Extending Shopify – How to optimize your Shopify store
Whether you’re experimenting with a new venture, or if you’re already well established and just looking to migrate to a performant, user-friendly e-commerce solution, Shopify delivers. Alongside great technology, they have a thriving community of apps, developers and a useful knowledge base for any e-commerce retailer. They are also growing like crazy and investing heavily in their platform.
Shopify is a great tool, but it’s not without its limits. It’s not designed for sales order fulfillment, managing purchase orders with vendors, or full warehouse operations. There are small apps for most things that can extend Shopify far enough to simply add one or two features each – this is fine for improving the shopping experience, but can quickly strain your business when it comes to wider operations.
Over the years we’ve seen hundreds of businesses who have attempted to survive by stitching together Shopify, point of sale solutions and spreadsheets. The inevitable results are that opportunities are missed due to limitations, mistakes are made due to the lack of consolidated information, and admin costs rise as complexity increases. Luckily, there are dedicated back office systems that thrive in delivering solutions to the growing pains of an omnichannel retailer. In this guide, we’ll be working through some of the core activities that are best placed in a back office solution, and how to ensure Shopify is empowering your business, rather than hindering.
What’s in the guide?
There are core activities involved in your business that are best placed in back office retail systems, like Brightpearl to ensure Shopify is helping to grow your business, not hinder. These core operations include (but are not limited to):
- Inventory management
- Fulfilling sales orders
- Selling on multiple sales channels
- Point of sale transactions
- Accounting and financial control
Read on to find out how you can extend your Shopify platform and start automating these retail workflows and core business operations.
Shopify inventory management
Like most e-commerce platforms and inventory management systems, Shopify has the ability to track inventory levels on a per SKU basis, which is a great first step to maintaining accurate inventory levels and limiting overselling. However, where things start to break down, is with managing multiple locations (e.g. opening a new warehouse or store) of inventory per SKU, since Shopify does not have the concept of multiple inventory locations.
This can cause a few issues:
- Having to track inventory spread across locations in a spreadsheet or external tool. This quickly leads to stale and inaccurate data across systems.
- Difficulty in correctly replenishing products across your different branches.
- Partial fulfillments out of multiple locations leading to significantly increased shipping costs.
Multi-location inventory management is a complexity in Shopify that can be eliminated by using a dedicated back office with strong inventory management. A back office solution should facilitate the multiple pools of inventory, combining them to generate a product’s combined availability, and then pushing that to Shopify in real-time. When orders are placed, the solution can then takeover once again and route the fulfillment requests to the right team and inventory location.
Fulfilling Shopify orders
If you’re handling a few orders a day, then Shopify’s ability to print an order and use that printout as a packing slip will not cause major problems and is actually a great way to get started as a Shopify merchant! However, if you’re starting to see hundreds of orders per month, your warehouse team need a tool with built-in warehouse management workflows to avoid mispicks, missed orders and a slow fulfillment process. A few functions to look for that can rapidly improve your fulfillment are:
- Consolidated picking lists to efficiently process batches of shipments at once
- Barcode scanning to speed up order verification and reduce errors
- Channel specific packing slips to ensure desired branding across Shopify, Amazon, Wholesale and more
- Product location tracking (i.e. aisle, bay, shelf and bin)
Without these features, warehouse teams typically work at a slower pace in an effort to mitigate errors as best as they can, costing you more in processing time; or even worse, they maintain speed and make mistakes, leading to lost customers and potentially negative customer reviews.
Along with increased order volumes, managing multiple fulfillment efforts can quickly become unmanageable within the admin panel of your webstore. Shopify doesn’t have the native ability to acknowledge multiple warehouses, partial fulfillments, drop-shipments and other standard fulfillment practices for an omnichannel merchant. This typically leads to spreadsheets, inaccurate data and missed orders.
Any good inventory and order management tool will have the basics of warehousing and order fulfillment covered – picking up orders from Shopify as they’re made, filtering them through to the appropriate fulfillment streams, facilitating the order assembly through dedicated pick-pack-ship workflows, and then updating Shopify with progress and tracking references.
Selling on multiple sales channels
All of our most successful companies sell on multiple sales channels, and Shopify is a great e-commerce solution to quickly establish and launch new webstores to serve different markets or brands. In a study of 46,000 consumers by the Harvard Business Review, 73% of people used multiple channels before purchases and omnichannel experiences lead to 23% more repeat customers.
Shopify’s core feature set doesn’t power multiple webstores from one admin area, so this means you’ll need multiple Shopify accounts if you want multiple webstores. Each account can then have its own product set, it’s own company information, and importantly it’s own look and feel. This isn’t a bad way to go about thingsas as long as you’ve got something backing them up! Inventory and order management systems will be able to connect to multiple Shopify accounts, keep their inventory levels in sync, consolidate fulfillment efforts, and provide your business with a centralized system to work from. Without a system, you’ll literally have to jump from admin to admin to check orders or set inventory levels, and therefore, you’ll constantly be open to overselling, or missed sales opportunities.
