Get your products offered through the right channels, and get your messaging right, and the orders will start to roll in. This is a great moment but immediately it puts pressure on your back office processes.
The challenge is to cope with the increased volume whilst maintaining levels of customer service and profit margins.
In this section, you’ll learn how to:
Maintain a centralized view of all your inventory
Streamline your pick, pack, ship process
Minimize mistakes through managing by exception
1. Make use of SKUs
Doing business across multiple sales channels can make product management difficult. For one thing, you’re likely to offer a different subset of your products on each channel. Plus, each channel runs its own software.
The only way to bridge these differences is with Stock Keeping Units (SKUs). They act as unique identifiers for the products you sell and give you a common way to refer to them, regardless of channel.
2. Maintain a centralized view of your inventory, what you have and where it is
When the orders start to roll in, you need to get the goods into the hands of your customers with the minimum fuss and effort.
You cannot possibly build an efficient process if you do not know what you are holding or where it is.
Specify which orders are fulfilled from which warehouse to simplify your workflows and ensure you give great service to customers.
Don’t forget your brick and mortar stores. Maximize your opportunity to sell by ensuring store staff have visibility of inventory in the warehouse and vice versa. Keep track of products on the shelf as well as in the warehouse.
When you send inventory out for pop-up shop locations, make sure you move this inventory into a new virtual warehouse, so that you can track it in the same way as you would for all other locations.
“Having the multi-warehouse functionality has helped me immensely. Most of my inventory is managed externally but some will also sit with me, my freelancers or with the manufacturer. Being able to mark us as separate warehouse facilities means I can keep track of all of my inventory all of the time.”
3. Look into the future
Most retail businesses over stock. Reducing the amount of product in your warehouse puts more cash in your bank account, but it increases the risk of stock-outs. The way to mitigate this risk is to know what is on its way and when.
Use purchase orders. A purchase order process means more work upfront, but it’s the key to taking control of your supply chain.
Establish a single trusted source of truth and keep it up-to-date. Spreadsheets are brilliant tools, but it’s all too easy to find yourself basing important decisions on out of date information.
Maintain an up-to-date picture of inventory, sales and products on order, and use it to make intelligent decisions about what to order and when.
Make sure new products are available for sale the moment they arrive (if not before). If it’s in your warehouse and not for sale, it’s costing you money.
4. Streamline your pick, pack, ship process
As your business grows, so does your payroll. Minimizing unnecessary labor costs can have a huge impact on the bottom line of a business.
A great place to look for these efficiencies is in the warehouse, where well thought out processes can maximize efficiency and minimize human error and shrinkage.
Create warehouse locations and organize your warehouse for optimum picking efficiency.
Use pick lists to pick multiple orders in batches, then pack them at a centralized packing station.
Integrate your order management system with your chosen shippers and you will never have to re-key an address again. But remember, shipping is a highly competitive market; rates change and customer service levels vary between suppliers, so be careful not to get locked in.
Don’t be afraid to outsource. Many merchants find it’s more cost effective to outsource some or all of their warehousing and ecommerce fulfillment to specialist third party logistics suppliers.
The most successful businesses use software like Brightpearl to manage their operations to:
Drive cost efficient replenishment and administration
Provide exceptional customer service with the right processes in place
Easily scale operations and meet fluctuating operational requirements across multiple channels
Is your ability to analyze your business operations confounded by endless listings and reports?
Are you letting customers down or missing out on new markets because your operations are at full capacity?
Smart and savvy retailers are using tools and software to get their operations under control.
5. Stay on top of partial shipments
Different channels also treat partial shipments differently. Most ecommerce systems support the concept of shipments and multiple shipments for an order.
And most software pushes shipment information back into the sales channel.
eBay is the big exception. This channel marks orders as “shipped” only when all shipments are completed.
Make sure you know which channel does what.
6. Add a multichannel system
When you venture into new sales channels, your ecommerce and accounting software won’t be enough to handle the new workload.
Instead, you need to supplement that software with a multichannel retail management, or hub, system designed to handle the unique complexities of this business model.
Support your ecommerce platform: When you pull sales from your ecommerce platform (and any others) into a hub system where back office processes like order processing, inventory management and customer service can be handled efficiently, you leave your ecommerce system to do what it does best - sales.
Augment your accounting software: Hub systems provide more purchasing, order processing and inventory management power to handle the increased load. They also send consistent, branded invoices and communications, even if you use different trade names on each channel. And they support multiple levels of permissions so your whole team can work in the system.
Merchandising for multichannel retail
Good merchandising means emptying your shelves of slow moving inventory and re-investing the money that you release on products that sell fast and that are profitable. To do that, you’ll need to:
Build a product hierarchy and use it to analyze your sales
Set your pricing in the light of full landed costs
Invest in inventory that moves
1. Understand your product hierarchy
You may know your individual products inside out, but to put together a great range, you need to know what categories, brands and styles sell well, so you can stock the products that your customers want.
Say you’re running a bike shop. Are you selling men’s bikes or women’s? Road bikes or mountain bikes? The right insight will allow you to spend your valuable cash on the right products.
