Optimizing Multichannel E-Commerce Operations
As a growing brand selling through multiple sales channels, properly implementing new channels is key to achieving successful results. Adding more channels to your network only works if each new addition positively contributes to business goals and any resulting pressures on your resources remain manageable.
First of all, it is important to realize that an individual channel could harm your business. The most common case is a channel that does not generate enough revenue to justify its strain on your resources. But that is not the only risk. Here are some examples of how poorly performing or under-optimized channels could negatively affect your business:
- Your D2C website costs a lot to operate and maintain but fails to generate enough traffic and sales
- A marketplace channel has very detailed requirements, generates mistakes and requires too much attention
- A retailer repeatedly misrepresents your products and hurts your brand image
A multichannel e-commerce strategy focuses on generating business growth by implementing and operating multiple channels. With the right tools and organization, each new individual channel can generate positive outcomes without putting too much extra strain on your business.
Maximizing Revenue
As you add new channels to your distribution, your top goal is to get that channel to start contributing to revenue. Next, you will want that revenue to grow steadily as you assert your foothold on the channel.
A few things can help you maximize your revenue, especially when planning for long-term success:
Channel mix: Build a strong multichannel strategy that includes different types of channels. A diverse channel mix can allow you to broaden your customer base while minimizing revenue cannibalization between channels. Channels should be chosen based on relevance to your brand, but in general, the more variety in your selection, the higher your revenue opportunities.
Best sellers: For many brands, a handful of products drives the majority of revenue. Expand top-performing products to avoid relying on limited lines to drive your sales. Test your product portfolio by channel and support winning products with advertising.
Availability: Out-of-stock products directly hurt your revenue and funnel sales toward your competitors. It is possible to optimize in-stock rates by properly allocating inventory between channels and anticipating demand.
Protecting Profit Margin
Profit margin is a great indicator of channel health. Together with revenue, it paints a great picture of how each channel contributes to your bottom line. Depending on channels, different costs in the following areas could trim your margins:
- Discounts and promotions
- Advertising
- Returns
- Fulfillment
- Platform commissions/retailer margin
We often hear about the importance of revenue. However, relying heavily on sales targets can be misleading. Ensure you are not only driving sales but that you meet your profitability targets.
To maximize your profits, it’s crucial to be strategic with your product mix and apply a layered approach:
- Identify and group products by margin level and pricing
- Build your portfolio strategy by channels utilizing product groups
- Consider fees and costs associated with each selling destination
Returns can also affect your margin levels across all verticals, especially in the fashion category. The following steps can reduce the impact of returns:
- Consider requirements related to returns when selecting new sales channels
- Analyze the correlation between product line and return level
- Reassign products with a high return rate to a different channel
- Reallocate advertising budget to boost visibility on low-return products
Promoting a Strong Brand Image
As a brand selling on a variety of channels, brand image should absolutely be a key consideration. Ideally, you want to stay away from channels that negatively impact consumer perception — especially since the damage may not be contained to that channel. But measuring brand image and customer perception is tricky and costly. Even more so if you’re trying to determine which channels are driving it up or down.
When we think of brand image, we tend to focus on product content. But it is far from the only parameter that affects how consumers perceive your brand. Here are examples of how underoptimized channels could affect your brand image:
- Poor imagery: Content is missing or includes low-quality images
- Vague or misleading descriptions: Product-related texts (titles, descriptions, specifications) are incomplete or inaccurate
- No digital shelf presence: Your brand rarely shows up in product searches
- Heavily discounted prices: The pricing for a particular channel is far from your recommended price
- Out-of-stock products: Consumers have to find another option
- Negative reviews: Shoppers complain about your products
Trying to optimize all these parameters on a wide selection of channels can be daunting. It helps if the content and data you are sending is clean and matches the channel requirements. Then it’s a question of regularly auditing your brand presence, including on retail channels.
Managing Strains on Internal Resources
No matter how integrated, automated and optimized a channel is, it is likely to still require some work from your team.
For instance, listing your products on marketplaces could mean spending a sizeable amount of time fixing marketplace errors. Busy retail buyers may lead you to spend time monitoring out-of-stock products and trying to trigger new orders. And D2C websites require regular maintenance and oversight.
The resource strain of channels can usually be minimized with automation — even retail channels can be routinely monitored to quickly surface important actions.
Strengthening Retail Channel Performance
Even if they are indirect channels, online retail channels still have a major impact on a brand’s success. Whether retail represents a fraction or the majority of your online sales, your retailers’ performance is your performance.
But retail channels are notoriously hard to optimize. As a brand, you do not directly build product listings and you do not control prices. There is, however, a lot you can do to optimize online retail channels. These four pillars include key areas brands can focus on to help improve retailer performance:
- Optimize assortment and availability: Getting the right products listed and keeping them in stock consistently should be a top priority. As a brand, you can monitor and remedy critical out-of-stocks, increase the number of listed SKUs and monitor third-party sellers.
- Improve pricing and promotions: In most geographies, brands can’t legally dictate retailer prices. However, it is possible to watch out for pricing mistakes, try to understand price-matching dynamics in the markets and execute synchronized promotions across your channels.
- Enhance your position on the digital shelf: The products that show up more often in front of consumers gain an edge. And brands can work to increase their position. Test how different keywords in titles and descriptions affect search position, use promotions and advertising strategically — and keep an eye on your competitors!
- Maximize content and reviews: Representing your products in the best light possible is every brand’s ideal goal. Ensure your product pages have approved and up-to-date assets, make the most of content and rich content opportunities and plan corrective action for pages with bad reviews or low averages.