An FD’s Guide to Reducing eCommerce Costs During an Economic DownturnDownload Brochure
Business Strategy During Recession: Reducing eCommerce Costs
For businesses of all sizes the current economic climate is a concerning time. Added strains have been placed on business leaders who are working tirelessly to improve business cash flow, retain employees and maintain their position within the marketplace. In recent years both B2B and B2C organisations have invested heavily in eCommerce systems to help ease the growing demand of selling goods and services online. However, the maturity of eCommerce and current economic conditions brings new pressures.
Having an online store to compete is one thing, but having an online store that is 'cost competitive' means that financial leaders are having an integral role to play in planning and implementing a business strategy that can balance cash flow and is fit for business survival during a recession.
Typical considerations that finance professionals often refer to when reviewing and analysing 'cost competitive' items include:
- Product production costs
- The cost of physical distribution
- Hosting, maintenance, SSL security certificate costs
- The costs of promotion
Finance professionals automatically concentrate on these areas, therefore look to apply pressures to reduce these overheads to become 'cost competitive'. Although it is good business acumen to review the 'obvious' costs it has its downside. One of the shortcomings of this approach is that it misses the opportunity to improve business performance and gain a competitive advantage. Gaining a competitive advantage in tough economic times can be achieved by looking deeper into the eCommerce process and the hidden costs associated with order and stock management. It's in this area that forward-thinking finance professionals will identify, quantify and reduce the hidden costs that quietly eat away at company profitability.
What is the overall goal of reducing the hidden costs of eCommerce?
Ultimately, the goal of reducing the hidden costs of eCommerce is to extract the maximum profit from each sales order from your web store. However, in highly competitive markets, extracting more value may enable you to become more competitive on price or promotion and the ability to process more orders without having to increase overheads and resources.
Regardless of an organisation's overall goal, removing hidden costs from order and stock management processes is a priority that many financial professionals are already beginning to address.
How to identify the hidden costs
Identifying the hidden costs of eCommerce means that financial leaders need to think less about the obvious costs mentioned above and more about the whole eCommerce process. A significant proportion of eCommerce costs that eat away at company profitability are absorbed and hidden through order management processes that include repetitive data processing in multiple business systems across multiple departments. An eCommerce process is not just the responsibility of the marketing team, but it also spans through customer service, warehouse and distribution and finance. Each department creates avoidable costs within an eCommerce process, these include:
Finance and Accounting
The finance and accounting department manually process orders taken through your eCommerce store. This manual data entry administration task can include the processing of customer details, products purchased, purchasing new materials and stock, bank reconciliation for online payment gateways such as Worldpay, PayPal and Stripe. These hidden costs take time and is prone to human error which can cause bottlenecks and additional costs in other areas of the business. For example, delivery to the wrong address can impact warehouse and distribution costs and customer service calls. Common hidden eCommerce costs within the accounting and finance department include:
- Entering customer details into accounting software e.g. name, billing and delivery address, payment details, transaction ID
- Entering product information from sales order
- Processing of bank reconciliation
- New stock purchase orders and authorisations
Within the marketing department, an eCommerce process presents different challenges. In many organisations, the marketing department can be responsible for real-time stock availability, product descriptions and product categorisation. In addition to the manual administration of products, the organisation may be running multiple eCommerce platforms alongside the primary store. Updating products to additional third-party eCommerce platforms such as Amazon and eBay add increased strains of time starved employees and increasing the probability of manual errors such as wrong product descriptions and categorisation. Ideally, the marketing team should be focusing on running sales campaigns for existing and new customers. Common hidden costs within the marketing department include:
- eCommerce automation; Synchronising eCommerce store with eBay, Amazon and other retail platforms
- Transferring customer details into a CRM system
- Manually updating marketing and lists and unsubscribes in both email and CRM applications
- Updating stock levels, product descriptions and categories
Image: eCommerce process example.
Warehousing and Distribution
Once an order has been processed it is now ready for picking and dispatch. Depending on the distribution model of the business, hidden eCommerce costs can include the manual creation and printing of pick lists and placing orders for consignment with local, national and international courier services. These steps include manual data entry and updating internal systems along with placing consignment details into courier software. Another repetitive and time-consuming cost is the creation and printing of delivery notes for every product shipped. Common manual processes within warehousing and distribution include:
- Creating and printing pick lists
- Placing orders with courier services
- Creating and printing delivery notes
- Updating stock levels
- Updating customers with delivery statuses
The hidden costs of eCommerce don't stop with warehouse and distribution processes; it can also encroach into the customer service department. eCommerce places a large emphasis on organisations to deliver a quick and seamless service. In many instances, customer satisfaction can create trust and make a business stand out from the competition. This department is essential to any eCommerce business, particularly where manual data administration is prevalent throughout the eCommerce management process. When a mistake is made in either the accounting and finance, marketing or warehouse and distribution, customer service teams are the first point of contact for customers. They need to resolve complaints about poor product quality, failed deliveries, incorrect products shipped, mis-categorised and wrongly described goods and poor customer communication. This ripple effect are all costs that result from manual and error-prone processes. Common manual tasks within customer services include:
- Dealing with failed deliveries
- Dealing with product complaints
- Managing the start of the returns process
- Dealing with refund requests and escalating issue to the accounting team
Mapping eCommerce Processes
Mapping your eCommerce process can help you to identify where your hidden costs start and end. It will also help you to identify gaps within the process and potentially highlight other areas within the business or process that can be automated to save the business time and money. Download the Mapping eCommerce Processes resource below and use it as a starting point to map your standard eCommerce process. For further reading visit - Mapping your eCommerce Process Flow.Mapping eCommerce Processes
Highlighting the hidden costs of eCommerce in your business
As highlighted in the examples above, the hidden costs of eCommerce are the manual, standardised processes that are required to complete an order from customer purchase to delivery. These costs are, in the main, employee-driven tasks that most organisations address in the first instance when looking to recruit suitable employees. To gain an insight into the costs that quietly eat away at your organisation, work through the template of common processes below and use this ROI calculator.
