We all have shifted into adopting these applications because we don't have $100k to completely dial in a major ERP system that will never work properly and our teams will consistently loathe using.

 Multiple applications are a fact of life for growing retailers and now we have an issue maintaining a Single Version of the Truth and it's becoming a progressively larger problem.  This is a great problem to have, but it still is a challenge that we are still dialing in the solution for managing effectively.

Thanks for the excellent post, Matthew.

My business is setting up a Magento store, and shopping for both a warehouse / fulfillment company, and an ERP.

Right now Shipwire and Brightpearl seem like great options. However, both Shipwire and Brightpearl have Magento integration and inventory management. As of yet, Shipwire and Brightpearl don't offer out-of-the-box integration with one another (surprising, since they seem like such a great fit).

It seems that people using 3PLs that integrate with Magento would actually add a few steps to the ordering process by throwing Brightpearl into the mix. I.e. you'd have to get the orders into Brightpearl, and then export a CSV of those orders to your fulfillment company, and then accept a reply CSV from fulfillment reflecting the actions they've taken.

If the end-goal is complete automation of the entire ordering and accounting process, would companies like mine, who totally outsource warehousing and fulfillment, be better off just letting Magento talk directly to our 3PL, and forget about ERP for now? In other words, Magento would be the database of record, and you'd use one of the many Magento accounting modules out there to do a daily data dump into your bookkeeping software.

An assumption here is the the CRM and other tools offered by Brightpearl aren't of great value to us right now.

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