The Unsexy Stuff
One of the most overlooked areas of managing an ecommerce business is the daily operations that happen behind the scenes. I call it “the unsexy stuff” of online business. Frankly, it’s the unsexy stuff in any business that is all too important not to run as efficiently and effectively as possible.
In the ecommerce world, it’s the operational side of the business -- order processing, customer service, purchasing, warehousing, inventory management, accounting, HR, production/manufacturing – where all the internal conversion needs to take place so you actually earn the revenue that is generated by all your search marketing efforts. It would be ideal if you’re only responsible for demand sales, after all, shipping the stuff would be somebody else problem right?
Well, in small business, it doesn’t happen that way, if you’re running a small crew, let’s say under 10 people, even if there are designated individuals who are truly responsible for processing orders, more than likely, 7 out of your 10 people know how to process orders, know how to pick and pack and operate machinery, if you’re doing production or manufacturing. Even though we’d like to be master of one, it’s not really an option sometimes.
Within each of these distinct but related departments, there are aspects of the internal process that can be reviewed, studied, tested and tweaked to run more efficiently. If there is room for improvement (and there usually always is), you’ll see that these small changes can help you find more profits, which you can then turn around and re-invest into search marketing so you can start the process over again -- but in a much more effective and rewarding way.
Technology is your friend when it comes to finding ways to streamline and become more efficient. For example, look for more efficient backend inventory management software or a better CRM that tracks customer communication, can save time and money and, frankly, manpower (or it lets you re-allocate resources more effectively). Either way, all of this is good for the business and if you’re not always thinking along these lines, you’re doing your company a disservice and if you’re the owner, you’re not optimizing your profits – business owners hate it when they hear this and rightly so.
Here’s an example. If you’re constantly short on cash and having difficulty paying suppliers, when was the last time you reviewed your purchasing process? How are goods being ordered and re-ordered. When was the last time you reviewed the inventory list? How much of this is dead stock? How much of these are slow sellers? Is the marketing department heavily promoting the stale inventory? How much of this process is being communicated within purchasing, warehouse, inventory management and marketing?
The other department that should have a say is accounting. Who is the watchdog for product margins? Is there clear communication between marketing and accounting about how much inventory is on the books and what the agreed upon margin guidelines, to avoid marketing promotions to the point of losing money from every sale.
Unfortunately, there is no easy fix. In fact, this is not a fix-it-once-and-forget-about-it activity. This is one of those monthly conversations that needs to take place and each department needs to regularly review the metrics not just on your web analytics but internal accounting metrics just to ensure that your company is on track not just to meet sales goals, but margin goals.
If you aren’t regularly reviewing these things, I urge you to have a consistent process to track your web and internal metrics. These little buggers can sneak up on you just when you think you’re really paying attention and if you don’t watch them closely, you’ll wonder, at the end of the year, why margins slipped instead of each month when you had the opportunity to address them.
Nice article Shirley. Being an ecommerce company, especially a startup requires a lot of work and getting your hands dirty. We have just one required meeting and that is the time each week in which things like operational issues or payables are discussed when all the departments are present.
Jagath Narayan says:
Shirley, this is a great article. Here is my observation on this topic. It is okay to just focus on sales, marketing, SEO and traffic (all the sexy stuff) when you are just getting started. You can live with a chaotic backoffice process for a little while. But when you actually start getting a decent order volume, (5 orders/day or more) you've got to turn your attention to the unsexy stuff - order fulfillment, inventory management, purchasing, accounting.
What I have noticed is that the really successful merchants are the ones who realize this fact very early on in the game. They get their house in order so that they have a clear accurate view of what is happening in their business. This not only improves their operational efficiency, but also helps them have a better focus on their sales and marketing. For example, if they know which products are in dead stock, they can run a promotion and liquidate the stock and free up cash. If they know what their top sellers are, they can focus on the SEO for those items and boost their traffic.
Successful business owners know that their business doesn't operate in silos. All the different elements need to work together, and that is how you grow your business.
I am a newbie and now I feel weird. Actually the efficiency stuff sounds very sexy to me. If I ever get going I believe I would have more fun training employees, improving efficiency, watching and improving margins etc.