Focusing a little more on order fulfillment, when you make the move to multiple brands, you need that branding to survive all the way from checkout to the time the customer opens their package. Additionally when setting up new territories, you’re likely to be setting up new fulfillment operations to support them, potentially even outsourcing this new venture to a third party logistics company to avoid international shipping fees. A centralized order management platform will take orders from each and every channel, and route the orders to the right team as per your business design – and most importantly won’t enforce any limitations on your customer-facing assets.
When it comes to selling offline, such as in a physical store, or as a rep on the road, you’ll need an order entry system. When just starting out, if order volumes are small, and you’re managing everything through Shopify, then go ahead and enter your telephone orders directly in the admin area – the order entry workflows are slick, and you won’t require another system. When it comes to in-store orders, Shopify have another product, Shopify POS, which has been designed for the in-store, customer facing environment. It effectively acts as an extension to your Shopify account, offering an alternative order entry feature – if you’re already using Shopify for your webstore, and not selling anywhere else, then it’s a good solution.
As per the recurring theme here, Shopify’s limitations are further exposed once you start selling offline. There’s a long list of minor reasons, but the major points to reiterate are that Shopify isn’t separating your inventory into multiple pools, so if you want to split your store stock from your warehouse, or want to recognize a selection of inventory that you’re taking to an event, then this can’t be done directly in Shopify (and therefore, you won’t be able to track it at all)! Additionally, some channels such as events are more prone to discounts and bartering, and therefore need the freedom of their own assigned price lists and discount rules. You could shoehorn this into Shopify, but why not move these operations into a back office solution that’s designed for multiple sales channels which each have their own intricacies.
Accounting and financial control
Shopify is not, nor does it try to be anything close to an accounting package (and we don’t blame them, it shouldn’t be)! Shopify customers address their accounting requirements through apps that connect to accounting-specific utilities like QuickBooks or Xero, which aren’t designed for retail e-commerce businesses. The result of using an accounting only integration is poor data quality, and therefore a lack of accuracy and reporting later on down the line which will hinder your decision making.
Let’s take a very clean example:
- I receive a new order in Shopify, for one product at $34.95 plus shipping of $3.00 and tax of $1.00.
- The customer and transaction is created in my accounting platform as a paid invoice for $38.95.
- That order gets processed and shipped in Shopify.
- The COGS of the order are entered based on a static price list value you have for that product.
Looks fine, right? Wrong. The literal order value gets taken care of, but at no point does either system know or cater for the exact cost of inventory, or log the financials specific to the shipping line item. There’s also a disconnect from a timing perspective; many businesses opt to defer posting their cost of goods sold journal entry until the product has been shipped. These are just quick examples that scratch the surface of the sorts of issues that will be invisible to you, on every order. Answering questions like how profitable is this product? is difficult. You don’t have a single system that knows every financial detail of your inventory, so you are left with high level assumptions and inaccuracies.
Luckily, there are retail management solutions in the Shopify app store that will allow you to seamlessly and accurately manage the accounting for your Shopify sales. Through connections to retail management solutions like Brightpearl or Netsuite, you will have a much more accurate picture on the true profitability of your product sales because they house not only your accounting but your inventory, sales and purchasing information.
Going back to our initial example:
- I receive a new order in Shopify, for one product at $34.95 plus shipping of $3.00 and tax of $1.00.
- The customer and order are populated into Brightpearl with a line item for the product and shipping, each tracked against different account codes. The tax liability is also collected and tracked separately.
- Once the order is shipped and invoiced, accounting entries are made to Product Revenue: $34.95, Shipping Revenue: $3.00, Tax Liability: $1.00 and COGS: Based on the FIFO cost of the product.
- The order is updated as shipped in Shopify.
As you can see, Brightpearl will provide much more clarity on the breakdown of your revenue and cost for each order. You will be able to use data rather than assumptions to understand in real-time how profitable your sales are; if you’re charging too much or too little for shipping and much more!
Shopify is a fantastic platform to rapidly launch, and manage your webstore indefinitely, but needs a partner, like Brightpearl behind it to take over the management of your business.
Shopify is much more intuitive and accessible than it’s competitors, and has an active and positive community. Their feature set is succinct, and you can literally launch a new, great looking webstore that’s raking in orders in no time at all. That’s generally where their story ends, and our solution begins.
Brightpearl co-exists brilliantly with Shopify to provide omnichannel order and inventory management, and accounting. As soon as orders are placed in Shopify, our integration steps in and downloads all details to Brightpearl and automatically routes them through your workflows to the appropriate fulfillment centre, as well as logging activities within your CRM and accounts with exact details on inventory costs incurred and revenue recognized.