Build a product hierarchy and assign each and every product a place within it.
Identify best sellers and worst sellers at each level - and don’t forget to factor returns into these calculations.
Analyze your sales against this hierarchy and use these insights to drive merchandising decisions.
2. Customize your product content
Different sales channels may need different product information, so it’s best to manage products at the channel level.
eBay listings, for example, may contain much more information - even a storefront full - than Amazon listings.
And ecommerce stores need extra content that the other channels don’t need to help shoppers search for and compare products.
Although this channel-specific content can lead to inconsistent data, it’s generally worth it to have the information tailored to each channel’s format.
3. Focus your investment in products which sell through
If you ask an accountant to assess two merchant businesses, one key measure is the rate at which they turn their inventory.
Sure, there are huge variations depending on the goods you sell, but the fact remains that if you buy the right goods, you can sell them faster, and release the cash more quickly to buy more.
Identify slow moving products and clear them out. Mark down the price if you have to, just do what you can to release the cash that’s tied up in these products and re-invest it in fast moving lines, categories and brands.
Where customer expectations permit, fulfill orders on demand by placing back-to-back orders with your vendors.
Take this a step further by having your vendors dropship orders directly to your customers.
4. Get your pricing right
Pricing is hard. Drop your prices and you sell more, but make less margin. Raise your prices and the opposite happens.
Furthermore, one of the benefits - and challenges - of selling on multiple channels is that you’re selling to different audiences. To do this well, your prices may need to be different from channel to channel.
eBay and Amazon shoppers are especially price sensitive, so pennies can make a difference. Others, such as your in store or wholesale customers, may be willing to pay more.
Striking the right balance is art as well as science. But one thing is for sure - without data, you’re in the dark. To optimize your prices you must know your margins.
Track the total cost of getting products into the warehouse (the landed cost) to understand their true margins. You need to allocate all the costs of the inventory including: cost to ship, taxes, insurance, storage costs, etc.
Attribute costs by channel to ensure each channel is running profitably.
Know your marketplace. What do your competitors charge? Does it differ online, on marketplaces and in store?
Understand the value proposition, what your customers are buying and what they are willing to pay.
Track and analyze your markdown rate - are you giving too much money away?
Consider tailoring your pricing to your audience in one of two ways:
Built-in price management: Some systems include automated price management, which is especially handy on channels with price-sensitive shoppers where adjustments are made more often.
Outside price management: If your system doesn’t include automated re-pricing, you can deactivate price management for that channel and delegate the responsibility to a separate price management system.
Building a wholesale business
The traditional separation between retail and wholesale is breaking down, with ambitious independent merchants increasingly combining the two. Success depends upon tracking and optimizing each according to its own criteria. Remember to:
1. Separate your data
Margins may be smaller on wholesale orders, but the lifetime value of a customer is typically much higher.
This is just one of many respects in which the metrics you use to manage a wholesale business differ from those that are appropriate to a retail business.
The fact is, to effectively track and optimize your wholesale business, you need to be able to look at it separately.
Flag your wholesale customers and orders so that you can report against them.
Assign costs to the relevant business stream, and don’t forget to include your internal costs: salaries, rent and the like.
Build separate income statements for each business stream.
Establish relevant performance indicators and analyze your wholesale business against them.
2. Know your customers
Great customer service is, if anything, even more important when you’re dealing with trade clients.
If your account managers are to maximize the lifetime value of each and every account, they need to know your customers, their needs, their history and their business cycles.
Log every interaction with every customer and make it available across your team.
Keep track of your customers’ business cycles, their goals and their buying windows.
Understand your customer's processes and make their lives easy wherever you can.
Manage your customers’ expectations. They are themselves making commitments so will value clarity and predictability from their suppliers.
3. Cross-sell and upsell
Trade customers, like retail customers, will likely come to you initially for a particular product. The challenge as you develop the relationship is to encourage them to purchase across your range.
Learn about their business. See what sells well and identify appropriate products to offer them.
Don’t assume your retailers know your business. Show them what you’ve got.
Learn from your customers and replicate best practice. Help your retailers to succeed by keeping them aware of which products are your best sellers.
Measure your success. If you know what a profitable customer looks like then you’re in a much better place to replicate them.
Managing cash and profitability
No matter what else is going on, if you run out of cash, the music stops. To maximize your chances to make the most of any situation, you need to know, at any moment, how much money you have, what is due in and what you have committed to pay out. Always:
Use purchase orders to understand future outgoings
Assign costs by channel to protect margins
Target your team on profitability
1. Use purchase orders
It may seem at first like a bureaucratic overhead, but the use of POs is one of the most important disciplines that you can introduce to a retail or wholesale business.
Purchase orders give you a view of what is on its way and when, which is invaluable data when evaluating how to spend your money. They are also a vital piece of the puzzle when evaluating supplier performance.
Build purchase orders in your inventory system.
Ensure inventory that is on PO is visible to operations.
Book in inventory against each purchase order.
2. Use retail analytics to maximize channel profitability
It takes effort to optimize a sales channel, which is effort that could equally be expended elsewhere.