|Process Name||People Involved||Hourly Wage||Average Time Per Week||Cost of Manual Processing|
|Entering customer order details into accounting software||(people)||(wage)||(time)||(cost)|
|Processing of Bank Reconciliation data||(people)||(wage)||(time)||(cost)|
|New Stock/Material Purchases||(people)||(wage)||(time)||(cost)|
|Synchronising eCommerce site with eBay, Amazon and other retail systems||(people)||(wage)||(time)||(cost)|
|Transferring customer details into a CRM application||(people)||(wage)||(time)||(cost)|
|Updating marketing lists and unsubscribes in email and CRM tools||(people)||(wage)||(time)||(cost)|
|Updating stock levels and product descriptions||(people)||(wage)||(time)||(cost)|
|Dealing with failed deliveries||(people)||(wage)||(time)||(cost)|
|Dealing with incorrect products shipped||(people)||(wage)||(time)||(cost)|
|Placing orders with courier services||(people)||(wage)||(time)||(cost)|
|Updating customers with delivery statuses||(people)||(wage)||(time)||(cost)|
|Creating and printing delivery notes||(people)||(wage)||(time)||(cost)|
|Creating and printing pick lists||(people)||(wage)||(time)||(cost)|
For more information on how to define your eCommerce business process, download the following resources and calculate your costs using the ROI calculator.
How to streamline eCommerce processes
Now that you have calculated some of the hidden costs within your eCommerce process you will need to put an action plan in place and investigate ways that can reduce or eradicate these costs. Not all hidden costs can be removed completely, but the majority can. The main hidden costs and problems are caused by repetitive, bi-directional data entry tasks. More specifically the rekeying of data to and from your eCommerce platform to other business systems and applications such as accounting, ERP, WMS and CRM systems.
Financial leaders can remove these costs by looking at the very nature of the process itself. For example, the data is always structured e.g. name, address, products ordered, transaction IDs etc. and therefore can be automated by using business process automation software.
Business process automation software allows businesses to automate everyday data administration tasks to enable them to reduce or completely remove the costs associated with these processes, or reallocate resource to other business critical functions that can add positive monetary gain. Another advantage of removing these costs from the business is that automating standard processes such as order processing, ensures that organisations can scale in size without requiring additional resource and overheads to process a larger volume of orders.
Common automated eCommerce integration scenarios for your store (Shopify, Bigcommerce, Magento, Amazon etc.) include:
- Accounting and ERP integration with eCommerce store: e.g. SAP Business One, Sage 200, Sage 1000, Access Dimensions, Microsoft Dynamics, SYSPRO, Epicor etc.
- Automated management of customer accounts: Including creating and updating new, existing and guest accounts with name, billing and delivery address, payment details etc.
- Automatically process orders from eCommerce store: e.g. From Shopify, Bigcommerce, Amazon, Magento 2 etc. with product descriptions and code, quantity, customer details, delivery method, payment method etc.
- Automated sales order status upload from ERP system to eCommerce platform
- Automatic creation of incoming AR invoices and payments
- Automated inventory and pricing updates from ERP to eCommerce platform
- Automatically update products e.g. product SKU, description, tax class, weight, retail price, inventory quantity etc.
- Courier integration e.g. Parcelforce, DPD, UPS, FedEx etc.
- PO invoice automation
- Automated pick lists, shipping notifications and dispatch note creation
When planning your automation strategy, Business process automation solutions such as Codeless Platforms' BPA Platform 2020, help to provide you with a competitive advantage and streamline eCommerce operational costs during an economic downturn. It enables you to automate practically any manual administration task, reducing manual data entry throughout the business which in turn will help you to cost-effectively process a larger volume of orders without additional overheads. Learn more about business process automation by downloading the brochure below.
How to kick-start your eCommerce integration project
One of the first steps that financial leaders should conduct is to identify the monthly and yearly costs that are being incurred by the business to manually process data created by transactions made in its eCommerce application. This will help highlight how much time and money being consumed by non-value adding tasks such as sales order or fulfilment processing.
More detailed attention will be required to identify the impact of errors on customer service teams. However, a simple survey of the customer service department will help to highlight whether costs have been incurred because of data entry errors made in the initial stages of the sales order management process.
Our professional services team are business process experts and have a wealth of knowledge and experience in working with a wide range of industries and business systems and applications from software vendors such as SAP, Microsoft, Sage, Access Group, Epicor, SYSPRO and many more. In addition, we work closely with our global channel of partners that can help plan, build and deploy BPA Platform 2020.
To help you start your investigation process on reducing the hidden costs of eCommerce, use the table above and download the BPA Project Management Workbook. The workbook will help you to identify the manual business processes that you would like to automate. Additionally, it will help you to define individual systems involved in the eCommerce process and the processes that are currently a manual task. The ROI calculator will provide you with the initial cost savings that you could achieve when implementing business process automation software.
For more information on planning your business process automation strategy and to speak with a member of our professional services team call us on +44 (0) 330 99 88 700.
BPA Platform Brochure
The Business Process Automation (BPA) Platform enables you to quickly and easily build automated processes unique to your organisation through an intuitive drag and drop graphical user interface.Download Brochure