In June of this year, U.S.shoppers spent $64.7 billion online. Of this, $6.5 billion was spent on marketplaces like Amazon, Jet.com, Overstock and more.
As marketplaces continue to grow, even brands and retailers with a successful online presence can’t ignore them. More and more retailers are working on a hybrid approach where they have their own store to build better brand and customer loyalty, as well as a presence on marketplaces to take advantage of the traffic that goes through them. The challenge with this approach is the manpower required to maintain complex pricing models, accurate inventory, immediate order fulfillment, timely customer updates and more. Most of these merchants use solutions such as ChannelAdvisor to ease the complexity of managing sales across multiple channels.
When working with marketplaces, retailers must focus on the following key areas:
- Effective inventory management
- Fast fulfillment
- Tax and fee management
Effective Inventory Management
Inventory management is the backbone to success as a marketplace seller. Without sufficient inventory to serve your customers, your seller rank plummets, sales flatline and you will need discounts and promotions to get back in the game.
In addition to the severe penalties that certain marketplaces apply to retailers that cannot deliver products to the customer in a timely manner, you will lose control of the buy box that you’ve worked so hard to build, allowing your competition to control it and potentially cause damage to your page ranking.
Also, if you have more than one sales channel, you have to either reserve inventory for each channel to prevent overselling, or rely on near-real-time updates of inventory to your marketplace as the inventory gets allocated to sales across various channels.
With everyone chasing the buy box on marketplaces, and it’s very easy to get into a race to the bottom. Pricing has to be dynamically adjusted based on not just the market demands and competition, but also other factors, such as cost of the goods purchased, age of inventory (more days in the warehouse means more inventory carrying costs), volume of inventory and inventory movement (how many are getting sold within the week, or month).
While solutions such as ChannelAdvisor offer complex algorithms to price your product effectively, your back-end ERP system plays a key role in tracking your purchase orders, gauging the inventory in your warehouse and your sales orders.
With most marketplaces offering no-hassle returns and returning money to the buyer as soon as the return request is placed, it is essential to track these returns and ensure that the goods are processed. It’s also important to track the condition of the goods and ensure that the correct return reasons were provided by the customer. This is important not just for ensuring that your inventory is accurate and fees collected are as per terms, but also making sure that any falsely-coded returns don’t affect your marketplace standing.
With marketplaces like Amazon and Walmart offering same-day delivery, efficiencies in order processing are key to success. If you’re a first-party seller and drop ship the products yourself, this means that the faster you can get the order from the marketplace to your back-end/fulfillment system, the sooner your warehouse would be able to process the order and send it out on the truck for delivery. (ChannelAdvisor’s Retailer Network offers a variety of first-party support, including order processing.)
Tax and Fee Management
One big challenge for sellers on the marketplace is payment delays, and the ability to track the fees to each sales order. It is further complicated by changes to the tax laws which are unique in almost every state. The outcome of the recent South Dakota v. Wayfair case has dramatically impacted how states can tax sales by out-of-state sellers. Having a financial system that can track these fees and taxes and ensure that they are recorded appropriately has become a critical requirement for online retailers.
While most successful retailers are aware of these key areas and challenges, most of them connect their marketplace systems to their own e-commerce stores for ease of management. However, e-commerce stores do not have all the necessary data to manage these aspects effectively. So, retailers try to bring this data from their product information management (PIM), ERP, warehouse management system (WMS) and other systems into the e-commerce store, burdening it with unrelated data elements just to support marketplaces.
In an ideal situation, retailers should connect their marketplace systems directly to their back-end/fulfillment/ERP solution, which is the original source of truth for product information. In doing so, retailers would be taking advantage of near-real-time updates to marketplaces and using that as a competitive advantage.
Acumatica, a cloud-based ERP solution with an integrated PIM, financials, WMS and various other components, already has many of the data elements needed to sell effectively on marketplaces. With Kensium’s ChannelAdvisor connector for Acumatica, merchants can push product updates to their marketplaces, pull down customer/order data and push shipment information via ChannelAdvisor — immediately gaining a necessary competitive advantage.