By associating the cost of doing business through a particular channel with the orders it generates, you can decide whether that commitment is justified.
Account for goods movement on a first-in, first-out (FIFO) basis. That means your margin reporting remains true even as your vendors change their prices.
Get a true picture of your cost of sales by assigning all costs associated with a transaction, including, for instance, marketplace fees, forex charges and the cost of processing orders.
Assign expenses at the channel level, including the costs of preparing your listing data, translating descriptions and optimizing for search efficiency.
Use all this data to understand your profitability by channel. Focus your valuable time where the margins are.
3. Build incentives around profitability
To give yourself the best possible chance of achieving your goals, you need to specify exactly what you’re trying to achieve, communicate this to your team and build incentives around them.
Build a set of management accounts and identify key performance indicators. These are the numbers that tell you how well you’re shaping up to your objectives. Regularly measure your business performance against them.
Keep your books up-to-date. The sooner you can see something changing, the sooner you can react.
Manage by exception. If there’s a number that doesn’t look right, investigate - quickly.
The most profitable way to manage your business is with Brightpearl, which shows you:
How much money you’re really making, thanks to landed cost and multicurrency features
Your income statements on a daily basis and in real time
Key data to help you make informed decisions to grow more efficiently and profitably
Accurate data and software tools that can help you to interpret your data, is important for savvy retailers to glean real insight into business operations and to stay competitive. A business that turns their data into useful actionable knowledge is expected to make decisions five times faster than its competition.
4. Set up taxes correctly
You’ll find that each channel handles taxation a little bit differently. Your best bet is to make sure everything is set up properly at the sales channel level.
Just enter tax exclusive (net) prices and then add tax based on country-specific rules.
U.K. merchants: Under your VAT-based scheme, tax depends on the type of product as long as it’s being purchased from within the EU. Buyers in Australia don’t pay tax.
U.S. merchants: Under your sales-tax scheme, tax is chargeable based on where you and your customer are located as long as the product is taxable.
Read our retailer's guide to international trade VAT implications.
Getting your team building your business for you
When your business is small, you know what products you have in stock and what is on order, you see what is selling and what isn’t and you know how much money you have to spend.
But in a larger business, this simply isn’t possible. An organized and focused team can be the difference between success and failure. You’ll need to:
Clarify roles and responsibilities
Create a trusted source of truth
Establish efficient processes and keep improving them
1. Plan for success
Think about the business you want to become and map out in detail what it might look like.
What are the roles and responsibilities of the people involved? What are their key skills and characteristics?
Clear ideas will help you hire the right people and clear responsibilities will help them succeed.
Talk to others in your sector even if they are your competitors. People love to talk and you will be amazed at what you can learn.
Map out an org chart and plan the roles that you will add as your business grows.
Define a role before you fill it and what qualities an ideal candidate might have. Not only will it help you hire wisely, but also the clarity will help them succeed.
Set some simple KPIs for each role so that you and the individual know what success looks like.
2. Stay in tune
“Singing from the same hymn sheet”...“on the same page”... The driving force behind these cliches (and plenty more besides) is the importance of teamwork.
As the leader of a team, your success depends upon the combined energies of the people around you. Get them working together and you can move mountains.
Be explicit about what you’re setting out to achieve. Sell it to your team and they will sell it to the world.
Ensure everyone is working with the same facts by establishing single trusted sources for all your key data:
A single view of all customer activity will mean that no matter who your customer interacts with in your team, that person is in possession of the relevant facts.
A single view of orders will help your fulfillment team make fewer errors.
A single view of inventory, sales and commitments will help you order wisely.
A single system across all these entities is gold.
Use technology to give people access to tools and information. Clearly there is some data that is sensitive, but the more people can see and understand what their colleagues are doing, the easier it is for them to collaborate.
3. Define your workflows
When your business is small, workflows are simply what you do and you very quickly work out the most efficient ways of getting the business of the day squared away. They just become second nature.
Add a few more people into the mix and inefficiencies and mistakes easily creep in, which can erode margins and change the dynamics of your business.
Get it right, on the other hand, and you can create a culture of ongoing improvement.
Make your workflows explicit and train your team to follow them.
Identify objective measures to assess how well they are working. If you have a pick, pack, ship process, how many orders are you processing in a day? What are your error rates? How much inventory is lost or broken?
Review your workflows regularly, listen to feedback and iterate. If you’re measuring the right things, you will quickly see if your business is improving.
4. Manage by exception
Whether that’s giving special treatment to your most valued customer, or identifying potentially fraudulent orders on your website, the fact is that a few exceptional cases can have a disproportionate impact on the profitability of the business as a whole.
If you can identify the exceptions, you can deploy your most intelligent and effective people to deal with them - and that is interesting and motivating work.
Specify opportunities. Is the person walking into your flower shop looking for a single rose for their sweetheart or organizing a wedding for 200?
Specify threats. Does that delivery address look complete or is there a chance that the package will be returned?
Work out the features that identify the exceptions that matter and flag them straight away. Use technology to automate this if you can.
Identify appropriate responses and empower the right people to act on them.
Streamline your workflows around the unexceptional. Use technology and automate as much as you can.